U.S. House Speaker John Boehner agreed Thursday to call a vote on legislation to extend a temporary payroll tax cut by two months. A provision of the bill requires President Obama to decide within two months whether to issue TransCanada a permit to build the $7-billion, cross-border Keystone XL pipeline.JONATHAN ERNST/Reuters
TransCanada Corp.'s controversial Keystone XL pipeline faces a growing risk of rejection after U.S. congressional leaders reached a deal late Thursday for a vote on a payroll tax bill that would force President Barack Obama to make a quick decision about the pipeline's fate.
After a week-long drama that pitted Senate Republicans against their Tea Party colleagues in the House of Representatives, House Leader John Boehner agreed to call a vote on legislation passed by the Senate that would extend a temporary payroll tax cut by two months.
In earlier votes on the bill, both the House and the Senate approved a rider that would require President Obama to make a determination within two months whether to issue TransCanada a permit to build the $7-billion, cross-border pipeline.
The House is expected to vote Friday on the Senate version of the payroll bill that includes a provision directing the administration to make a decision on Keystone XL within two months. The Senate version also acknowledges that the State of Nebraska must conclude its environmental assessment of the planned rerouting of the line around its ecologically sensitive Sand Hills region, a process that could take nine to 12 months.
Analysts warn the short deadline has increased the risk that the Obama administration will refuse to issue the required permit. The State Department has repeatedly warned that if the legislation passed it would have to reject the permit because the two-month deadline does not provide adequate time for a proper review of the changed route.
In November, the administration announced it was delaying the decision until early 2013 to allow time to assess the environmental impacts of the new Nebraska route. Critics argued the White House was punting the decision until after the November, 2012, election.
The congressional action is now pushing the Keystone XL project "to the brink," said Robert Johnston, director of energy research for Washington-based Eurasia Group, a political risk consultancy.
"There is a growing risk that the Republican push to link the approval of the project to must-pass payroll extension could backfire, at least from the prospective of their stated energy policy goal in favour of the pipeline," Mr. Johnston said in a note to clients.
House Republicans appear to be willing to sacrifice the pipeline to political advantage, which they believe would accrue to them if Mr. Obama kills a project that supporters have extolled as a major job creator.
However, National Bank analyst Pierre Fournier argued the employment and energy security rationale for the pipeline will trump environmental concerns, and that the administration will approve it, even if it is forced to shorten its review period.
"The rejection of the pipeline is clearly contrary to the economic and geopolitical interests of the United States.," Mr. Fournier wrote in a report Thursday. "Keystone enjoys majority support in both houses of Congress, and from the public."
For its part, TransCanada has said it welcomed the congressional support for the pipeline. The company said it would not begin building north of Nebraska until the state had concluded its environmental assessment and formally approved the route.
TransCanada spokesman Shawn Howard said Thursday the pipeline has been rigorously studied and the only outsanding work is a review of a 65-mile rerouting in Nebraska.
"There are some fairly straightforward questions that need to be addressed and it is not as complicated as some people make it out to be."
But it is eager to commence construction of the southern leg of the XL pipeline that would connect the existing terminus at Cushing, Okla., with the major refinery hub on the Gulf Coast. TransCanada's original Keystone pipeline, which began transporting crude in February, delivers oil sands bitumen to Cushing, and has added to a supply glut that has driven down prices for Canadian oil.
The Canadian government has lobbied aggressively to win approval for the pipeline, which it says is needed to ensure growing oil sands production finds attractive markets. Prime Minister Stephen Harper responded to threats that the Obama administration would turn down the Keystone project by vowing to expand Canada's oil exports to Asia.
However, proposals to ship crude through British Columbia face a lengthy and heated review process, given adamant opposition from first nations communities in British Columbia.
With a file from the Associated Press