House panel advances Keystone pipeline plan

WASHINGTON (Reuters) - A plan to fast-track the stalled Keystone XL oil pipeline was passed by a key committee in the U.S. House of Representatives, as Republicans made yet another attempt to spur approval of the project that has become a major issue in the 2012 elections.

The bill would wrest decision-making on the pipeline from the Obama administration and hand it to the Federal Energy Regulatory Commission, which would be compelled to issue approval permits quickly on the Canada-to-Texas project.

But the plan would need to clear several more congressional hurdles, including getting through Democratic opposition in the Senate, before it could land on President Barack Obama's desk for approval.

In a decision last month that pleased environmental groups, Obama blocked TransCanada's $7 billion project, citing the need for further review of its route as the line would have traversed sensitive lands and an aquifer in Nebraska.

Republicans have made the pipeline a symbol of what they believe are unnecessary regulations that are stifling job creation and energy production in the United States.

On Tuesday, the House Energy and Commerce Committee voted 33-20 to send its Keystone bill to the full House, where it will likely become part of a highway and infrastructure funding bill that House Speaker John Boehner wants to see passed this month.

Republicans also have not ruled out trying to attach a Keystone provision to must-pass payroll tax-cut legislation.

"We're going to use all options, so we'll see," said Fred Upton, the Republican chair of the energy committee, who is also part of a joint Senate-House conference panel working on the payroll tax-cut compromise.

GLUT IN MIDWEST

The latest Keystone debate comes as a glut of crude oil in the U.S. Midwest widens the discount between what refiners pay for oil around the key delivery point of Cushing, Oklahoma, compared to the price paid by refiners on U.S. coasts and the rest of the world.

Meanwhile, Canadian production is surging on expanding output from the oilsands. With exports to the United States up 34 percent year-over-year, existing pipeline capacity is full.

The lack of pipeline space has pushed the discount between Canadian crude and benchmark prices to multi-year lows, eating into the profits of the Canadian oil industry, including its two largest producers, Suncor Energy Inc and Canadian Natural Resources Ltd.

Canadian oil producers are desperately looking for alternative markets in Asia and elsewhere, though it will be years before any new export lines can be built.

Canada's Prime Minister Stephen Harper is leading a large, high-level trade mission to Beijing this week, and told Reuters that Canada will focus on exporting oil to China even if the U.S. decision on Keystone is reversed.

KEYSTONE ROUTE IN SENATE UNCLEAR

Republicans in the Democratic-controlled Senate also are trying to resurrect a quick start for the pipeline, but have not yet determined a strategy for advancing legislation.

On Tuesday, Republican Senator Orrin Hatch withdrew a proposal to link Keystone to the Senate's highway funding bill.

"It is absolutely tragic that the prime minister of Canada is now negotiating with the Chinese to take their oil because we're too stupid to allow a pipeline to go through," Hatch said at a Senate Finance Committee hearing.

Max Baucus, the Democratic chairman of the powerful panel, convinced Hatch to withdraw his measure.

"The inclusion of Keystone would take down the bill," Baucus said, although he noted he strongly supports the pipeline.

LAWSUITS AHEAD?

On Tuesday, House Democrats tried but failed to amend the bill to block exports of oil and refined fuels from the pipeline, and to bar TransCanada from having the ability to expropriate land for the pipeline from private owners.

Also defeated was a proposal to postpone action on the pipeline pending results of a study, expected sometime in 2013, on whether pipelines carrying petroleum from Canada's oilsands are at greater risk for spills than those carrying other types of crude.

John Dingell, a Democrat from Michigan who supports the pipeline, argued the authority to approve the line should remain with the president rather than being fast-tracked by Congress.

Dingell said he worries environmental groups would tie up the pipeline with lawsuits if the Republican plan goes ahead.

"It's going to infuriate the environmentalists who are going to be on this like a duck on a June bug," Dingell said.

The Natural Resources Defense Council panned the bill, saying it attempted to "jam" the project ahead in a rush.

"We hope the Senate will use common sense and avoid trying to undermine proper review using politically motivated legislative maneuvers," said Frances Beinecke, president of the group, in a statement.

But Lee Terry, a Republican from Nebraska, said the Obama administration has dragged out the process for too long, making it essential for Congress to take charge.

"It is the president that made this a political football," Terry said.

(Additional reporting by Scott Haggett in Calgary; Editing by David Gregorio, Russell Blinch and Dale Hudson)