Amid Oil Price Drop, White House Vows Keystone Veto

Amid Oil Price Drop, White House Vows Keystone Veto
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The White House on Tuesday locked horns with congressional proponents of the proposed Keystone XL pipeline, issuing a much-anticipated veto threat tied to legislation expected to land on President Obama’s desk this month.

The new Congress’s first clash of executive-legislative wills occurred as world petroleum prices plummeted below $50 a barrel. Flagging demand and a copious global supply are partially responsible for the cheap gas that has cheered consumers but rattled global financial markets.

As promised, Senate Republicans made Keystone their top priority on Tuesday, introducing legislation authorizing construction of the pipeline as their first bill of the 114th Congress.

When the House passed a similar bill in 2013, Obama issued a veto threat. Josh Earnest, White House press secretary, said the president won’t hesitate to do it again. “I can confirm for you that if this bill passes this Congress, the president wouldn't sign it, either,” Earnest told reporters.

The GOP-controlled Congress hopes to vote this week to force Obama to approve construction from Canada through the Midwest. But the cost-benefit arguments for the project, which would move oil sands from Alberta to refineries on the Texas coast, often bubbled to the surface.

Colorado Gov. John Hickenlooper, who led a small National Governors’ Association meeting with Obama at the White House Tuesday, defended the State Department’s prolonged evaluation of the proposed pipeline. The president, who has expressed environmental and economic reservations about the project, is also still weighing the pros and cons. His analysis remains incomplete after delays and a pending Nebraska court decision that could come as early as Friday.

Hickenlooper, who worked for five years as an oil company exploration geologist before entering politics, suggested that TransCanada, the company that wants to build the pipeline, and its investors must be relieved the pipeline is not under construction while crude prices have been dropping. He said that without a sustainable economic rationale for construction in the near-term, it is “good to put it off for a couple years.”

“With the price of oil down as low as it is, I don’t think the Keystone pipeline makes sense,” Hickenlooper, the chair of the NGA executive committee, said following the White House meeting.

Congressional Republicans argue Keystone would create thousands of U.S. construction jobs and offer another opportunity for the United States to become less dependent on Middle Eastern oil. Proponents dismiss sagging petroleum prices as any reason to pause, even as they concede the argument to urgently green light the project has been somewhat undercut by prices that make tar sands less attractive to pipe across North America.

“Most of us don’t think it’s going to stay down,” Utah Gov. Gary Herbert, the vice chair of the NGA executive panel, said of the current low price of crude. Keystone proponents are focused on long-term infrastructure needs for domestic oil and gas, rather than current valuations, he added.

“It’s not if, but when” crude prices will rise, echoed North Carolina Gov. Pat McCrory, who voiced support for the Keystone legislation.

Obama has argued the project would primarily benefit Canada, not the United States, by moving that country’s tar sands oil -- expensive to extract and then to refine -- at a lower cost to the Gulf Coast via pipeline than by truck or rail.

“At issue in Keystone is not American oil -- it is Canadian oil that is drawn out of tar sands in Canada,” Obama said in December. “That oil currently is being shipped out through rail or trucks and it would save Canadian oil companies and the Canadian oil industry an enormous amount of money if they could simply pipe it down through the United States and through the Gulf.”

What is advantageous for Canada is not necessarily in the U.S. interest, the president argued to reporters. “It’s very good for Canadian oil companies and it’s good for the Canadian oil industry. But it’s not going to be a huge benefit to U.S consumers. It’s not even going to be a nominal benefit to U.S. consumers,” he said

The president and his administration have expressed frustration that congressional Republicans tout Keystone’s great potential as an economic engine. The administration says the claim is not supported by data.

Reacting to Obama’s veto threat, Speaker John Boehner and Senate Majority Leader Mitch McConnell issued statements Tuesday accusing the president of saying “no to more American jobs."

Boehner asserted that “fringe extremists in the president’s party are the only ones who oppose Keystone,” a charge that will be tested if House and Senate Democrats are needed by the White House to back Obama’s veto.

The number and nature of U.S. jobs that would result from the Keystone project are hotly debated. Opponents accuse proponents of inflating the numbers, and supporters say the  administration minimizes the permanent new jobs. Fact-checking published by The Washington Post this week, which relied on available administration data and interviews, concluded that Keystone XL might add at least 4,000 new construction jobs, and represents “0.02 percent of annual economic activity across the nation.”

The newspaper said the overall economic impact would be barely “a ripple,” which is not what economists believe consumers are experiencing with current rock-bottom gas prices.

Capitol Hill’s prioritization of Keystone as a way to thwart Obama and contrast two political parties this week lost some of its urgency as global oil markets shifted.

McConnell said he expects the Senate to engage in a vigorous debate about energy policy this week before approving a measure to force Obama’s hand. The White House said the required assessment of facts has a ways to go.

Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com.  Follow her on Twitter @ASimendinger.

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