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Keystone pipe outlook no rosier after Senate vote

Demonstrators call for the cancellation of the Keystone XL pipeline during a rally in front of the White House in Washington
Demonstrators call for the cancellation of the Keystone XL pipeline during a rally in front of the White House in Washington

By Timothy Gardner

(Reuters) - Senate Republicans claimed victory on Saturday for a bill that may force President Barack Obama to make a speedier decision on a Canada to Texas oil pipeline, but a White House official indicated quick approval of the project is not likely.

The two-month payroll tax break extension bill passed by the Senate on Saturday included language that would make Obama decide within 60 days whether TransCanada Corp's 700,000 barrel-a-day Keystone XL oil sands pipeline is in the country's national interest.

But the U.S. State Department, which must approve the cross-border project, has said it will not be rushed into a decision before it has time to consider the environmental impact of alternative routes. That could leave Obama room to approve the project in principle but still keep construction at bay.

"This bill will stop President Obama's delaying tactics," said Senator Richard Lugar, who had introduced the measure to speed up a decision on the pipeline. "This is a tremendous victory for our security and for creating jobs."

The State Department in November delayed a decision on the line until after the 2012 presidential election, citing the need to study alternative routes in Nebraska where the proposed route would cross one of the country's largest aquifers.

An Obama administration official who briefed reporters said the State Department would "almost certainly" have to turn down an approval because there would not be enough time to complete its review of alternate pipeline routes through Nebraska's fragile Sand Hills region.

An energy policy analyst said the State Department's November ruling could be a large factor in Obama's decision.

"The foundation for plausible deniability has been laid already," said Kevin Book, an analyst at ClearView Energy Partners in Washington.

"The Obama administration has already said they won't be rushed, but they don't have to rush to say no, either."

Even if Obama ended up approving the line, it would not survive the court process, Daniel Weiss, of the Center for American Progress, said on Friday.

If Obama decides against the line before the election, he could face criticism from Republicans in the campaign that he gave up an opportunity to provide thousands of jobs.

And if the price of oil is high next summer, he could also face criticism that he did not do enough to fight energy prices. But environmentalists are part of Obama's political base and activists say oil sands petroleum emits more greenhouse gases than average crude oils.

Russ Girling, TransCanada's president and chief executive, said on Saturday his company would do whatever is necessary if the bill is passed and the 60-day deadline comes into effect to make sure the project is approved. The Republican-led House of Representatives is expected to vote on the bill early next week.

"We will continue to focus our efforts on collaborating with Nebraska's Department of Environmental Quality, the state and the federal State Department on an alternative route that avoids Nebraska's Sand Hills," Girling said in a release.

Environmentalists also geared up for a battle. "We're of course ready to fight like heck," Bill McKibben, who led protests at the White House in November, said in a note to supporters on Saturday.

(Editing by Todd Eastham)

(Reporting By Timothy Gardner)

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