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US delays Keystone XL oil pipeline from Canada to look at new routes in Nebraska

WASHINGTON – The Obama administration said Thursday it is delaying a decision on a massive oil pipeline until it can study new potential routes that would avoid environmentally sensitive areas of Nebraska.

The decision probably will put off final action on the pipeline until after next year’s U.S. elections.

The announcement by the State Department means Calgary-based TransCanada Corp. will have to figure out a way to move the proposed Keystone XL pipeline around the Nebraska Sandhills region and Ogallala aquifer, which supplies water to eight states. The State Department said it will require an environmental review of the new section, which is expected to be completed in early 2013.

U.S. President Barack Obama said the 1,700-mile pipeline could affect the health and safety of the American people as well as the environment.

“We should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood,” Obama said in a statement.

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The decision on whether to approve the $7 billion pipeline “should be guided by an open, transparent process that is informed by the best available science and the voices of the American people,” Obama said.

TransCanada Corp. is seeking to build a 36-inch pipeline to carry oil derived from tar sands in Alberta, Canada, to refineries on the Texas Gulf Coast. The pipeline would travel through Montana, South Dakota, Nebraska, Kansas and Oklahoma before reaching Texas.

The heavily contested project has become a political trap for Obama, who risks angering environmental supporters if he approves the pipeline and could face criticism from labour and business groups for thwarting job creation if he rejects it.

Some liberal donors have threatened to cut off contributions to Obama’s re-election campaign if he were to approve the pipeline.

The project has become a focal point for environmental groups, which say it would bring “dirty oil” that requires huge amounts of energy to extract. They also worry that the pipeline could cause an ecological disaster in case of a spill.

Thousands of protesters gathered across from the White House on Sunday to oppose the pipeline, and celebrities including “Seinfeld” actress Julia Louis-Dreyfus have made videos urging Obama to reject the pipeline. The State Department has authority over the project because it crosses a U.S. border.

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Environmental activist Bill McKibben, who led protests against the pipeline and was arrested in a demonstration this year, said on Twitter that the protests had an effect on the Obama administration.

“A done deal has come spectacularly undone!” he wrote.

The Keystone XL pipeline would carry as much as 700,000 barrels of oil a day, doubling the capacity of an existing pipeline operated by TransCanada in the upper Midwestern United States. Supporters say the pipeline to Texas could reduce significantly U.S. dependence on Middle Eastern oil while providing thousands of jobs.

TransCanada said in a statement it was disappointed in the delay but confident that the project ultimately will be approved. The company has said previously that a delay could cost millions of dollars and keep thousands of people of from getting jobs.

Russ Girling, TransCanada’s president and CEO, called the pipeline “shovel-ready,” adding that it could create as many 20,000 jobs.

“If Keystone XL dies, Americans will still wake up the next morning and continue to import 10 million barrels of oil from repressive nations, without the benefit of thousands of jobs and long-term energy security,” he said.

The American Petroleum Institute, the oil industry’s chief lobbying group, said the decision put election-year politics above creation of thousands of jobs. “Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers,” said API president Jack Gerard.

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Republican Rep. John Boehner, speaker of the House of Representatives, used similar language, saying Obama had sacrificed thousands of jobs “solely to appease his liberal base. It’s a failure of leadership.”

Canadian Prime Minister Stephen Harper also was disappointed.

“As we have consistently said, the pipeline will create thousands of jobs and billions in economic growth on both sides of the border,” said Harper’s spokesman, Andrew MacDougall.

Still, McDougall said Harper remained hopeful that the project eventually will be approved.

Nebraska Gov. Dave Heineman said the State Department decision was due largely to pressure from Nebraskans. Heineman called a special session of the Nebraska Legislature to address pipeline concerns, including a possible rerouting of the pipeline around the Sandhills.

Heineman, a Republican, called the State Department decision “an exceptional moment for Nebraskans” and a sign their voices have been heard.

The decision to reroute the project comes as the State Department’s inspector general has begun a review of the administration’s handling of the pipeline request. That examination follows complaints from Democratic lawmakers about possible conflicts of interest in the review process.

The inspector general will look at whether the State Department and others involved in the project followed federal regulations.

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Sen. Bernie Sanders, the independent lawmaker who requested the inspector general’s review, welcomed the delay.

“I strongly believe that the more the American people learn about this project, the more they will understand that it would be disastrous for our environment and for our economy,” Sanders said.

Associated Press writers Grant Schulte in Lincoln, Nebraska, and Dina Cappiello in Washington contributed to this report.