Obama cancels Keystone pipeline

WASHINGTON - President Obama rejected a presidential permit Friday for the controversial Keystone XL pipeline, citing concerns about its impact on the climate.

"America is now a global leader in taking serious action to fight climate change," Obama told reporters, standing in the Roosevelt Room beside Vice President Biden and Secretary of State John Kerry. "And, frankly, approving this project would have undercut that global leadership. And that's the biggest risk we face: not acting."

He said now was the time to act to "protect the one planet we've got while we still can."

In the roughly seven-minute statement, Obama rejected the idea that the project would either lower oil prices or improve America's energy security.

"The point is the old rules said we couldn't promote economic growth and protect our environment at the same time," he said. "But this is America, and we have come up with new ways and new technologies to break down the old rules."

The decision to deny TransCanada Corp. a cross-border permit for a 1,179-mile pipeline between Hardisty, Alberta, and Steele City, Neb., puts an end - at least for now - to a seven-year fight over a project that came to symbolize what Obama could do unilaterally to keep fossil fuels in the ground.

What started as a routine permitting application for a large infrastructure project became a litmus test among Democrats for what Obama was willing to do to tackle global warming in the face of Republican resistance in Congress. Backers of the project said it would ensure a secure supply of oil from a reliable U.S. ally; opponents said it would both exacerbate climate change by releasing a massive amount of carbon into the atmosphere and could cause environmental damage both in Canada and along the pipeline's route.

On Wednesday the State Department rejected TransCanada's request to suspend its review of the pipeline until the Nebraska Public Service Commission approved a revised route through the state. The completed pipeline would move roughly 830,000 barrels a day of heavy crude oil to U.S. Gulf Coast refineries. The move drew immediate criticism from congressional Republicans as well as praise from environmentalists.

Sen. John Hoeven (R., N.D.) called Obama's decision "not surprising, but it is disappointing."

"It's ironic that after delaying construction for more than seven years . . . the president now finds it pressing to make a decision just as the company is asking for a pause to resolve any concerns," Hoeven said. "Clearly, the administration is making a political decision when it comes to Keystone."

By contrast, 350.org's Bill McKibben, whose group helped elevate the permit decision to a national issue by staging a huge protest in Washington in 2011, called Obama "the first world leader to reject a project because of its effect on the climate." He said in a statement: "That gives him new stature as an environmental leader, and it eloquently confirms the five years and millions of hours of work that people of every kind put into this fight."

Industry analysts are divided over what the decision will mean for oil development in Canada's oil sands region, which has already been hard hit by lower global crude prices.

"Denial constitutes an extreme case of politicization of energy infrastructure permitting," said Robert McNally, president of the consulting firm Rapidan Group and energy expert on President George W. Bush's National Security Council.

He said "It will add what the industry calls 'above ground risk.' It will not prevent the development of energy resources in Canada or the U.S., but delay and uncertainty will raise costs."

Those costs have become more important as the price of oil has slipped. Although rail transport has expanded greatly to carry oil sands to the United States, it is more expensive than pipeline transport. And the extra cost looms larger at current oil prices, which are about half the levels they were for much of the past six years. Yet the final rejection of the Keystone XL project was widely expected in the oil industry, and many companies have already made other plans.

"The Keystone XL decision was a foregone conclusion," said Pavel Molchanov, energy analyst at the investment advisory firm Raymond James. "The administration had already telegraphed its opposition."