WASHINGTON — The Obama administration on Wednesday denied a presidential permit for construction of the $7-billion Keystone XL pipeline, ruling that a proper environmental review could not be conducted before a 60-day deadline set by the U.S. Congress to rule on the controversial oilsands project.
But Calgary-based TransCanada Corp., the company behind the 2,700-kilometre pipeline, has been given the option of making a new application — and company officials confirmed they will propose an alternative route for Keystone XL that avoids environmentally sensitive areas in Nebraska.
In a statement released Wednesday afternoon, the U.S. State Department said its decision was "predicated on the fact that the Department does not have sufficient time to obtain the information necessary to assess whether the project, in its current state, is in the national interest."
It added, however, that "denial of the permit application does not preclude any subsequent permit application or applications for similar projects."
TransCanada first applied more than three years ago for a permit to build Keystone XL, designed to transport 830,000 barrels a day of crude oil from northern Alberta to refineries on the Gulf Coast of Texas.
Russ Girling, TransCanada's CEO, said the company hopes the State Department will use existing information from previous environmental reviews to make a decision on the new Keystone XL permit in an "expedited manner."
Girling said he believes a new pipeline permit can be approved in time to put Keystone XL into service by late 2014.
"This outcome is one of the scenarios we anticipated. While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL," Girling said.
TransCanada said it would complete a proposal for a new pipeline route by September or October.
But Kerri-Ann Jones, an assistant secretary of state, told reporters there was no guarantee of a speedy decision on a new Keystone XL proposal.
"If TransCanada comes in with a new application, it will trigger a completely new process," Jones said in a conference call with reporters.
"We do have guidelines that would allow us to use information that is out there . . . but we would also have to look at this as a completely new application."
The unfolding drama over Keystone XL's fate follows weeks of political gamesmanship between the White House and Republicans in Congress.
In December, the GOP won passage of legislation that required U.S. President Barack Obama to make a decision on the pipeline within 60 days.
The Keystone XL provision, which was inserted into a broader tax relief bill, derailed plans by Obama to put off a final ruling on Keystone XL until early 2013 — after the next presidential election.
Obama, in a statement, blamed Republicans for killing the pipeline.
"The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment," Obama said.
"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people."
The U.S. president called Prime Minister Stephen Harper to relay the news, telling him TransCanada was free to re-apply. Harper reacted "with profound disappointment," his office said in a statement.
Alberta Premier Alison Redford said the U.S. ruling confirms the need for the province to focus on diversification of export markets for oilsands crude "with a clear aim" to the Asia-Pacific region.
"Today's decision does not mean that America will consume one less barrel of oil," Redford said. "What it means is this: America will continue to import oil from jurisdictions with much weaker environmental policies and who do not share the same values as Canadians and Americans."
The Keystone XL pipeline would have crossed the U.S. states of Montana, South Dakota, Nebraska, Oklahoma and Kansas, on the way to Texas refineries.
With the decision, Keystone XL appears set to become a major issue in the U.S. presidential campaign, with Republicans vowing to hammer Obama over the loss of jobs associated with construction.
GOP front-runner Mitt Romney called the decision "shocking" and said Obama demonstrated "a lack of seriousness about bringing down unemployment, restoring economic growth and achieving energy independence."
Former House Speaker Newt Gingrich, campaigning Wednesday in South Carolina, called the pipeline denial "a stunningly stupid thing to do."
He added: "Stupidity No. 1 — we need the jobs."
Canadian Natural Resources Minister Joe Oliver suggested environmental "radicals" had improperly influenced the decision.
"Let's say their influence is greater during a presidential election year," Oliver said, outside the House of Commons.
Oliver said he believed environmental issues and a lack of Canadian regulations were not a factor in the decision.
Congressional Republicans, too, expressed outrage at the denial of Keystone XL. U.S. House Speaker John Boehner accused Obama of bowing to pressure from the environmental wing of the Democratic party.
"The president is selling out American jobs for politics," Boehner said at a Capitol Hill news conference.
"The president won't stand up to his political base, not even in the name of creating American jobs. And now Canada is going to have to look to other nations, like China, to sell its oil reserves to."
In December, the Obama administration had warned that the Keystone XL pipeline would be doomed if Congress insisted on forcing an accelerated timetable for a ruling.
Prior to the legislation's passage, the State Department said 60 days was not enough time to complete an environmental review of a proposed new pipeline route that would avoid the ecologically fragile Sand Hills region of Nebraska.
Last November, the State Department ordered TransCanada to find a new route so the pipeline would not cross the Sand Hills, following vocal protest from Nebraska landowners, environmentalists and state legislators.
TransCanada had agreed to work with officials in Nebraska and at the State Department on the new pipeline path — a decision that eliminated opposition from Nebraska legislators — but the company had not yet proposed the route.
Republicans maintain they are not to blame for Wednesday's decision.
Boehner and others in the GOP say the original decision to delay the Keystone XL decision until 2013 was made out of fear approving the pipeline would alienate Obama's supporters ahead of his re-election campaign.
"Is it not in the national interest to create tens of thousands of jobs here in America with private investment?" Boehner asked. "Is it not in the national interest to get energy resources from an ally like Canada as opposed to some countries in the Middle East?
The Obama administration's decision to say no to Keystone XL was cheered by U.S. environmentalists, who had mounted a mass protest at the White House in November that many believe played a pivotal role in the State Department's original delay.
Denial of the Keystone XL permit "represents a triumph of truth over Big Oil's bullying tactics and its disinformation campaign with wildly exaggerated jobs claims," said Frances Beinecke, president of the Natural Resources Defense Council.
"A decision on the pipeline proposal requires nothing less than a thorough and fair-minded analysis of its full effects on our environment and climate. But the schedule forced upon the Obama administration — a 60-day rush to judgment — left insufficient time to conduct that assessment. Pipeline proponents preordained this outcome."
Under the 60-day deadline for a decision that was imposed by Congress, the Obama administration technically had until Feb. 21 to rule on Keystone XL.
Republicans in the House of Representatives had started an online countdown clock to the deadline, and supporters of the pipeline recently launched a new wave of television ads in the U.S. pressing Obama to approve the pipeline.
When TransCanada makes its new application for Keystone XL, environmentalists said the company can expect to face the same opposition.
"If TransCanada reapplies, Keystone XL will still face the same valid public concerns and fierce opposition as the first time," Beinecke said.
