The Obama administration today formally rejected a bid by Canadian energy company TransCanada to build a $7 billion oil pipeline linking the tar sands of Alberta to refineries in the Gulf of Mexico.
The Keystone XL project, which was estimated to create thousands of U.S. jobs, became an election-year lightning rod, embroiling President Obama, congressional Republicans, labor unions and interest groups in a heated debate over jobs and the environment.
The State Department, which holds the authority to approve or reject pipelines that cross an international boundary, said in November that it would delay a decision on Keystone to allow for further study of the environmental impact along its 1,700-mile route.
Then in December, Congress tried to force the president to make a decision proposal within two months, tucking the mandate into the payroll tax cut bill that Obama ultimately signed into law.
But the president said today in a statement that the congressionally imposed deadline did not provide adequate time for the State Department to finish a customary review of the pipeline's route through six states.
"The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment," Obama said.
"As a result, the secretary of state has recommended that the application be denied. And after reviewing the State Department's report, I agree."
Sources say the administration's decision effectively hits the reset button on a review process that has been underway for several years, but does not preclude TransCanada from resubmitting a proposal for reconsideration.
Labor unions, oil industry groups -- even the president's jobs council -- have signaled support for the plan, which also has bipartisan backing on Capitol Hill. But environmental groups warned it would have a dangerous effect on ecosystems and human health, ratcheting up pressure on Obama to defer to his progressive base in an election year.
"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.
Still, news of the rejection quickly sparked condemnation from members of Congress on both sides of the aisle.
House Speaker John Boehner of Ohio, who has said pipeline construction would "create 100,000 new jobs," warned that delaying the deal would mean losing jobs to China.
"The Canadians are in conversations with the Chinese, and if we don't build this pipeline to bring that Canadian oil and pick up the North Dakota oil and deliver it to our refineries in the Gulf Coast, that oil is going to get shipped out to the Pacific Ocean and will be sold to the Chinese," Boehner said.
Rep. Joe Donnelly, a Democrat from Indiana, said he is "very disappointed" in the Obama decision. "They are missing an opportunity to create thousands of jobs in America," he said.
Meanwhile, environmental groups claimed victory over the oil industry, which had spent millions lobbying intensely for approval of the pipeline.
"The Keystone XL fight was David versus Goliath; no one thought we could win," said Dan Moglen of Friends of the Earth. The decision shows "sustained grassroots pressure aimed at holding the president accountable to the public interest proved more powerful than all the lobbyists the oil industry could muster."
Frances Beinecke, president of the Natural Resources Defense Council, praised Obama for putting "the health and safety of the American people and our air, lands and water -- our national interest -- above the interests of the oil industry."
But the U.S. Chamber of Commerce, the nation's largest pro-business lobby, said the interests of Americans looking for work were cast aside in what was "a politically charged" move.
"By placing politics over policy, the Obama administration is sacrificing tens of thousands of good-paying American jobs in the short term, and many more than that in the long term," chamber president Tom Donohue said in a statement.
"It is dumbfounding that President Obama's decision to deny the Keystone XL pipeline permit ignores his own Council on Jobs and Competitiveness "Road Map to Renewal" report. Issued yesterday, it recommends that the United States step up its game on energy and construct pipelines to deliver fuel as a key component of our economic recovery."
Administration officials have denied that politics played a role in the decision, citing established precedent for careful review of the environmental impact of major projects .
It is a "non-political, professional process that has been in place long before this administration came into office," White House press secretary Jay Carney told reporters today.
Carney would not comment directly on the administration's decision or why it was made.