Now that the US House of Representatives has approved (if unwillingly) the Senate bill providing a two-month extension to lower payroll taxes and extend unemployment benefits, the bill goes to President Obama for signature along with the requirement that the President make a decision on the Keystone XL pipeline within 60 days. What are Obama’s options?

The President could veto the bill, he could sign it and tack on a so-called signing statement, or he could sign it and make the decision Congress is forcing on him. Transcanada Corp. (NYSE: TRP), builders of the proposed Keystone XL pipeline, might have reason to worry here.

It is highly unlikely the President will veto the bill, so that choice is out. Obama has said before that he would use a signing statement only in the event that the legislation includes an unconstitutional provision. He may not like having his hand forced, but Congress can legally do it.

In the end, Obama will have to decide. Environmental groups, normally big supporters of the President, will demand that he kill the pipeline. If he chooses this course, he is required by the legislation within 15 days to provide a “report that provides a justification for determination, including consideration of economic, employment, energy security, foreign policy, trade, and environmental factors.” Will he take the bait, for that is surely what it is? House Republicans are betting that he will not, and that he will be forced to accept the pipeline.

The argument over the Keystone XL pipeline should have been settled long ago, and construction should already have started. The odds now, however, favor a presidential rejection, not because it’s the best choice, but because environmental voters could abandon him in 2012 if he approves Keystone XL. Most supporters of the pipeline were unlikely to vote for him in the first place.

Transcanada’s shares have not been affected much by today’s House vote. But as the deadline for decision on the pipeline gets closer, Transcanada could come under some pressure.

Paul Ausick

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