Obama says no to Keystone; but please try again

WASHINGTON — Trapped by an untenable Feb. 21 deadline imposed by Congress, U.S. President Barack Obama rejected TransCanada’s proposed $7-billion Keystone XL pipeline on Wednesday in a decisi

WASHINGTON — Trapped by an untenable Feb. 21 deadline imposed by Congress, U.S. President Barack Obama rejected TransCanada’s proposed $7-billion Keystone XL pipeline on Wednesday in a decision his Canadian counterpart greeted with “profound disappointment.”

It quickly became clear, however, that the rumours earlier in the day of Keystone’s death had been greatly exaggerated.

When he called Prime Minister Stephen Harper to break the news, Obama took pains to point out that TransCanada was free to submit an amended plan — one that would reroute the Alberta-to-Texas pipeline around an environmentally sensitive aquifer in Nebraska.

“The president explained that the decision was not a decision on the merits of the project, and that it was without prejudice, meaning that TransCanada is free to re-apply,” Harper spokesman Andrew MacDougall said.

And though Harper “expressed his profound disappointment,” MacDougall said, “he indicated to President Obama that he hoped that this project would continue given the significant contribution it would make to jobs and economic growth both in Canada and the United States of America.”

Indeed, Keystone XL is more delayed than dead: the move lets the White House reclaim control of the approval process after Republican lawmakers attempted to force Obama into green-lighting the politically charged project in late December.

TransCanada (TMX:TRP) was not surprised by the announcement, and quickly confirmed plans to submit an amended proposal.

“This outcome is one of the scenarios we anticipated,” company CEO Russ Girling said in a statement.

“While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL…. We will re-apply for a presidential permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014.”

A release from the U.S. State Department, tasked with making a decision on Keystone XL because it crosses an international border, said the pipeline was not currently in the national interest of the United States.

But the decision “was predicated on the fact that the department does not have sufficient time to obtain the information necessary to assess whether the project, in its current state, is in the national interest,” the statement said.

In Edmonton, Alberta Premier Alison Redford said she had spoken to TransCanada about the province helping it with a new proposal.

“One of the things that we talked about is whether or not in these current circumstances it might be worth coming up with a plan where we can work together,” Redford said.

“TransCanada certainly did agree that we needed to talk about that. We haven’t gone any further than that, but we certainly, quite honestly, made the offer.”

Redford said she plans to make another visit to Washington to discuss the pipeline. She also said the decision doesn’t mean Alberta will focus more or less on the U.S. or on any other market for its bitumen.

Bob Schulz, a professor with the Haskayne School of Business at the University of Calgary, said Wednesday’s announcement was more politics than policy.

“It clarifies when the clock starts,” he said. “(Obama) is saying the clock starts again …. It’s a political manoeuvre to get around the 60 days.”

That didn’t prevent Republican presidential hopefuls Mitt Romney and Newt Gingrich from pouncing on a political opportunity that was largely the GOP’s making.

“President Obama’s decision to reject the Keystone XL crude oil pipeline is as shocking as it is revealing,” Romney said in a statement.

“By declaring that the Keystone pipeline is not in the ’national interest,’ the president demonstrates a lack of seriousness about bringing down unemployment, restoring economic growth, and achieving energy independence. He seems to have confused the national interest with his own interest in pleasing the environmentalists in his political base.”

Campaigning in South Carolina, Gingrich also let loose, calling the decision a “stunningly stupid” one that would force Canada to forge energy partnerships with China.

“These people are so out of touch with reality, it’s as if they were governing Mars,” he said.

The project met with massive opposition in Canada and the U.S. in part because the original route travelled through the Ogallala aquifer in Nebraska. Other critics have taken issue with so-called “dirty oil” from Alberta’s oil sands, while still more say Keystone XL embodies North America’s ongoing dependence on fossil fuels.

The Obama administration — trapped between a job-starved economy and a core constituency with strong environmental leanings — said last year it would not make a final decision on Keystone until after the 2012 election.

Foreign Affairs Minister John Baird says the controversy proves the need for Canada to diversify its energy markets.

“We strongly believe Keystone is in the best interest of both countries; a lot of jobs can be created,” Baird said.

“It’s the best way to secure energy security for the United States, and obviously it’s all about jobs and economic growth for Canada. We’ll continue to be an active supporter of the project.”