Senate Democrat proposes ban on Keystone fuel exports

WASHINGTON (Reuters) - A Democratic senator proposed on Wednesday to ban exports of oil from the proposed Keystone XL crude pipeline from Canada and require U.S. iron and steel be used to build it, part of an effort to derail a Republican plan that would fast-track the project.

Senator Ron Wyden said he believes booming oil and gas production gives the United States a competitive advantage that could be lost if exports are allowed without more analysis.

"I am increasingly concerned about the export of American energy," Wyden told Reuters. "We have seen this dramatic shift in our energy policy and it's kind of like we're on autopilot to start exporting," he said in an interview.

Wyden believes his plan will get time on the Senate floor, something that could happen this week as the Senate tries to wrap up work on a highway funding bill.

It was filed as an "side-by-side" alternative to a Republican amendment, championed by Senator John Hoeven of North Dakota, that would see Congress approve the project.

If the dueling amendments to the highway bill are voted on, both would have a difficult time attracting the 60 votes required to pass. But they would provide a chance for fresh debate on the project, which President Barack Obama put on ice pending further environmental review.

Republicans have sought to make the Keystone delay an issue in the presidential election, and the recent run-up in gasoline prices has elevated arguments that the pipeline would carry oil that could help displace U.S. crude imports from Venezuela and the Middle East.

TransCanada's $7 billion pipeline would carry crude from Canadian oil sands to Texas refineries, and would also pick up crude from North Dakota and Montana along the way.

Last year, exports of refined products like diesel exceeded its imports for the first time since 1949, the U.S. government has said, crediting strong world demand and increased supplies from Canada and North Dakota.

PUTTING TEETH INTO ENERGY SECURITY CLAIMS

Wyden declined to contrast his plan with the Republican plan, but said his amendment "puts teeth" into claims that Keystone would boost energy supplies.

"You see all over television, commercials and enormous sums of money spent by the advocates who constantly keep talking about how this is going to strengthen domestic energy security," Wyden said. "This amendment guarantees that."

The vast majority of the fuel made from Keystone oil would stay in the United States, said Ryan Bernstein, an aide to Hoeven, who said the Democratic proposal would be a setback for the pipeline, if it passes.

Some refined products such as high-sulfur diesel and petroleum coke need to be sold outside the country, where there are markets for them. Keeping them inside the United States would increase the costs of the project and could lead to higher gasoline prices, Bernstein said.

Wyden said his amendment would allow for broad presidential waivers for exports in cases where they were truly needed.

And it would require iron and steel be used in the pipeline to create more jobs.

His plan would keep the presidential permitting process, rather than handing the authority to Congress, but would add a 90-day deadline for a decision on the pipeline once all environmental reviews were complete.

Senate leaders have struggled to agree on how many amendments to allow on the transportation bill. Funding for highways and other infrastructure projects runs out at the end of March and Congress is running out of time to agree on a plan.

Republicans in the House of Representatives have passed the energy portion of their transportation bill, which would grant Keystone a permit. A similar proposal for a ban on oil and fuel exports failed in the House.

In the meantime, TransCanada Corp has said it will split the $7 billion project in two and build the southern leg between the Cushing, Oklahoma storage hub and Texas refineries.

(Reporting by Roberta Rampton; editing by Todd Eastham)