Keystone Clears Hurdles, Stage Set for Washington Showdown

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The Keystone XL oil pipeline cleared two hurdles on Friday, setting up a showdown between Congress and President Barack Obama who has raised new questions about the project after more than six years of review.

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Following months of deliberation, the Nebraska Supreme Court allowed a route for the pipeline to cross the state, shifting the debate over TransCanada Corp's project fully to Washington, where Republicans now in control of Congress are seeking to force its final approval.

Hours later, the House of Representatives passed a bill 266 to 153, with 28 Democrats in support of the project. The Senate will debate a Keystone bill next week, but White House officials said Obama would reject the legislation.

"If presented to the president, he will veto," spokesman Eric Schultz said in a statement.

Obama has criticized the pipeline recently saying it would do little to cut prices for U.S. consumers and that it would mainly benefit the company as the petroleum would eventually be shipped abroad.

In Nebraska, the legal question narrowly focused on whether former Governor Dave Heineman had a right to bless the route of the pipeline in his state. The pipeline would carry up to 830,000 barrels of oil per day mostly from Canada's oil sands to Nebraska, en route to Gulf Coast refineries.

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But the court was deadlocked, which amounted to ruling in the company's favor.

The pipeline has galvanized environmentalists who see it as an emblem of fossil fuel dependence, and energy interests who see a Canada-to-Texas pipeline system as a tool to spur more energy production in North America.

Obama has said he could not endorse a project that meaningfully worsens climate change and the issue could become one of the more controversial of his second term.

But Congress may yet settle the matter if Republicans can surmount an Obama veto or attach a Keystone provision to must-pass legislation, such as a spending bill or a wider energy measure.

Senator John Hoeven, a North Dakota Republican who is sponsoring the legislation, has said he has 63 votes for the bill, four short of the number needed to overturn any veto.

The court's ruling allows the U.S. State Department to decide whether the pipeline meant to carry Canadian oil sands petroleum would be in the country's interest, a necessary step for the cross-border project.

Environmentalists oppose Keystone since it could help expand emissions-intensive development of the oil sands.

Obama has said his administration could not measure the project's impact on the climate before the Nebraska Supreme Court ruled. Friday's decision cleared the way.

 

(By Patrick Rucker and Timothy Gardner; Additional reporting by Aruna Viswanatha, Jeff Mason and Amanda Becker in Washington; Editing by Alden Bentley and Tom Brown)