Keystone: Political drama far from over

It’s Keystone time. Republicans now control both Houses of Congress. The House has passed legislation to start up the pipeline process. Republican leaders in the Senate have put Keystone at the top of their legislative agenda. More, 80 percent of Republican voters support the KeystoneXL project.

This seems to be, finally, the end of a long, long process that began back in April 2008 when TransCanada announced the Keystone XL pipeline expansion project. In the six years and three months since the announcement, a monster array of federal and state government agencies, industry associations and citizen groups have legislated, negotiated, litigated and demonstrated in favour of the pipeline and against it.  Meanwhile the price of oil, about $140 a barrel in 2008, fell to around $55 in 2009, rose to $120 in 2011 and has fallen again to around $40 today.

The problem is that this is not playing out in Ottawa, and Congress is not the House of Commons. Legislation is infinitely more complicated on the south side of the border. Here are five parts of the political process that could change the game.

1. It’s Not Just a Majority in the U.S. Senate

Plot-wise, the drama is pretty simple – at least to begin with. The Republican majority in the Senate (54-46) can pass the legislation. But in the real life of the Senate, they need 60 votes to stop debate and bring the bill to the floor for a vote (this is called “cloture”). Given some Democratic support (nine Democratic Senators seem likely to vote for the legislation at this moment), they can probably accomplish this. But, then, 67 votes are required to override a possible (and likely?) Presidential veto. So, four more Democrats have to be recruited to the majority-Keystone side.

2. And There Are Amendments

But it is more complicated than how the Senate votes. Senate Majority Leader Mitch McConnell (and therefore, a Republican) has promised to allow an open amendment process on the Keystone bill. This opens the door to debate on a much broader set of issues which will drag out the process and may alter the balance of support for the bill. So far, three amendments have been put on the agenda for debate: some items from an energy efficiency package debated earlier in the Senate; a ban on exports of oil shipped through the pipeline; and a requirement that Keystone be constructed out of U.S. steel.

McConnell has also said that he will allow the Senate to vote on an amendment proposed by Independent Senator Bernie Sanders asking if members agree that climate change is impacting the planet. Other amendments may be put on the table – Republican Senator Ted Cruz has discussed an amendment that would lift the decades-old ban on crude oil exports, and fellow Republican Deb Fischer proposed an amendment that would prohibit the consideration of greenhouse gas emissions in the federal environmental review process for infrastructure and energy projects. (I know, you can’t make this stuff up.)

3. Democrats may yet divide and conquer

The Democrats have two strategies here – they can add amendments to the bill that would weaken Republican ardour for it, or they can add amendments that would make it more palatable to Democrats and possibly also the President. What they want most is to deepen the division between the ultra-red Republicans and the Republican leadership. McConnell’s problem will be to make sure that in satisfying his right wing he does not discourage the Democrats who have said they will support Keystone.

This process is likely to take several weeks, and will touch on a wide range of environmental and energy issues. McConnell could change his mind, of course, and not permit amendments. But this would prove to Democrats that he is not to be trusted and not to be supported.

4. Is a “Grand Deal” possible?

Meanwhile – more complications – negotiations will possibly go on with the White House, perhaps on some sort of grand deal to get the President to forgo his Keystone veto.  The Republicans would have to offer something that the President really wants – related, perhaps, to new rules on pay during illness or after childbirth, early education, tax reform or something similarly contentious – but something that would not damage the Republican leadership’s control over their troops. For McConnell, this path is dicey. Putting together a grand deal would show his ability to confront the President and bring home legislation at the top of the Republican list. But a bargain like this might well push his already rebellious right into outright civil war within the party.

5. Reconciling the House and Senate Bills

Finally, remember that if the bill passed by the Senate differs from the House bill, a Conference Committee composed of members from both Houses must be constructed to try to reconcile the differences and draft a bill acceptable to both. And then both Houses must approve the new bill.

So, what’s it all about anyway?

What makes this debate even more surrealistic is trying to find the core of it.  It’s pretty clear that Keystone XL won’t be a grand job creator, nor will it have a dramatic effect on the environment (though it’s a question mark environmentalists say is not worth the gamble). On one hand, American demand for oil is declining (U.S. imports of oil are down almost 40 percent in the past decade). But, on the other, Canadian crude from Alberta is pouring south – even without Keystone. The bulk of crude exports are shipped south on Enbridge Inc.’s 2.5 million barrel per day (bpd) and the Mainline export network (which is now being expanded) and by rail as well. Indeed, the flow of Canadian crude to the U.S. in October was three times the level a year earlier, and beginning to close on Saudi exports to the U.S.

There are even more interesting twists – it is possible that declining oil prices might benefit oilsands producers because their production cost is lower than the U.S. tight oil producers (like Bakkan).

Given all of this — particularly the increase in the flow of Canadian crude southward — it is hard to see why Ottawa has staked so much on Keystone XL. On the U.S. side, it is clear that neither oil nor the environment is central to Keystone itself. Yet, despite its relatively modest real-world importance, Keystone has gained great political and symbolic weight.

In the world of Parliamentary processes, the next steps would be simple indeed. But in the convoluted, complex choreography of the U.S. Congress, how Keystone plays out promises to be quite picturesque.