KEYSTONE XL:

Pipeline shouldn't be part of payroll tax deal -- Reid

E&ENews PM:

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Senate Majority Leader Harry Reid (D-Nev.) today signaled that his party would not accept a GOP bid to override President Obama's rejection of the Keystone XL oil pipeline as part of a deal extending payroll tax relief past next month.

While not fully ruling out language revitalizing the Canada-to-U.S. pipeline -- which Republicans have adopted as their No. l energy issue since Obama denied it a permit Wednesday -- Reid reminded reporters that he had lambasted the project more than three months ago.

"If we want to wean ourselves from foreign oil, why would we allow a pipeline to be built for 1,700 miles to manufacture petroleum products to be shipped overseas?" Reid said. "That's the purpose of this."

Vowing to look at "reasonable proposals" from the GOP as part of bicameral talks on payroll tax cuts that began this afternoon, Reid added that undoing Obama's veto of the XL line "doesn't sound too reasonable to me."

The Democratic leader spoke as one of his chamber's Republican negotiators on the payroll tax opened conference talks by injecting Keystone XL back in the mix. Bipartisan support for the pipeline means that it "obviously ... will have to be discussed again" as part of a longer-term extension, Senate Minority Whip Jon Kyl of Arizona said today.

House Energy and Commerce Chairman Fred Upton (R-Mich.) agreed with Kyl, saying that Keystone XL "comes within the scope of this bill."

The senior payroll tax negotiator from Reid's chamber, Senate Finance Chairman Max Baucus (D-Mont.), is a pipeline supporter who could help Upton and Kyl add an XL-related provision to a final deal. Reid acknowledged today that Baucus, who frequently sparks the ire of the same liberals who helped bring down the pipeline, "is certainly a free agent."

Other Democrats who were tapped to work out a payroll tax cut deal suggested that rolling back oil and gas tax breaks could help pay for a longer-term extension. Such a proposal would run afoul of the GOP and conservatives in their own party but give Obama and most other Democrats a fresh election-year opening to hit the Republicans for their ties to the oil industry.