Emboldened Republicans to Strike Early on Keystone Pipeline Approval

Senate Republicans will charge ahead early in 2015 with a bill to approve the long-stalled Keystone XL oil pipeline from Canada, a move that would back President Barack Obama into a corner and set the tone for how the party taking control of Congress will govern the next two years.

The $8 billion project would deliver heavy Canadian oil sands crude from Alberta to Nebraska and make it easier to deliver oil from North Dakota's Bakken region to the U.S. Gulf Coast. It has languished for six years awaiting presidential approval, which is needed because the pipeline crosses a national border.

Legislation earlier this year to approve the pipeline in a proposed end-run around the administration already had an estimated 57 votes in the 100-member Senate, and is now thought to have a filibuster-proof 61 votes after Republican gains in Tuesday's mid-term elections.

In addition, Republican Senator John Hoeven of North Dakota, who has authored several Keystone bills in the past, will propose a new bill for Congress to use the Foreign Commerce Clause of the U.S. Constitution to green light the pipeline without the need for presidential approval.

"I've got a bill right now that's got about 56 co-sponsors," Hoeven, who has fought for years in Congress to advance such a bill, told Reuters. "And with the election results, we'll have over 60 who clearly support the legislation."

Shares in TransCanada, the builder and owner of the XL and other branches of the Keystone pipeline system, rose as much as about 3 percent on Wednesday on renewed optimism that the pipeline will finally go ahead.

Political observers look for Mitch McConnell, the expected new Senate Majority Leader, to quickly back a Keystone bill because it has bipartisan votes and the support of key constituencies, such as organized labor.

Hoeven's North Dakota counterpart Heidi Heitkamp, said she would do what she did a few months ago when she got 10 Democratic senators to support full approval of the pipeline.

"I'll continue to work with both sides to get it done," she told Reuters in a statement, adding that its approval will "allow us to move on and focus on the larger energy picture in this country."

Democrats Tom Carper and Chris Coons, both from Delaware, have also indicated previously that they support the pipeline.

"If McConnell plays his cards right, he might be able to get the Democratic votes necessary to get a bill out of the Senate. Whether or not the president would sign such a bill is a whole other question," said Jim Manley, a former adviser to current Senator Majority Leader Harry Reid.

Some observers think McConnell will try to set a constructive tone for the new congress by starting with a Keystone bill rather than more confrontational measures, such as blocking coal regulations proposed by the Environmental Protection Agency (EPA).

"There is a lot of concern about not overreaching and being seen as extreme. They want to show that they can govern," said a former Republican aide and political consultant.

Keystone legislation would also force Obama to either veto a measure with bipartisan support, or let a project advance that he has vowed to stop if certain emissions criteria are not met.

"The main result would be Republicans getting it on the record and using it to demonstrate an obstructionist Democrat-Obama stance on the issue," said Divya Reddy, director of global energy at political risk consultancy Eurasia Group.

The pipeline has become a symbol for environmental groups and the oil industry, galvanizing the green movement and forcing the White House to focus on climate change.

For industry, the delay in its approval has come to represent what they say is the Obama administration's over-regulation and hindering of energy development.

Energy markets have largely moved past Keystone, though, since alternative means are already on hand to move oil around the country.

For now, the pipeline's proposed route through Nebraska is still entangled in a legal battle that could potentially drag on through 2015.

Beyond Keystone, Republicans could look for other energy priorities that could garner Democratic support, including a bill to speed up liquefied natural gas export approvals and increase reliability of the electric grid.

"The name of this game is negotiation, not necessarily legislation," said Scott Segal, head of the Policy Resolution Group at industry lobbying group Bracewell Guiliani.

But as he signaled on the campaign trail, McConnell said from his Kentucky headquarters on Wednesday that he is prepared to play hardball on Republican priorities, such as battling EPA carbon regulations.

"We will use the power of the purse to try to push back against this over-active bureaucracy and of course we have a huge example in this state with the war on coal," he said.

(By Valerie Volcovici; Additional reporting by Roberta Rampton, editing by Ros Krasny, Alden Bentley and David Gregorio)