Obama Administration Delays Pipeline Decision

By David Lerman and Jim Efstathiou Jr. - Nov 11, 2011 5:30 AM GMT+0700

The U.S. State Department said it is delaying a decision on TransCanada Corp. (TRP)’s Keystone XL oil pipeline to study an alternative route for the $7 billion project away from environmentally sensitive areas in Nebraska.

Evaluating a revised route will postpone a final ruling on the pipeline, which has drawn support from business groups and protests from environmentalists, until after the 2012 election.

The Obama administration’s decision responds to concerns raised by Nebraska citizens, state officials and some members of Congress that TransCanada’s proposed route across the state’s Sandhills area risks the Ogallala aquifer, the drinking-water source for 1.5 million people.

“Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood,” President Barack Obama said in a written statement.

The 1,661-mile (2,673-kilometer) pipeline would deliver 700,000 barrels a day of crude from Alberta’s oil sands to the Gulf of Mexico by crossing Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

TransCanada ‘Confident’

Russ Girling, chief executive officer of Calgary-based TransCanada, who had said rerouting delays might kill the project, said today the company remains “confident Keystone XL will ultimately be approved.”

“This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed,” Girling said a statement.

The State Department, which announced the delay in an e- mailed statement, has jurisdiction because the project crosses an international border. The route review “could be completed as early as the first quarter of 2013,” the department said.

Republicans and supporters of the project said the timing wasn’t a coincidence, as Obama faced pressure from environmental groups who had said they may not mobilize to help Obama win re- election if he approved the pipeline.

“Calling for a new route is nothing but a thinly veiled attempt to avoid upsetting the president’s political base before the election,” House Speaker John Boehner, an Ohio Republican, said in a statement.

‘Political Decision’

“This is clearly a political decision, and everyone knows it,” Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, the nation’s largest business lobbying group, said today in an e-mailed statement. “Unfortunately, it will immediately cost more than 20,000 Americans an opportunity to get a job working on the pipeline and hundreds of thousands more jobs in the future.”

Election-year politics played no role in the decision, a State Department official said today.

“The White House did not have anything to do with this decision,” Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs, told reporters on a conference call. “They did not direct us to make this decision.”

Environmentalist groups cheered the delay as a step toward their goal of canceling the pipeline as a risk to water supplies and a contributor to global climate change.

‘Spectacularly Undone’

“A done deal has come spectacularly undone,” said Bill McKibben, founder of 350.org, which organized protests against the project outside the White House that sponsors say resulted in more than 1,200 arrests.

The State Department said its new study will supplement an environmental impact statement issued in August that found Keystone XL would cause “no significant” environmental damage provided that TransCanada complies with U.S. law.

Senator Bernie Sanders, a Vermont independent who has questioned whether that review was “free of actual or apparent conflicts of interest,” said in a statement today that “the more the American people learn about this project, the more they will understand that it would be disastrous for our environment and for our economy.”

Nebraska’s Governor

Nebraska residents expressed opposition to the route during State Department hearings on the pipeline, calling it a threat to drinking-water supplies. The state legislature is currently in a special session weighing measures to force a rerouting of the project.

“We’re very excited here in Nebraska that our voices have been heard,” Nebraska Governor Dave Heineman, a Republican, said today in an interview. “And I want to emphasize, most Nebraskans, including myself, we support the pipeline but we’re opposed to the route.”

In the environmental impact study in August, the State Department said it studied 14 “major route alternatives” for the pipeline. The department “did not find any of the major alternatives to be preferable to the proposed project,” it said at the time.

The department said in its statement today that the delay is in response to the “concentration of concerns” regarding the route through the Nebraska’s Sandhills. “The concern about the the proposed route’s impact” has “increased significantly over time,” the State Department said.

To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editors responsible for this story: Larry Liebert at lliebert@bloomberg.net; Mark Silva at msilva34@bloomberg.net