US President Barack Obama has options to kill or delay the Canada-to-Texas oil sands pipeline despite language in the payroll tax bill that forces him to make a decision on a permit by late February.
Obama signed into law on Friday the bill containing a measure ordering him to grant the permit for TransCanada Corp's Keystone XL oil sands pipeline in 60 days, unless he determines the line does not serve the national interest.
"The project now faces further uncertainty following its entanglement in Congressional manoeuvring around the payroll tax extension legislation," Robert Johnston, a director for energy and natural resources at the Eurasia Group, said in a research note.
Last month, Obama bowed to pressure from environmentalists, who are an important part of his base, to delay the project past the 2012 election.
Thousands of them staged high-profile protests at the White House this year to stop the pipeline that would deliver oil sands crude from the boreal forests of Alberta to refineries in Texas.
In November, the State Department, which has the power to give the project a final permit because it would cross the national border, announced it would delay its decision until after next year's presidential election.
Environmentalists oppose the project for the carbon emissions that come from processing oil sands. The line's route also faced stiff opposition from greens and Republicans in Nebraska because of concerns a pipeline spill would contaminate a huge aquifer that serves millions and spoil the state's fragile Sandhills region.
Pipeline supporters say Keystone would bolster US energy security and relieve a buildup of crude in the Midwest. TransCanada claims it would create 20,000 jobs, though the State Department said the number is closer to 7,000. Despite the language in the tax package, Obama can kill the project and likely can still delay it. He could reject it based on the national interest argument, or he could give it a thumbs up, but delay it by awaiting a route study.
If Obama decides the pipeline is not in the national interest, "it would effectively be the end of the project", said Johnston, although TransCanada would likely still move forward with a smaller leg of the pipeline from the Cushing, Oklahoma oil hub to Texas.
Even if Obama approves it within 60 days, he could do so conditionally by declaring the project is in the national interest, but contingent on the completion of the State Department's study on alternative routes through Nebraska.
The State Department based its delay in November on a need to study alternative routes in Neb-raska.
That decision came a day after some 10,000 environmentalists and other opponents of Keystone circled the White House in protest.
Obama did not mention Keystone at a brief press conference on Friday after he signed the bill. But earlier this month White House officials said the congressional manoeuvring does not help the project.