Obama Denies Keystone, Will Allow Refile

By Kate Andersen Brower and Jim Snyder - Jan 19, 2012 5:27 AM GMT+0700

President Barack Obama denied a permit to build TransCanada Corp. (TRP)’s Keystone XL oil pipeline and the company said it will refile a revised route to avoid an environmentally sensitive area in Nebraska.

The decision today was praised by environmentalists, who said the pipeline would add to greenhouse-gas emissions and endanger water supplies, and decried by business groups and Republican lawmakers, who had pushedObama to approve the project as a way to add jobs.

Obama faced a Feb. 21 deadline Congress set after the administration in November postponed a decision saying it needed time to review a revised Nebraska route. TransCanada said the 1,661-mile (2,673-kilometer) project would carry 700,000 barrels of crude a day from Alberta’s oil sands to refineries along the Gulf of Mexico, crossing six U.S. states and creating 20,000 jobs.

“I’m disappointed that Republicans in Congress forced this decision, but it does not change my administration’s commitment to American-made energy,” Obama said in a statement. “We will continue to look for new ways to partner with the oil and gas industry to increase our energy security.”

TransCanada fell 33 cents to $41.41 at 4:15 p.m. in New York, and earlier today fell 4.8 percent, the biggest intraday decline since June 2009.

The company will reapply and Chief Executive Officer Russ Girling in an e-mailed statement said he expects a review that would let the pipeline begin operating by 2014. A decision on a route that avoids the Sand Hills of Nebraska qwill be made by September or October, he said.

‘Profound Disappointment’

Canadian Prime Minister Stephen Harper, who was called by Obama, told the president Canada will seek to diversify its energy exports after Keystone was rejected. Harper “expressed his profound disappointment” with the Keystone decision, according to a statement from his office.

The State Department, which reviewed the pipeline because it crossed an international boundary, recommended that Obama deny the permit and find that “Keystone XL pipeline be determined not to serve the national interest,” according to an e-mailed statement. “The president concurred.”

The denial of the permit application doesn’t preclude any future permit applications for similar projects, the State Department said.

“TransCanada remains fully committed to the construction of Keystone XL,” Girling said in the statement. A review of the revised application should “make use of the exhaustive record compiled over the past three plus years,” he said.

Adequate Information

Kerri-Ann Jones, assistant secretary for oceans and international environmental and scientific affairs, said department didn’t have “adquate information” to proceed with the review. She declined, during a conference call, to estimate how long a new review of an alternatie route would take.

Representative Fred Upton, a Michigan Republican and chairman of the House Energy and Commerce Committee, said he will hold a hearing next week on the pipeline. Secretary of State Hillary Clinton is being invited as the committee seeks ways to “restart the project,” he said in a statement.

Environmentalists said the pipeline will add to greenhouse- gas emissions tied to climate change and endanger drinking water supplies in Nebraska. They have staged demonstrations outside the White House and vowed to withhold financial support to Obama’s presidential campaign if he approved the pipeline.

“The entire purpose of the pipeline is to move Canadian oil to the crude refineries in the Gulf so that it can be shipped overseas,” Jeremy Symons, a National Wildlife Federation vice president, said today in a phone interview. “If the pipeline is built, Canada gets the jobs, China gets the oil and American families get the oil spills.”

Ogallala Aquifer

Protests in Nebraska and at the White House focused on the risks of a spill tainting the Ogallala aquifer in the state’s Sand Hills region. TransCanada has discussed alternate routes with state officials that would pose less risk to drinking-water supplies.

“We’re glad Keystone hasn’t been approved, but we’d like to see the pipeline rejected outright,” said Noah Greenwald, endangered species program director for the Center for Biological Diversity, in a phone interview. He said producing petroleum from oil sands releases more greenhouse gases and requires more water than conventional oil production.

The Natural Resources Defense Council, an opponent of the project, said Obama’s decision puts the health and safety of the public ahead of the interests of oil and gas companies.

‘Truth, Misinformation’

The decision is “a victory of truth over misinformation,” Frances Beinecke, the group’s president, said today in an e- mailed statement. “This pipeline was never in America’s national interest.”

Governors in the six states along the Keystone route were unhappy with the decision, saying they were relying on the project to create jobs and help get their oil to market.

“We need this pipeline if we want to pull together for energy security,” Montana Governor Brian Schweitzer, a Democrat, said in a telephone interview. Montana issued a permit for the pipeline in December and negotiated a $100 million access on-ramp for state-produced oil with TransCanada, he said.

Wendy Abrams, who raised from $50,000 to $100,000 for Obama in 2008, according to the Center for Responsive Politics, had said rallying her friends around the president would be hard if he approved the pipeline. She said Obama has since shown that he’s not “in the pocket of Big Oil.”

‘Politically Motivated’

The decision was “politically motivated” and will make the U.S. more dependent on foreign nations “that don’t share our interests,” U.S. Chamber of Commerce President Thomas Donohue said. The decision shows job creation is not a high priority for Obama, he said.

“The president’s decision sends a strong message to the business community and to investors: Keep your money on the sidelines, America is not open for business,” Donohue said.

Denying a U.S. permit shows Obama listens to “fringe protest groups” and will set a bad precedent, said Charles Drevna, president of the Washington-based National Petrochemical & Refiners Association.

“President Obama has given in to political pressure from extremist opponents of fossil fuels and turned his back on American consumers who need fuel, American workers who need jobs, and America’s economic and national security,” he said in an e-mailed statement.

‘A Distraction’

Representative Edward Markey of Massachusetts, the senior Democrat on the Natural Resources Committee, said the pipeline isn’t critical to U.S. energy policy, and became “a distraction” from attempts to reduce the nation’s dependence on foreign sources of oil.

“This pipeline would have taken the dirtiest oil on the planet, sent it snaking across the Midwest in an already-leaky pipeline, only to be exported to foreign markets once it reached the Gulf Coast,” Markey said. “The United States shouldn’t be used as a middleman between the dirtiest Canadian oil and the thirstiest foreign markets, when what the American people get in return is environmental risk and higher gas prices.”

The administration in November delayed approving the project until after the 2012 election, saying it wanted to study an alternate route that would take the pipeline away from environmentally sensitive Sand Hills area in Nebraska.

The State Department said at the time that the review of an alternative route could be completed “as early as the first quarter of 2013.”

‘All In’

Obama’s jobs council yesterday called for an “all-in” approach, urging an expansion of oil and gas drilling and an acceleration of projects including pipelines.

“We should allow more access to oil, natural gas and coal opportunities on federal lands,” the President’s Council on Jobs and Competitiveness said in a year-end report.

The American Petroleum Institute, the Washington-based group representing oil and gas companies, plans to lobby Congress for legislation that would take away Obama’s power to make a final decision on the Keystone pipeline.

“The president’s decision today makes us question if he’s truly interested in jobs creation,” API President Jack Gerard said in an interview before an appearance in Washington.

TransCanada applied for a U.S. permit in 2008. Advocates such as Senator Richard Lugar, an Indiana Republican who sponsored legislation to set the February deadline, said further delay compromises U.S. efforts to import more oil from a friendly nation.

“The studying time is done,” Lugar said in an e-mailed statement. “The environmental concerns have been addressed. The job creation, economic and energy-security arguments are overwhelmingly in favor of building it. The president opposing pipeline construction is not in the best interest of the United States.”

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net; Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Timothy Franklin at tfranklin14@bloomberg.net