Obama said there was not adequate time to review the 1,700-mile proposed pipeline between the Alberta oil sands and Texas Gulf Coast refineries (route pictured), because of a 60-day deadline set by Congress, the New York Times reports. Last month Republicans inserted a provision in the temporary payroll tax cut bill, requiring the administration to make a decision on the pipeline by February 21.
Obama said he planned to work with the oil industry to boost domestic production and possibly build new pipelines within U.S. borders.
TransCanada said it will quickly apply for a new permit for a similar route, and plans to largely maintain the original construction schedule. Chief executive Russ K. Girling said the company expects its new application to be processed in an “expedited manner,” allowing the pipeline to come into service in late 2014.
But Kerri-Ann Jones, the assistant secretary of state for oceans and international environmental and scientific affairs, said any new application would go through a complete review and would not be expedited.
White House spokesman Jay Carney said that by requiring a decision before Keystone could be fully studied, Republicans might have actually delayed the project. But a spokesman for speaker of the house John Boehner said: “President Obama is about to destroy tens of thousands of American jobs and sell American energy security to the Chinese.”
The American Petroleum Institute and Republican presidential frontrunner Mitt Romney also attacked the decision.
Last week congressional Republicans said they are drafting contingency legislation that would allow Congress to approve the Keystone XL pipeline in case the White House does not approve it. The grounds for the legislation derive from past constitutional debate over whether authority for cross-border permits should rest with the executive branch (e.g., the State Department) or Congress.
Forbes contributor Peter Cohan said the decision will benefit other oil sands transportation channels. Enbridge Energy Management runs a pipeline that could be expanded to handle the same work, without needing a permit. Railroads could also carry tar sands oil.
TransCanada shareholders could also benefit from the decision, he said. The company has already invested $1.9 billion in the project, and if it canceled the work altogether, the reduction in capex and costs would push its EPS to between five and 10 percent this year and next.
But Bloomberg said the project could have added $10 a share to TransCanada’s stock price this year, and quoted BMO Capital Markets analyst Carl Kirst, who said that if the project is cancelled, the stock becomes “dead money” for a time.
More delays might cause producers and refiners to ditch Keystone XL for other pipeline projects, but many investors say the U.S. will approve Keystone in time to prevent that happening.