Bloomberg News

Obama Says He Opposes Linking Keystone to Payroll Tax Cut

December 13, 2011

(Updates with Obama remarks and Republican proposal beginning in third paragraph.)

Dec. 7 (Bloomberg) -- President Barack Obama said he would reject any effort by congressional Republicans to tie accelerated U.S. approval of the Keystone XL pipeline to extending a cut in the payroll tax.

The payroll tax cut “shouldn’t be held hostage” by any other issue, including approval of the proposed TransCanada Corp. oil pipeline from Canada to the U.S., Obama said after meeting with Canadian Prime Minister Stephen Harper at the White House.

Political considerations played no part in the administration’s delay of a decision on the pipeline until early 2013, after the elections for president and Congress, Obama said.

“This is a big project with big consequences,” he said. The environmental impact of building the pipeline must be “properly understood.”

Legislation backed by House Republicans would require the U.S. make a decision on the Keystone project in as little as seven months and give authority over it to the Federal Energy Regulatory Commission. The State Department has jurisdiction over the project because the pipeline crosses an international border.

Republican leaders are considering including expedited approval of the pipeline in legislation extending a cut in the payroll tax, which is set to expire at the end of the year. The tax measure is a top priority for Obama and Republican lawmakers, who have objected to Democratic proposals to raise taxes on the wealthiest Americans to replace the lost revenue.

‘Extraneous Issues’

If the payroll tax cut “is attached to a whole bunch of extraneous issues,” then “it’s not something I’m going to accept,” Obama said, adding that he doesn’t expect the provision to survive congressional negotiations.

A spokesman for House Speaker John Boehner said Republicans are ready for a battle over the provision.

“We are working on a bill to stop a tax hike, protect Social Security, reform unemployment insurance and create jobs,” Brendan Buck, the Ohio Republican’s press secretary, said in an e-mailed statement. “If President Obama threatens to veto it over a provision that creates American jobs, that’s a fight we’re ready to have.”

Canadian Crude

The $7 billion, 1,661-mile (2,673-kilometer) Keystone pipeline would carry Canadian tar-sands crude through the Great Plains to the Gulf of Mexico.

The State Department, which had planned to make a decision on the project by the end of the year, said on Nov. 10 it will delay its decision until early 2013 to consider alternative routes.

The pipeline would carry as many as 700,000 barrels a day of heavy crude across parts of Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. Its original proposed path would take it over an ecologically sensitive area in Nebraska that also supplies drinking water sources to 1.5 million people. TransCanada has reached agreement with Nebraska officials to move the route away from environmentally sensitive areas.

Obama and Harper announced the two nations have agreed on steps to speed up the flow of goods and people across the border while also enhancing security.

--Editors: Joe Sobczyk, Jim Rubin.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Kate Andersen Brower in Washington at kandersen7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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