There has been a frenzy of activity in Washington on Keystone XL pipeline this week, setting the stage for a confrontation with President Obama.
Democratic senator, Mary Landrieu, of the oil-refining state of Louisiana, emerged from the mid-term elections with an unresolved result. She faces a run-off election on Dec. 6 against her opponent, Republican congressman, Bill Cassidy. Louisiana is home to refineries that would take oil carried by the proposed pipeline from Alberta’s oil sands. In a last-ditch appeal to win reelection, Landrieu immediately took to the Senate floor to demand a vote on Keystone XL pipeline—and began lobbying colleagues to support her.
Until now, Democratic leaders had refused to allow a vote in the Senate even though the Republican-controlled House of Representatives had passed similar legislation multiple times. But they have now relented and a vote in the Senate is expected Tuesday. Landrieu has claimed she can whip up the 60 votes necessary to overcome a filibuster in the Senate and pass the law. As of Friday, 59 senators were on record as intending to vote in favour.
On Friday, the House passed the law, sponsored by Cassidy, on a vote of 252-161. The Senate vote is expected next week. If the legislation passes, it must go to Obama for his signature. Environmental groups are pressing the president to veto.
The White House is signalling that a veto is likely—for now. A different question is whether he will ultimately approve the pipeline, once the State Department’s own review process is complete. Or whether he would veto similar legislation in the New Year once he has to negotiate with a newly-seated Republican majority in the Senate. Keystone XL could be a useful bargaining chip for a president who will need Senate Republicans to pass funding bills and confirm judicial nominees.
Asked about the pipeline at a press conference in Myanmar on Friday, Obama emphasized that he wants the State Department’s process to carry on and he played down the economic arguments in favour of the pipeline. He also made the striking comment that he believes the pipeline to be of benefit to Canada, not the U.S., embracing an argument advanced by critics of the project that it will merely transport oil to Gulf Coast ports for export:
Q: I’m wondering what your take is on the plan to pass a bill to build the Keystone pipeline that’s in the works now, before the State Department’s review process is over.
Obama: With respect to Keystone, I’ve been clear in the past, my position hasn’t changed, that this is a process that is supposed to be followed. Right now you have a case pending in Nebraska, where the pipeline would run through, in which a state court judge has questioned the plan. And until we know what the route is, it’s very hard to finish that evaluation. And I don’t think we should short-circuit that process.
I have also noted that, as policy matter, my government believes that we should judge this pipeline based on whether or not it accelerates climate change or whether it helps the American people with their energy costs and their gas prices. And I have to constantly push back against this idea that somehow the Keystone pipeline is either this massive jobs bill for the United States, or is somehow lowering gas prices.
Understand what this project is. It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. That doesn’t have an impact on U.S. gas prices. You know what does have an impact on U.S. gas prices is the incredible boom in U.S. oil production and natural gas production that’s taken place under my administration.
And if my Republican friends really want to focus on what’s good for the American people in terms of job creation and lower energy costs, we should be engaging in a conversation about what are we doing to produce even more home-grown energy. I’m happy to have that conversation.
Interestingly, Obama’s comments contradict the findings of his own State Department, which concluded that exports of crude oil from the pipeline would not be economically justified. The State Department found that the diluted bitumen flowing through the pipeline was more likely to replace declining supplies of heavy crudes from Mexico and Venezuela used by Gulf Coast refineries that are configured for high-sulfur heavy crude, not the lighter crudes produced in the U.S.
Here is an excerpt from State’s discussion in the Final Supplemental Environmental Impact Statement issued last January:
Comments were received throughout the review process speculating that WCSB heavy crude oil supplies carried on the proposed Project would pass through the United States and be loaded onto vessels for ultimate sale in markets such as Asia. As crude of foreign origin, Canadian crude is eligible for crude export license as long as it is not comingled with domestic crude. However, such an option appears unlikely to be economically justified for any significant durable trade given transport costs and market conditions.
Once WCSB [Alberta] crude oil arrives at the Gulf Coast, Gulf Coast refiners have a significant competitive advantage in processing it compared to foreign refiners because the foreign refiners would have to incur additional transportation charges to have the crude oil delivered from the Gulf Coast to their location. The pipeline or rail-delivered crude oil would compete with seaborne crude from elsewhere that has already undergone costs of loading onto seagoing tankers and may be delivered to other countries more competitively.
The fact that Obama is disagreeing with his own government report and taking the view of the project’s critics suggests a veto is more likely than not.