OIL AND GAS:

Top Republicans warn of benefit to China if Keystone XL isn't approved this year

The $7 billion Keystone XL oil pipeline, hailed by labor leaders for its job-creation potential but opposed by environmentalists, could be canceled and its prospective crude diverted to China if the Obama administration does not act on it this year, two top House Republicans warned this week.

The remarks by Energy and Commerce Chairman Fred Upton (R-Mich.) and Rep. Ed Whitfield (R-Ky.), one of his top lieutenants, come as the GOP prepares to move legislation that would require the administration to rule on a permit for the U.S.-Canada oil pipeline by Nov. 1. That bill touched off partisan wrangling this week as committee Democrats suggested that the pipeline risks raising gas prices in the Midwest (E&E Daily, May 24).

Whitfield said yesterday that he hopes to see floor consideration of the Keystone XL bill before the August recess, adding that he believes the project would be canceled if the State Department does not decide on the pipeline before year's end.

If the 1,700-mile link is not built, Whitfield added, its sponsor is likely to "start sending some of this oil to China."

Upton offered a similar prediction this week, telling Fox Business Network that Canada has told him, "'We're really waiting for the State Department, because ... if you don't make the decision before the end of the year, we're going to look at building a pipeline maybe to China. Putting it on a boat.'"

That hard deadline goes a step further than testimony that Alex Pourbaix -- a vice president at the company behind Keystone XL, Calgary, Alberta-based TransCanada Corp. -- delivered Monday before Whitfield's subpanel.

Stating that the company had no role in persuading House Republicans to take up its banner and has not "taken a public position on the proposed legislation," Pourbaix added: "[O]ur perspective is that we have had a very comprehensive process ... and we take comfort that we are seeing an increasing focus to have a decision on this permit before the end of the year."

Meanwhile, green groups working to derail the pipeline's permit bid contend that construction of Keystone XL would not stop the oil-sands crude it is set to carry from heading to Chinese markets.

"Piping Canadian oil across America does not make it American oil," National Wildlife Federation Senior Vice President Jeremy Symons said Monday. "The [Keystone XL] pipeline scheme opens the Canada-China oil route that oil companies have long sought. The pipeline will take Canadian oil that is already flowing to America in the Midwest refineries, and instead send it to refineries on the Gulf Coast where they can export it."