American Oil and Gas Reporter - January 2012 - 28

Congress Closes Year

Expedited Keystone Decision Passes
By Del Torkelson
WASHINGTON-After three stunning
reversals of fortune in less than a week, a
rider attached to legislation that passed
Congress in late December will require a
decision from the Obama administration
on a presidential permit for TransCanada
Corp.'s planned Keystone XL crude oil
pipeline.
Before the House passed a two-month
payroll tax holiday that the Republican
majority initially rejected, it appeared
likely that the Keystone provision would
perish as collateral damage in an unrelated
showdown-an ironic outcome considering
how several days before Keystone appeared to be a poison pill that would prevent the Senate from passing a payroll
tax bill.
Although both chambers passed payroll
tax legislation in the waning days before
Congress' holiday recess that included a
provision that required the U.S. State
Department to expedite a Keystone decision within 60 days, the House balked at
the Senate's plan to extend the tax holiday
by only two months, according to published reports.
House Speaker John Boehner, R-Oh.,
called for a conference committee to resolve discrepancies between the House
and Senate bills, but the fact that the
Senate already had adjourned left the
House without a negotiating partner.
Shortly thereafter, reports say, Boehner
conferred with Obama and Senate Majority
Leader Harry Reid, D-Nv., and the House
acquiesced to the Senate's two-month
extension in exchange for some technical
corrections and a House-Senate conference
in early 2012.
As for why the Senate would pass
and the president would sign legislation
containing the Keystone amendment after
earlier insistence they would not, Independent Petroleum Association of America
Vice President of Government Relations
Lee Fuller pleads ignorance. "First, Obama
was going to veto any bill with the Keystone language," Fuller recalls. "Then he
announced if they put it in he was going
to deny the permit, so why include it?
But with time, his position has grown increasingly vague."
Back And Forth
December began with Senate Democrats discussing a plan that published
reports say would have cut the 2012
payroll tax from 6.2 percent to 3.1 percent
for employees and employers with payrolls
28 THE AMERICAN OIL & GAS REPORTER

smaller than $5 million a year. Media reports also indicated that Reid wanted any
such legislation to include a surcharge
on incomes above $1 million, a provision
that most conventional wisdom presumed
would prove dead on arrival in the House.
According to press accounts, House
Republicans initially expressed skepticism
about increasing the deficit, but then
found ways to offset the payroll tax cut
with measures that included extending
the federal pay freeze, government-employee pension reforms, and modest
Medicare means thresholds. They also
attached a provision that would have required the Obama administration to issue
a determination on Keystone XL's presidential permit within two months.
Numerous analysts agree a Keystone
ruling poses a challenging political calculus
for the president. A permit risks offending
the green portion of the Democratic base,
but rejecting the pipeline not only would
defy polls that show a firm majority of
Americans back the project, it also would
contradict the wishes of another traditional
Democratic constituency. Numerous labor
unions have expressed support for Keystone XL, including the Teamsters, AFLCIO, Laborers International Union of
North America, and the United Association
of Plumbers and Pipefitters, analysts point
out.
The payroll tax cut's Keystone language
could force the president to decide on
the pipeline during an election year instead
of keeping the matter at bay until 2013, a
scenario rendered likely by the State Department's Nov. 10 announcement that it
would examine pipeline routes that did
not traverse Nebraska's ecologically sensitive Sand Hills region (AOGR, December
2011, pg. 32).
Senate Democrats spent much of December indicating to the media the House's
Keystone language was a nonstarter, and
the president publicly vowed to veto legislation carrying such a provision. However, that changed on Dec. 17, when the
Senate passed a two-month payroll tax
cut that dropped the millionaire surcharge
but included a Keystone amendment. As
the Senate adjourned, press accounts
quoted the president as willing to sign
the bill.
The surprise many Washington observers expressed at the Democrats' concession grew as the House on Dec. 20
decided against accepting the Senate bill,
and instead passed a yearlong payroll
tax cut, after which Boehner called for a
House/Senate compromise that would re-

quire the Democrats' cooperation. Reid
and House Minority Leader Nancy Pelosi,
D-Ca., were quoted saying they would
not appoint members to a conference
committee. A couple days later, the House
reversed course, which resuscitated the
otherwise dead Keystone provision.
Streamline Or Stymie?
The legislation provides the Obama
administration 60 days to grant a permit
unless the president determines Keystone
XL does not serve the national interest, a
determination that the legislation says he
would be required to justify to congressional leadership "including consideration
of economic, employment, energy security,
foreign policy, trade and environmental
factors." If the president issues no determination after 60 days and TransCanada's
application meets all requirements, the
legislation continues, the Keystone permit
"shall be in effect by operation of law."
Furthermore, the amendment states that
the final environmental impact statement
issued by the secretary of state on Aug.
26, 2011, satisfies all requirements associated
with the National Environmental Policy
Act and the Historic Preservation Act.
Similarly, while sections in the bill dealing
with the pipeline's Nebraska portions allow
the governor to submit a modified route,
failure by the president to act within 10
days on the governor's proposal also would
automatically approve the permit.
Fuller says his reading of that language
suggests presidential inaction would allow
the pipeline to go forward. "It doesn't
give him a yes or no," he assesses. "He
has to stop it on the basis that it is not in
the national interest. The bill deems the
environmental analysis already undertaken
under federal NEPA requirements as
complete and acceptable. That makes it
harder for the Obama administration to
say it is unsatisfied with the environmental
analysis."
Nevertheless, in the days leading up
to the payroll tax extension passing, some
administration staff were quoted as insisting the Keystone provision would
force the president to deny a permit on
the grounds that 60 days were insufficient
to meet NEPA requirements. White House
Communications Director Dan Pfeiffer
said on Twitter in mid-December that a
60-day review "virtually guarantees that
the pipeline will not be approved."
National Economic Council Director
Gene Sperling said on television that
State Department staff "made clear before
this legislation was even voted on that, if
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