Keystone decision rekindles U.S. fight over pipeline

U.S. President Barack Obama and Congress are back where they were before Christmas, locked in an election-season tussle over a proposed 2,700-kilometre oil pipeline from Canada to Texas.

TransCanada says new proposed route could be ready by fall

U.S. House Speaker John Boehner gestures next to House Majority Leader Eric Cantor during the G.O.P. news conference about the Keystone XL pipeline decision on Capitol Hill in Washington on Wednesday. (Yuri Gripas/Reuters)

U.S. President Barack Obama and Congress are back where they were before Christmas, locked in an election-season tussle over a proposed 2,700-kilometre oil pipeline from Canada to Texas.

Republicans hope to again force Obama to make a politically risky decision, while he is seeking to put it off until after the November election.

Obama blocked the $7-billion Keystone XL pipeline on Wednesday, at least temporarily, but Republicans signalled their intention to again to force the issue.

Rep. Fred Upton, a Republican from Michigan and chairman of the House Energy and Commerce Committee, said he will call Secretary of State Hillary Rodham Clinton, who recommended Obama's rejection, to testify at a hearing as early as next Wednesday. That's the day after Obama gives his State of the Union address before a joint session of Congress.

"This is not the end of the fight. Republicans in Congress will continue to push this because it's good for our country and it's good for our economy and it's good for the American people," especially those who are out of work, said House Speaker John Boehner.

Republicans are looking to drive a wedge between Obama and two key Democratic constituencies. Some labour unions support the pipeline as a job creator, while environmentalists fear it could lead to an oil spill disaster.

The plan by Calgary-based TransCanada Corp. would carry crude from Alberta's oilsands through a 2,700-kilometre pipeline across six U.S. states to refineries on the Texas Gulf Coast.

Environmental concerns in Nebraska

Obama was already on record as saying no, for now, until his administration could review an alternate route that avoided environmentally sensitive areas of Nebraska — a route that still has not been proposed. But in an unrelated tax deal he cut with congressional Republicans, Obama had been boxed into making a decision by Feb. 21.

The deal required that the project would go forward unless Obama declared by that date that it was not in the national interest. The president did just that Wednesday, generating intense reaction from all sides.

"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," Obama said in a written statement. "I'm disappointed that Republicans in Congress forced this decision."

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Newt Gingrich, campaigning for the Republican presidential nomination in South Carolina, called Obama's decision "stunningly stupid," adding, "What Obama has done is kill jobs, weaken American security and drive Canada into the arms of China out of just sheer stupidity."

Republican presidential front-runner Mitt Romney said the decision was "as shocking as it is revealing. It shows a president who once again has put politics ahead of sound policy."

Project supporters say U.S. rejection of the pipeline would not stop one from being built. Prime Minister Stephen Harper has said Canada is serious about building a pipeline to its West Coast, where oil could be shipped to China and other Asian markets.

Proposed route under review

TransCanada said it would submit a new application once an alternative route for the pipeline is established. Company chief Russ Girling said if approved, the pipeline could begin operation as soon as 2014. He said TransCanada will continue to work with Nebraska officials to determine the safest route for Keystone XL that avoids the environmentally sensitive Sandhills area, which he said should be completed this fall.

But Assistant Secretary of State Kerri-Ann Jones told reporters that if TransCanada submits a new application for a different pipeline path, it would trigger a new review process.

"We cannot state that anything will be expedited at this time," she said. "We would look to information that is out there to extent we can. It is a new permit application so the process would have to be started over again."

Demonstrators carry a giant mock pipeline while calling for the cancellation of the Keystone XL pipeline during a rally in Washington on Nov. 6, 2011. Joshua Roberts/Reuters

The proposed pipeline would pass through Montana, South Dakota, Nebraska, Kansas and Oklahoma en route to Texas. It is a dicey proposition for Obama, who enjoyed strong support from both organized labour and environmentalists in his winning 2008 campaign for the White House.

Environmental advocates have made it clear that approval of the pipeline would dampen their enthusiasm for Obama in November. Some liberal donors even threatened to cut off funds to Obama's re-election campaign to protest the project, which opponents say would transport "dirty oil" that requires huge amounts of energy to extract.

But by rejecting the pipeline, Obama risks losing support from organized labour, a key part of the Democratic base, for thwarting thousands of jobs.

TransCanada says the pipeline could create as many as 20,000 jobs, a figure opponents say is inflated. A State Department report last summer said the pipeline would create up to 6,000 jobs during construction.