The Republican midterm elections victory is breathing new life intoTransCanada Corp.’s hopes for approval of its $8-billion Keystone XL pipeline, as the GOP-controlled Congress prepares to wage war on President Barack Obama’s environmental and energy policies.

Republicans spelled out two energy-related priorities as they won control of the Senate, and hence both houses of Congress for the first time in Mr. Obama’s presidency: passing legislation to approve the Keystone XL and blocking efforts by the Environmental Protection Agency to impose climate regulations on coal-fired power plants.

More broadly, the Republicans are expected to back the oil, gas and coal industries – including pushing legislation to allow U.S. crude exports – and undermine the administration’s support for the renewable energy sector and action on environmental issues such as climate change.

The GOP victory in the Senate will put new pressure on Mr. Obama to approve Keystone XL, which would transport 830,000 barrels per day of crude from Alberta and North Dakota to the U.S. Gulf Coast, the world’s biggest refining hub. Republicans in the House of Representatives have in the past approved legislation taking the decision out of the president’s hands, but those bills died in the Democrat-controlled Senate.

TransCanada chief executive Russ Girling said Wednesday that the company will work with legislators from both parties who want to approve the pipeline, which the Harper government has identified as a key conduit to access new markets for oil sands crude. While growing volumes of Canadian oil are reaching the Gulf Coast by rail and other pipeline routes, Keystone would allow for a major expansion of those exports.

“The Keystone XL pipeline has always enjoyed bipartisan support and is a great example of an issue where both parties can work together to create jobs and enhance energy security for the United States,” Mr. Girling said in a statement. “After six years, it is time to break the gridlock on Keystone and move forward.”

Kentucky’s Mitch McConnell – who is slated to become majority leader in the Senate – is expected to work with his colleagues in the House of Representatives for early passage of a Keystone XL bill when the new session begins in January. However, the Republicans do not have the numbers to override a presidential veto, or even overcome Democratic filibustering in the Senate.

“KXL will get attention early, for sure,” said Robert Johnston, chief executive at Eurasian Group, a Washington-based consultancy. But he said it is unlikely that Congress can pass a veto-proof bill.

Some environmentalists worry the Republicans will attach the Keystone approval to a “must have” piece of legislation that Mr. Obama will be hard-pressed to block. “They’ve certainly indicated they might do that on Keystone as well as other issues,” said David Goldston, director of government affairs for the Natural Resources Defense Council. “But if the Republicans play that game, they won’t limit themselves to Keystone XL. There will be a whole series of riders that will be the fight, which will just highlight the extent to which they are overreaching.”

But it’s not clear legislation will even be required. The Obama administration says it is awaiting a Nebraska court ruling on whether the current pipeline route was properly reviewed by the state. If the project is cleared by the courts, the President could give it a green light and cite the conclusion of the State Department that the project itself would not cause undue environmental or climate impacts. In doing so, he would avoid a fight with Congress that he may not win.

In a news conference Wednesday, Mr. Obama said he would “let that [review] process play out.” But he noted the U.S. is far less dependent on imported crude – including Canadian oil – than it was when the approval was first sought six years ago, and Keystone XL is “one small aspect” of the country’s energy picture.

“We are closer to energy independence than we have ever been before, or at least in decades,” he said. “We are importing less foreign oil than we produce for the first time in a very long time …. So our energy sector is booming.”

Mr. Obama certainly has bigger challenges from a GOP-controlled Congress. Led by Mr. McConnell – a coal-state senator – the Republicans are taking aim at the administration’s centrepiece climate action: the plan to impose tough regulations on coal-fired power plants, the largest single industrial source of greenhouse-gas emissions in the United States.

Jack Gerard, president of the American Petroleum Institute, laid out a wish list in a news conference Wednesday, saying the industry is looking for approval of the Keystone pipeline, relaxation of some environmental regulations, and more licences to drill on U.S. federal lands and offshore.

“If the new Congress is serious about living up to their energy campaign promises, which we expect they are, they should waste no time advancing a pro-energy, pro-growth agenda,” he said.

OTTAWA — The Globe and Mail
Published Wednesday, Nov. 05 2014, 5:01 PM EST
Last updated Wednesday, Nov. 05 2014, 6:29 PM EST