The Obama administration has thrown the controversial Keystone XL oilsands pipeline into limbo with a decision to delay a final ruling on the $7-billion project until after the 2012 presidential election.
In a statement released Thursday afternoon, the U.S. State Department said it was ordering a new review aimed at rerouting Keystone XL around sensitive ecosystems along its proposed path through Nebraska.
A final determination on whether to grant Calgarybased TransCanada Corp. a presidential permit to build the 2,700-kilometre line is now unlikely before "the first quarter of 2013," the department said.
President Barack Obama, in a statement Thursday afternoon, said he backed the move because of the need for more information about the potential impacts on people and natural resources along the pipeline route.
"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," Obama said.
The decision comes after months of growing opposition to Keystone XL from environmental groups, legislators and landowners in Nebraska -- and from prominent donors to Obama's electoral war chest, who threatened to withhold support if the project went ahead.
The move is likely to increase strains between Obama and Prime Minister Stephen Harper, who has lobbied aggressively for Keystone XL and recently said approval should be a "complete no-brainer" for the U.S.
The news was also bitter disappointment for TransCanada Corp., which had expected a positive decision by the end of the year.
Speaking at the sidelines of a heavy oil conference in Calgary, TransCanada officials said they believed the issue facing TransCanada was more one of timing than a matter of approval.
Alberta Premier Alison Redford said the delay is "disappointing," and expressed hopes that anti-pipeline protesters did not play a role in State Department's decision.
"Our position has always been clear that we respect and understand that approval of the pipeline is a U.S. domestic matter, but the fact remains that Keystone XL is a key piece of infrastructure for our province," she said in a statement.
"I sincerely hope that the State Department made this decision based on science and evidence and not rhetoric and hyperbole from very well-organized interest groups."
Redford indicated that she will continue to support efforts to build the pipeline.
The State Department, in its media note on Keystone XL, said it will "examine indepth alternative routes" that would move the pipeline from its planned path across the vast Ogallala Aquifer and through the ecologically sensitive Sand Hills of Nebraska.
The decision marks a major about-face for the State Department, which issued a final environmental impact study in August that concluded there would be "no significant impact" on U.S. natural resources. That study also found TransCanada's planned route for the pipeline was the preferred one because all others would have greater environmental impact.
But on Thursday, State said "concerns about the proposed route's impact on the Sand Hills of Nebraska has increased significantly over time."
The Nebraska legislature is in a special session examining its own legislation aimed at forcing TransCanada to change the pipeline's route.
The administration's decision is a difficult blow for TransCanada, which already has spent millions of dollars obtaining easements from landowners along the existing route. The company has said the project could be jeopardized altogether if a new route is required.
But the delay is a significant victory for U.S. environmentalists who have been fighting for years against Keystone XL, and who succeeded in the last three months in turning the pipeline into an issue Obama could not ignore. Last Sunday, more than 10,000 pipeline opponents protested at the White House against the project.
The Keystone XL pipeline, as proposed by TransCanada, would run 2,700 kilometres from Hardisty, Alta., to refineries on the Gulf Coast of Texas, carrying as much as 830,000 barrels of crude oil per day.
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