Can Congress Capture Control Over Keystone?

With Memorial Day marking the effective kickoff of summer for a lot of folks, energy industry types and observers of the sector are awaiting President Barack Obama's decision, expected by fall, on whether to approve construction of TransCanada's (NYSE: TRP  ) proposed Keystone XL pipeline. There is, however, a possibility that the president may ultimately be preempted from making that decision.

In a lead-up to the holiday weekend, Republican House members, along with 19 of their Democrat colleagues, voted 241-175-1 to wrest authority for rendering a decision on the line from the president and transferring it to the Congress. In the process they squashed several proposed amendments, including one by Rep. Rush Holt (D-N.J.) that would have required all of the crude transported by the pipeline -- U.S. and Canadian -- to be refined and sold in the U.S.

Who's in charge here?
The obvious question now becomes whether the Senate is likely to go along. The betting would obviously fall on the side of the Democrat-controlled upper house -- with Nevada's Sen. Harry Reid at its helm -- balking at commandeering authority over the line from the president. But that wager may be overly hasty.

In March a bipartisan bill, which also would transfer Keystone authority to the Congress, was introduced in the Senate. Its authors were Sens. John Hoeven (R-N.D.) and Max Baucus (D-MT). Indeed, the Big Sky senator is hardly alone among those in his party pushing for a bill that would guarantee approval for the controversial 830,000-barrels-per-day line that would connect Hardisty, Alberta, in the midst of Canadian tar sands country, with refineries in and near Port Arthur, Texas.

Legislators in much of the Midwest -- not to mention Texas, Oklahoma, and Louisiana -- are obviously attracted to the notion of the jobs that would result from a Keystone approval. Estimates of the number vary widely, but it seems that several thousand employment opportunities would result from a Keystone imprimatur.

In addition, those favoring the line cite a reduction in U.S. dependence on OPEC crude, especially that arriving from politically wobbly Venezuela. And there clearly would be benefits to Canada's GDP, not to mention property taxes that would be collected in our country over the life of the project.

The opposition points to the extra greenhouse gasses that they maintain would enter the atmosphere each year, along with potential dangers to human health and the possibility for pollution of land and water. This, despite the proposed route having been altered to avoid environmentally sensitive areas of Nebraska.

Majority backing
Now, with a Pew Research report indicating that two-thirds of the U.S. public favors the project, the key question becomes one of ultimate constitutional authority in a clash over the $5.3 billion pipeline. The Washington Post tackled this conundrum recently and ended up feeling very strongly -- both ways. For starters, the paper quoted a 2012 Congressional Research Service report that states:

Article I, Section 8 of the Constitution authorizes Congress to "regulate Commerce with foreign Nationals." Whereas any independent presidential authority in matters affecting foreign commerce derives from the President's more general foreign affairs authority, Congress's power over foreign commerce is plainly enumerated by the Constitution, suggesting that its authority in the field is preeminent.

So far, so good. However, the Post went on to say that "to complicate matters, a 2013 CRS report notes that a 2010 ruling by the U.S. District Court for the District of Minnesota found the president had the right to issue international pipeline permits because Congress had not challenged this authority over a period of several years." The article arrived at the obvious conclusion that whichever way a clash between Congress and the president might tilt, the courts would be the final arbiter of a decision on the line.

Will they simply halt production?
Civics lessons aside, the contention that all manner of greenhouse gases would be unleashed into the atmosphere by construction of Keystone is difficult to fathom. Do opponents of the line really believe that, given a presidential suppression of permission to build the line, our Canadian neighbors would simply shrug their shoulders and summarily cease all oil sands production in Alberta?

Hardly. One of two alternatives -- or perhaps both -- would likely occur: Transportation of the Canadian bitumen into the U.S. would continue by more dangerous truck and rail. Or, even more ominously, an alternative pipeline could be constructed between Alberta and British Columbia to facilitate substantially increased transport of Canada's crude to China.

It's hardly inappropriate for Americans to become somewhat jaundiced about expanding Chinese incursions into North America. Those would include Sinopec's (NYSE: SNP  ) nearly $5 billion stake in Syncrude Canada, the world's leading oil sands producer, CNOOC's (NYSE: CEO  ) multiple U.S. partnerships with Chesapeake (NYSE: CHK  ) , and its recent $15.1 billion purchase of Canadian producer Nexen. 

Foolish takeaway
Study, consideration, research, and yammering about the advisability of the pipeline has now consumed nearly five years. American Petroleum Institute President Jack Gerard may have summed up the interminable kerfuffle logically when he stated: "The pipeline is clearly in the national interest and most Americans agree. After four comprehensive federal reviews and a Nebraska review, the analysis is unwavering: Keystone XL is environmentally sound." 

In any event, stand by for more protracted political and legal wrangling.

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