Senate Kills Keystone XL Bill, But Republicans Promise Redo in January

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--By the narrowest of margins--one vote--the U.S. Senate on Tuesday rejected a bill authorizing construction of the controversial Keystone XL crude oil pipeline. Senate Majority Leader Harry Reid (D-Nev.) only allowed the bill to come to a vote in an effort to help Sen. Mary Landrieu (D-La.) win a run-off election in her state next month. All 45 Republican senators supported the bill, as did 14 Democrats--some of them "lame ducks" who will be replaced by Republicans in the next Congress. But with only 59 votes, the measure fell one vote short of the 60 needed to end debate in the Senate.

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"We are disappointed that U.S. politics continue to delay a decision on Keystone XL," a spokesman for Canada's Natural Resources Minister told Reuters after the vote. Russ Girling, president and chief executive of TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), the pipeline's developer, told the news agency his company will not give up: "We will continue to push for reason over gridlock, common sense over symbolism, and solid science over rhetoric to approve Keystone XL and unlock its benefits."

In a statement issued before Tuesday's Senate vote, Girling cited two dozen public opinion polls showed roughly 66% of the Americans polled supported building Keystone XL. He added: "It is disappointing that since 2008, almost 10,000 miles of oil pipelines have been constructed in the United States--the equivalent of eight Keystone XL pipelines--and yet our project sits idle, all while the U.S. continues to import over 7 million barrels of oil (per day) from unstable countries that do not share American values. It makes no sense to receive oil from the Middle East and Venezuela, and not from a friendly neighbor in Canada."

"We put 9,000 Americans to work building the first two phases of the (Keystone) pipeline back in 2009/2010," Girling continued. "We hired another 5,000 to build the southern leg of the project two years ago, and we want to put 9,000 more Americans to work to finish what we started. This project is truly in the national interest of America."

TransCanada is developing the $5.3 billion, 1,179-mile pipeline, which has been stuck in partisan political limbo in Washington, D.C., since 2008. Keystone XL would transport up to 730,000 barrels per day (BBL/d) of Canadian oil sands crude and an additional 100,000 BBL/d of Bakken crude from Hardisty, Alberta, to Steele City, Nebraska, and then on to Cushing, Oklahoma, where it would interconnect with other pipelines leading to the Gulf Coast or the Midwest.

Because the project would cross international borders, the U.S. State Department is the lead agency in determining if the building the pipeline is in the U.S. interests. The State Department has produced several studies concluding the pipeline would not harm U.S. interests. Earlier this year, the Nebraska Supreme Court decided it would consider the legality of Nebraska Gov. Dave Heineman's decision to allow the pipeline to be built in the Cornhusker State. The State Department said it would postpone indefinitely its decision on Keystone XL until the Nebraska court reached a decision.

For more information on Keystone XL, see May 28, 2014, article - Has the Keystone XL Pipeline Project Become a Zombie? and February 3, 2014, article - State Department: Keystone XL Unlikely to Affect Canadian Oil Sand Extraction.

Click on the image at right to see a map of the proposed Keystone XL Pipeline.

The Senate's 59-41 vote Tuesday disappointed business and energy interests. Environmental groups celebrated the Senate's decision, while warning the bill will come back when the Senate passes to Republican control next January. The Senate bill, S. 2280, was a mirror of a bill already passed by the GOP-led House of Representatives.

President Barack Obama did not welcome the bill, and his spokesperson suggested the president would veto it if it came to his desk. If it comes to that in the next Congress, to be seated in January, the question becomes whether both houses would have the two-thirds majority necessary to override a presidential veto and enact the bill into law. Overriding a presidential veto is comparatively rare: Senate sources estimated that presidential vetos are overridden only about 10% of the time.

Commenting on Tuesday's Senate vote, Sen. John Hoeven (R-N.D.), said: "I believe we will have the votes to pass the bill in January when a number of new Senators who support my legislation take office and the new Congress begins. At that time, I will reintroduce the bill, possibly as part of a broader energy package or appropriations bill that the president will not want to veto."

Senate Minority Leader Mitch McConnell (R-Ky.), who will become majority leader in January, added: "We came up one vote short on the Keystone pipeline today. This will be an early item on the agenda in the next Congress, and I'm very confident that Senator Hoeven's bill will succeed and we'll be able to get it down to the president."

On the other side of the spectrum, the Sierra Club issued a statement of victory, combined with a call for additional donations to fight Keystone XL next year: "The U.S. Senate came closer than ever to approving the Keystone XL pipeline today. Just one vote stood between us and losing one of the most important battles yet on climate change. Simply put, the vote came Way. Too. Close. And with the new Senate being sworn in in January, you can bet this fight is about to get even harder."

"Keystone XL means wolves dying at gunpoint for oil, clean water poisoned with cancer-causing chemicals, clean air choked off with even more carbon," continued the Sierra Club statement. "But it's more than this. Keystone XL is our line in the sand. The place where we planted our foot firmly down and said NO MORE."

The group promised "an aggressive campaign" to make sure Obama does not backslide and approve the pipeline.

When Congress reconvenes in January, Republicans will have a 53-46 majority in the Senate. A runoff election will be held in Louisiana next month to determine the winner of a contest pitting incumbent Democrat Mary Landrieu against Republican challenger Bill Cassidy. Senate rules permit endless debate of an issue unless 60 votes can be rounded up to invoke cloture and force a vote on a bill. Next January, Republicans will be able to set the agenda and schedule votes.

TransCanada's Girling and other industry experts say that stopping Keystone XL will not keep Canadian oil sands crude off the market. For more on this, see December 2, 2013, article - Stopping Keystone XL May Not Keep Canadian Oil Sands from Reaching Gulf Coast.

Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries, has long believed Canadian heavy crude will find a way to get into the U.S.--if not by Keystone XL, then by another pipeline or by railcar. Failing that, Canada will find a way to export the crude. For more on that, see January 11, 2012, article - Delays in Pipeline Projects Won't Halt Development of Canadian Oil Sands, a "Navigating the Currents of Change" Webcast on Industrialinfo.com.

"There's an old saying that people who like to eat sausage should not watch it being made, lest they lost their taste for it," Davis said after the Senate vote. "There are a lot of people in the Oil Patch who are thoroughly disgusted with Washington's dysfunction over Keystone XL. Falling crude oil prices may make the economics of building that pipeline a bit trickier. But we still see that pipeline as an important part of an expanding network of pipes and plants that bring oil out of the fields and into the gas tanks of U.S. drivers."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.