GOP Uses Keystone to Stonewall White House on Tax Holiday Extension

After President Obama said it would take time to study the feasibility of TransCanada's (NYSE: TRP) Keystone XL Pipeline project, House Republicans found a new way of bringing the question to the table again, by bundling the issue within the law that would extend the tax cut through the holidays for lower income Americans.

The Keystone project has turned into a multifaceted battleground, drawing either steadfast support or opposition (with not much middle ground) from a wide array of organizations and interest groups. The battle, with a very pronounced political aspect, lit up last month when the Obama administration postponed a decision to grant border-crossing permits to the 1,700-mile pipeline channeling crude oil from the tar sands of Canada to the refineries of the Texas Gulf Coast refineries.

Proposed by pipeline company TransCanada, Keystone XL (as it is called due to its 36-inch diameter, larger than the existing 8-inch one it will lay beside for much of its length), the pipeline would funnel 1.1 million daily barrels of oil into the United States. That is about 6 percent of the 20 million-barrel daily oil intake for the U.S., according to Huffington Post, blogger Robert L. Cavnar. Cavnar says that, coupled with the 7.5 million barrels produced domestically everyday, the new oil would boost the North-American share of the daily consumption to 44 percent.

Democrats and the Obama administration opposed the immediate approval of the deal on ground of more feasibility analysis of alternative routes for the pipeline. People like Cavnar believe it is a transparent political move not to alienate environmentalists, a very important democratic electoral base, ahead of November 2012 elections. The decision was postponed last month till about the first quarter of 2013. According to The Hill, the administration has been lobbied heavily by environmentalists, among them the National Wildlife Federation (NWF), who considered the postponement of the decision a major victory for the environment.

Republicans have now moved to bring the decision back to the table by attaching it to an initiative deal to Democrats and the Obama administration. This is legislative bill extending the payroll tax cut, which would keep the federal tax burden taxpayers at 4.2 percent as opposed to 6.2 percent-should it be allowed to lapse at the end of this year, taking with it anywhere from $1,000 to $2,000 and change for over 160 million Americans. Republicans have been heavily lobbied by big oil companies like Exxon Mobil (NYSE: XOM), grass-root groups like Americans for Tax Reform, and some labor unions. The grounds for support of the pipeline are job creation and national energy independence.

Stocks to watch for opportunistic moves include traditional energy companies such as TRP and XOM. Alternative energy companies like First Solar (NYSE: FLSR) are also stakeholders in the energy debate.