UPDATE 1-Highway vote keeps Keystone fight alive in US Senate

Tue Mar 6, 2012 7:06pm EST

* Not enough Senate votes to end debate on highway bill

* McConnell: deal near for vote on Keystone, other amendments

* Keystone vote would stoke debate on gasoline prices

By David Lawder

WASHINGTON, March 6 (Reuters) - U.S. Senate Republicans' push for a vote to authorize the $7 billion Keystone XL oil pipeline project gained momentum on Tuesday after Democrats failed to end debate on a major transportation bill.

Fifty-two senators, most of them Democrats, voted to move forward on the $160 billion highway bill without a proposed Republican amendment to authorize construction of the Canada-to-Texas pipeline, eight votes short of the 60 needed to end debate.

The defeat gave Republicans a new opening to attack President Barack Obama for rejecting TransCanada Corp's project, as soaring gasoline prices become a top issue for voters ahead of the November presidential election.

A vote on Keystone faces an uphill battle in the Senate but would likely turn the highway bill into another battle over gasoline prices and job creation.

Senate Majority leader Harry Reid now must negotiate further with Republicans on a deal to hold a stand-alone vote on the controversial project and potentially dozens of other amendments. Senate aides said amendments should be ready for initial votes by Wednesday with final passage later this week.

"I don't know why everything we do has to be a fight. Not a disagreement, a fight," Reid said before the vote.

Among proposals under consideration for possible votes are an expansion of offshore oil drilling opportunities, slower phase-ins of some Environmental Protection Agency clean air rules and changes that would allow companies to set aside less money for their pension programs.

Senate Republican leader Mitch McConnell said an agreement was near and that Democrats made many of their own demands to attach provisions to the bill.

"We were both wrestling with trying to put together a package that would allow us to move forward," he said after the vote.

Senate Republicans last week used the "must-pass" legislation to try unsuccessfully to push through an amendment that would have reversed Obama's policy requiring health insurance coverage for contraceptives and other services by allowing employers to opt out for religious or moral reasons.

GAS PRICE PLATFORM

Environmental groups have fought the Keystone project, which would connect Canada's oil sands to U.S. Gulf Coast refineries, because of the pollution produced by the heavy oil sands crude.

Some Democrats support the project. But there are currently 47 Republicans in the Senate, meaning at least 13 Democrats would have to agree to move it forward.

Obama threw the project into limbo in January because he said his administration needed more time to evaluate the environmental impact of the pipeline's route through Nebraska.

In the meantime, TransCanada has said it will split the project in two and build the southern leg between the Cushing, Oklahoma storage hub and Texas refineries.

The Senate amendment - which would require Obama's signature to become law - would bypass Obama and see Congress approve the project. A study by the nonpartisan Congressional Research Service said Congress has the constitutional right to legislate permits for cross-border pipelines.

The Republican-controlled U.S. House of Representatives has passed an energy bill that would see an independent energy regulator give the project a permit.

Obama has said he would veto that bill because of the Keystone measure as well as other provisions that would expand oil drilling in sensitive areas.

The $109 billion Senate transport bill would fund highway and mass-transit construction projects for two years. The current legislation expires March 31, and if no action is taken by then, road project funding and collection of federal gasoline taxes would be halted, with potential layoffs of hundreds of thousands of road construction workers.

The House has yet to pass its version of the transport legislation, which currently is much larger, at $260 billion, and more complex. House Speaker John Boehner said on Tuesday that he may be willing to take up the Senate bill instead.

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