A copy of H. R. 5682, a bill which would approve the Keystone XL Pipeline, is arranged for a photograph in Tiskilwa, Illinois, U.S., on Friday, Nov. 14, 2014.Daniel Acker/Bloomberg
TransCanada Corp. is once again at the centre of an escalating political battle in Washington, as the Congressional Republicans push forward legislation that would approve the Keystone XL pipeline despite the threat of veto from President Barack Obama.
As the Harper government applauded in Ottawa, the Republican-dominated House of Representatives passed legislation Friday that would force approval of the controversial pipeline, which is designed to carry oil sands bitumen to the massive refining hub on the U.S. Gulf Coast.
For its part, TransCanada weighed in with a rebuttal of Mr. Obama's skeptical statement Friday, in which he played down the importance of the pipeline to the United States' energy needs.
"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," Mr. Obama said, evidently frustrated with questions about TransCanada's controversial project while he was standing alongside fellow Nobel Peace Prize winner Aung San Sui Kyi.
TransCanada spokesman Shawn Howard – who applauded the Congressional vote – said the KXL pipeline will carry crude from both Alberta and the U.S. Bakken field, and is clearly in the U.S. national interest, contrary to Mr. Obama's characterization. "American refineries need the oil that we will transport – from both Canadian and American oil fields – to create products that we all rely on," he said.
While exports from Canada to the U.S. are growing by other routes, the company and its shippers insist the Keystone XL line is still a much-needed link between Alberta's oil sands and the Gulf Coast refiners.
Ottawa has long urged Mr. Obama to quickly approve Keystone XL and welcomed the vote.
Natural Resources Minister Greg Rickford said the Harper government "will continue to advocate that the Keystone XL pipeline be approved without further delay."It's too early to say whether the Republican effort will result in victory for the Calgary-based company, which filed its Keystone XL application more than six years ago. Or indeed whether the partisan fight will backfire on the Canadian pipeline firm by stiffening the resolve of President Barack Obama to resist Republican pressure on the polarizing issue that is seen by many environmentalists as a litmus test for the President's climate agenda.
Given the fact that the Republican-led House has passed similar bills several times, Friday's vote was the easy first step in a renewed effort by backers of the project to forge bipartisan support for Keystone XL.
Much tougher will be the Senate early next week – where Democrats still have a majority until January. Getting the 60 votes needed to avoid a filibuster and pass a similar pro-Keystone XL measure will be a close. Louisiana Senator Mary Landrieu – a Democrat who supports the project – is eager to get a bill passed, as she is looking to demonstrate her clout ahead of a run-off election in her home state where neither she nor her Republican opponent won a majority of votes in the midterms earlier this month.
In any event, a stand-alone Keystone XL bill demanding the President approve the project would be easy to veto. The White House has already made clear that's what Mr. Obama intends to do. And there is little chance the current Senate could muster the 67 votes needed to override the veto.
A more substantive challenge may come early next year when the Republican midterm victors take control of the Senate. The next Congress will have Republican majorities in both houses. Then a Keystone XL approval provision tucked inside must-pass legislation – such as a critical funding bill – could be sent to Mr. Obama forcing him to make a much tougher decision on whether to veto. Even then, Republicans will need at least a dozen Democrats in the Senate to be able to override a presidential veto.
While Mr. Obama has sounded increasingly skeptical about the value of Keystone XL, he has said he will let the process play out before making a final decision. That includes a court case in Nebraska challenging the state's approval of the current pipeline route in which a decision is expected early next year.
Should the state court rule in favour of TransCanada, Mr. Obama may have little ground on which to reject the pipeline. The U.S. State Department has concluded the project will not lead to increased greenhouse gas emissions from the oil sands, though environmental groups have denounced that finding.
But at six years and counting since first being proposed, is the pipeline still needed?
Rail capacity has grown and TransCanada's rival, Enbridge Inc. is proposing an expansion that would add as much as 600,000 barrels of day of capacity from Western Canada and the U.S. to the Gulf Coast. Refiners that have the capacity to process up to 2.7-million barrels a day of heavy oil, and currently, are only accessing 1.8-million barrels due to a shortage from traditional suppliers in Mexico and Venezuela.
Valero Energy Corp. – the U.S.'s largest refiner – remains eager to see Keystone XL built, spokesman Bill Day said.
"Valero's Gulf Coast refineries currently receive some Canadian crude by rail, but we would like to increase deliveries of Canadian crude via Keystone XL, which will be a very efficient method of bringing heavy crude to our large, complex refineries on the Gulf Coast that process heavy crude," Mr. Day said in an e-mail. "Keystone XL will help Gulf Coast refiners like Valero replace higher-cost heavy crude from overseas with lower-cost heavy crude from North America."
"We do need the Keystone pipeline to move the growing volumes of heavy oil that we are expecting," said energy economist Jackie Forrest, of Calgary-based ARC Financial Corp. While costs have escalated for Keystone XL to $8-billion, Ms. Forrest said costs have risen for all transportation options. Even at the higher price tag, "Keystone would be more competitive than rail," she said.