Obama’s State Department rejects request to halt Keystone XL review

WASHINGTON — The Obama administration rejected TransCanada Corp.’s request to suspend a long-running U.S. government review of Keystone XL, prolonging the regulatory limbo that has ensnared the proposed pipeline for seven years.

Although the move stopped short of a final decision on the $8 billion project, it was seen as paving the way for an eventual rejection of the proposed pipeline that would transport oil sands crude from Alberta across 1,170 miles and three states to Steele City, Neb. President Barack Obama has been critical of Keystone XL and said he would only back the project if it “does not significantly exacerbate greenhouse gas pollution.”

State Department spokesman John Kirby said the decision to continue the review was communicated in a letter to Calgary-based TransCanada on Wednesday.

“We’re not required to pause it based on an applicant’s request; there’s no legal basis to do that,” Kirby said, noting that “a lot of interagency work has gone into this to date.”

TransCanada spokesman Mark Cooper said the company respected the decision, and would keep working “to demonstrate that Keystone XL is in the national interest of the United States” — a legal threshold for the State Department’s endorsement.

“The fundamental question remains: Do Americans want to continue to import millions of barrels of oil every day from the Middle East and Venezuela or do they want to get their oil from North Dakota and Canada through Keystone XL?” Cooper said. “We believe the answer is clear and the choice is Keystone XL.”

“Every test, every hurdle has been satisfied.” Cooper added. “If the decision on a presidential permit for Keystone XL is based on its merits and on science over symbolism it will be approved.”

TransCanada formally asked for a delay in the State Department’s review while a Nebraska commission evaluates the proposed route through that state, a process that could take seven months to a year.

Read more: TransCanada asks State Department to suspend long-running review of Keystone XL

White House press secretary Josh Earnest reiterated Tuesday that Obama still hopes to issue his verdict on Keystone XL before he leaves office.

Kirby declined to foreshadow the outcome of State Department’s ongoing “national interest” review, which appears to be nearing an end, after developing a series of environmental analyses, considering millions of public comments and hearing from other agencies.

“The process is fairly mature,” Kirby said, “and the secretary believes that out of respect for that process and all the input that has gone into it that it is the most appropriate thing to keep that process in place, to continue the review.”

Democratic presidential candidate Bernie Sanders and environmentalists are pressing President Barack Obama to reject Keystone XL now, a move that could bolster international climate negotiations in Paris.

Read more: Keystone XL rejection could give a boost to international climate negotiations

Environmentalists said TransCanada’s bid to halt its review — despite oil industry leaders’ criticisms of the lengthy scrutiny — was a ploy aimed at avoiding a presidential permit denial in hopes that a president with a more favorable view of the project would be elected next November.

Sierra Club Executive Director Michael Brune said the State Department was doing the right thing in “rejecting TransCanada’s blatant attempt to run out the clock on the Obama administration in hopes of getting approval for the Keystone XL pipeline from a subsequent administration that might not rely on climate science.”

Republican presidential candidates have said they support the project, while Democrats Sanders and Hillary Clinton oppose it.

Even if Obama rejects the project — whether now or next year — TransCanada could reapply.

“I have zero doubt that if a Republican wins the presidential election on day one, the Keystone people will be back pushing,” Sanders said Wednesday.

A rejection could force TransCanada to formally write off Keystone, which has cost $2.4 billion already.

But the oil price slump already has tamped down some of the clamor for new pipelines to carry diluted bitumen out of Alberta. Pipeline expansions by Enbridge also relieved some of the pressure.

“With oil prices down and Canadian production growth slowed or declining as a result and combined with the fact that the Enbridge expansions have removed bottlenecks for Canadian crude movements to the U.S. Gulf Coast, there is also no compelling need for Keystone in the near to mid term,” said John Auers, executive vice president of Turner, Mason & Co.

TransCanada and the shippers with contracted space on Keystone XL are exploring other options.

TransCanada is continuing to forge ahead with its proposed Energy East pipeline that would ferry oil sands crude to Canada’s east coast.

And in the meantime, oil sands producers that are hoping to transport their crude on Keystone XL have turned to alternatives, including rail and other pipelines that serve the region.