Keystone Pipeline Faces Uncertain Fate Despite Senate Deal

Nov. 6, 2011: Demonstrators march with a replica of a pipeline during a protest to demand a stop to the Keystone XL tar sands oil pipeline in Washington, D.C. (AP)

A senior House GOP aid tells Fox News that the House is opposed to the payroll tax deal passed in the Senate that includes provisions regarding a proposed Canada-to-Texas oil pipeline.

The aid says House Republicans oppose the bill because they believe it will impose more hardships on the already struggling middle class.They may seek to amend the Senate bill.

These comments only give further uncertainty to the future of the pipeline, which was addressed in the bowels of the $33 billion package passed by the Senate Saturday. The bill would extend the payroll tax cut as well as unemployment aid, and includes a tricky provision that would require President Obama to decide in 60 days whether to approve the permit for the so-called Keystone XL pipeline.

Republican lawmakers, unions and some Democrats want the project to get moving, citing the thousands of jobs it could create. The Obama administration, facing objections from environmentalists and officials whose states would be affected, recently delayed the project citing environmental and safety concerns.

Both the House and Senate versions of the bill contain the pipeline provision and the spin coming out of Washington on how the bill affects the project was dizzying.

Despite having opposed the Keystone provision with great vigor over the past couple weeks, Democrats shifted gears and appeared to dismiss the measure as a sop to the GOP which wouldn't necessarily do anything to advance the Keystone project.

"We feel we're giving them the sleeve off a vest," Sen. Charles Schumer, D-N.Y., quipped.

On the Republican side, some lawmakers claimed victory and suggested the Keystone project is a big step closer to moving forward.

But a couple things were clear -- Republicans have indeed put Obama in another politically sticky situation two months from now, while at the same time potentially imperiling the pipeline project itself.

The language in the tax cut bill does not force Obama to approve the project. Rather, it states that he must either approve the permit in 60 days or declare that it is not in the national interest and reject it.

The issue has the president caught awkwardly between two vital Democratic constituencies -- the unions and the environmentalists.

Republicans hope that in an election year, Obama will side with those pushing for job creation and approve the permit. Sen. Orrin Hatch, R-Utah, told Fox News it would be "crazy" to deny the project just to please "radical" environmentalists.

But White House officials signaled the president might just reject the project after 60 days, given that the State Department already has said it simply can't review the pipeline within that timeframe.

The administration potentially could argue that Republicans forced the president's hand by compelling a decision within an unreasonably short timetable.

"All they did was shorten the review process," one senior administration official said.

White House Communications Director Dan Pfeiffer offered a blunt warning earlier this week that the GOP was endangering the entire project.

"How will the GOP explain to their members that their bill doesn't force the President to approve Keystone, it essentially kills it?" he said on Twitter.

In another tweet, he wrote: "The House bill simply shortens the review process in a way that virtually guarantees that the pipeline will NOT be approved."

At the same time, Democrats struggled to explain why they were so vehemently opposed to the Keystone provision just days ago. Obama stated last week that he would reject any effort to tie Keystone to the payroll tax cut bill.

White House officials said Saturday that Obama was referring to any effort to force approval of the project, but that the president can accept a bill that leaves the decision up to him -- even though Republicans all along had left the final decision up to the president.

The stand-off doesn't necessarily spell the end of the project by any means. Obama could try to buy more time from Congress, or Congress could take it upon itself to take a different approach.
In a summary of the bill sent to House Republicans Saturday, the section on Keystone said that if Obama rejects the permit, "Congress will address this issue in the context of the next effort to extend" the payroll tax cut and other provisions.

Meanwhile, the dueling camps over Keystone returned to familiar arguments Saturday as they launched what is sure to be a two-month pressure campaign on the White House.

"Now President Obama will have to decide whether he will stand with his radical environmental friends and their destructive global warming agenda or with a majority of the American people who want to strengthen our energy security and create hundreds of thousands of jobs," Sen. James Inhofe, R-Okla., said in a statement. "I hope he makes the right choice."

On the other side, Friends of the Earth President Erich Pica urged Obama to end the "carbon bomb" project for good.

"The deal passed by the Senate rushes the pipeline review process, making a credible, science-based review impossible. Because of this, and the great harm we already know the pipeline would cause, President Obama has no choice but to reject the pipeline," Pica said.

Fox News' Ed Henry and Trish Turner contributed to this report.