Never Say Die - Keystone XL Pipeline to Enter U.S. Presidential Election

Like Lazarus arising from the grave, or a vampire pulling a stake out of his chest, the controversial Keystone LX pipeline, designed to transport Alberta's crude oil sands output to American Gulf of Mexico, is apparently to become a component in the November U.S. presidential elections.

Increasingly evident Republican nominee Mitt Romney declared on 20 April during a speech to the Republican National Committee's State Chairmen's National Meeting in Arizona, "I will build that pipeline if I have to myself." Slyly portraying Obama as a renewable green energy tree-hugger opposed to traditional sources of energy Romney added, "He likes all of the energy sources that come from above the ground. So anything below the ground he doesn't like: Coal, oil, gas. We all like wind and solar. But we also like those below the ground."

The stakes are high, as it was Romney's first major appearance before Republican party officials as the party's presumptive presidential nominee. Enfolding the failure of the Keystone XL pipeline into larger policies of the Democratic Obama administration Romney added, "The president has failed."

The issue is one of energy security, on which the Obama administration is being set up to be portrayed as "weak" on America's strategic energy imports. According to the U.S. Energy Administration, the United States total crude oil imports now average 9.033 million barrels per day (mbpd), with Canada sending 2.666 mbpd southwards to the U.S., making it America's top source of oil imports.

Since 1967 Ottawa has sunk more than $97 billion into developing Alberta's oil sands, and assumed until recently that Keystone XL would funnel that output to U.S. Gulf coast refineries.

The political imbroglio has a long history. Beginning in 2005, Congressional Republicans and the oil industry touted the 2,147 mile-long Keystone XL 830,000 barrel per day (bpd) pipeline, running from Canada's Hardisty, Alberta oil sands to U.S. refineries on the Gulf of Mexico. Three years later, TransCanada Keystone Pipeline, LP (Keystone) filed an application for a Presidential Permit with the Department of State to build and operate the $7 billion, 36-inch  Keystone XL Project. The only minor fly in the ointment was Executive Order 13337, which directed the State Department to review applications for Presidential permits when a proposed project would cross an international border with the United States, which also directed the Secretary of State, or her designee, to consult with at least eight other federal agencies, and then issue a decision as to whether granting a permit is in the national interest.

And then, the pipeline turned into Washington's favorite political football.

On 10 November 2011, four days after 12,000 pipeline protestors encircled the White House, President Obama announced "the decision on the (Keystone XL) pipeline permit would be delayed until at least 2013, pending further environmental review."  The White House effectively rejected making a decision on the pipeline until the project had been reviewed, a process expected to take at least until after the November 2012 elections.

The next month House of Representatives passed a Republican bill, House Resolution 3630, the 369-page ''Middle Class Tax Relief and Job Creation Act of 2011,'' to extend the payroll tax cut, tying extending the payroll tax cut for 160 million workers for another year as well as extending long-term unemployment benefits. Approved 234 to 193, the legislation would extend a one-year break in the payroll tax due to expire at the end of the month, continuing the current payroll tax rate of 4.2 percent instead of allowing it to lapse and revert to its previous 6.2 percent level, a $1,000 difference for a family making $50,000. House Republicans, scenting blood, included a mandate to approve the pipeline, attached to extending the payroll tax deduction.

Rejecting the partisan politics, on 18 January the Obama administration rejected the Republican initiative, saying, "The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment."

Obama's unlikely ally? Nebraska's Republican governor, Dave Heineman - concerned about the Keystone XL's environmental impact, Heineman vowed to use every state legislative mechanism to derail the project.

The biggest unanswered question in the upcoming long, hot summer debate, rather than hoping that a controversial $7 billion relentlessly go forward, why Canada simply doesn't build refineries near the oil?

A question that moderators of the upcoming presidential debates might write on their 3" x 5" index cards.

Speaking of conventions, little is certain before the Republicans meet in Tampa in August beyond this - Nebraskan governor is most unlikely to deliver the keynote address.

By. John C.K. Daly of Oilprice.com