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Obama Rejects Keystone Pipeline

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President Barack Obama rejected TransCanada Corp.’s bid to build the Keystone XL pipeline, ending seven years of debate over an infrastructure project that swelled into one of the most contentious environmental issues of his presidency.

A lengthy review by the State Department concluded that the pipeline “would not serve the national interest of the United States,” Obama said Friday at the White House. “I agree with that decision.”

Obama said the project wouldn’t make a meaningful contribution to the U.S. economy, lower gasoline prices or enhance the nation’s energy security. It also would have undercut U.S. global leadership on climate change, he said.

The decision comes just a month before world leaders from about 190 countries are scheduled to gather in Paris for United Nations-sponsored climate talks, where they hope to forge an international agreement to limit global warming through new environmental standards. Obama has made getting the accord a top priority of his second term, and achieving it will serve as central part of his legacy in office.

The rejection is a victory for environmental advocates, who sought to couple the 1,179-mile pipeline with Obama’s campaign to combat global warming. Backers said Keystone XL would create thousands of jobs, increase U.S. energy security, and help an important ally in Canada develop its energy resources.

Environmentalists Celebrate

Environmental activist Bill McKibben, an early organizer of opposition to the pipeline, said the decision gives Obama “new stature as an environmental leader, and it eloquently confirms the five years and millions of hours of work that people of every kind put into this fight.”

McKibben, co-founder of the environmental group, said that environmental activists “are well aware that the next president could undo all this, but this is a day of celebration.”

TransCanada’s Options

TransCanada said it will review all of its options in light of the permit denial. Those alternatives include filing a new application to receive a presidential permit for a cross-border crude oil pipeline from Canada to the U.S. because the industry still supports the project, Chief Executive Officer Russ Girling said in a statement following the rejection.

Republican presidential candidates began criticizing the decision before it had even been formally announced. “The Obama Admin’s politically motivated rejection of the Keystone XL Pipeline is a self-inflicted attack on the U.S. economy and jobs,” former Florida Governor Jeb Bush tweeted. House Speaker Paul Ryan said by scuttling the pipeline Obama is “rejecting tens of thousands of good-paying jobs.”

According to the State Department, the construction of the pipeline would have supported about 42,000 jobs, about 3,900 directly tied to building Keystone. Once up and running, pipeline operations would have required about 50 jobs.

The October employment report released Friday, which showed the U.S. gaining 271,000 jobs during the month and the jobless rate falling to a seven-year low of 5 percent, provided Obama with additional ammunition to rebut the arguments of pipeline proponents. He said said Keystone had taken on “an over-inflated role in our political discourse.”

No ‘Silver Bullet’

“This pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster illustrated by others,” Obama said, flanked by Secretary of State John Kerry and Vice President Joe Biden.

The Democratic presidential candidates, including front-runner Hillary Clinton and her main challenger Vermont Senator Bernie Sanders, both opposed letting the pipeline go through. 

The position of Obama and other Democrats has been bolstered by shifting voter attitudes regarding climate change. Two-thirds of Americans said the climate is changing in an October poll released yesterday by Yale University’s Program on Climate Change Communication. Fifty-nine percent of Americans said they are worried about global warming, up from 51 percent in March. Lobbying Campaign

The proposed cross-border pipeline, which would have carried Canadian oil sands to U.S. refineries near the Gulf of Mexico, spawned a multi-million-dollar lobbying campaign by both sides. The drawn-out process also soured diplomatic relations between Conservative Prime Minister Stephen Harper and the Obama administration. The incoming Liberal government, led by Justin Trudeau, is much less wedded to the project and to Alberta oil more generally. Obama said he spoke to Trudeau before making the announcement.

“We are disappointed by the decision but respect the right of the United States to make the decision,” Trudeau said in an e-mailed statement. “The Canada-U.S. relationship is much bigger than any one project, and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and cooperation.’’

TransCanada asked the State Department to put its review process on hold in a letter Monday, saying there was no need for the review to continue while it seeks approval from Nebraska authorities for the pipeline’s route through that state. The request was seen by some analysts as an attempt to circumvent Obama’s expected rejection of the pipeline by delaying a final decision until his successor takes office in 2017.

Obama has spoken critically of the project for more than eight months, disparaging its importance to Americans at a time when U.S. oil production has surged to near record highs. He has called the process of extracting Alberta’s oil sands “extraordinarily dirty,” and he set a test for the project saying he wouldn’t approve it if it would “significantly exacerbate the problem of carbon pollution.”

But while Keystone became a proxy to larger fights over the economy and the environment, energy experts said its importance to either was overstated by both sides.

TransCanada extended declines after the rejection was first reported. The shares fell 4.7 percent to C$43.10 at 11:15 a.m. in Toronto, its biggest drop in five weeks. The stock has fallen 25 percent this year, compared with a 17 percent decline in the Standard & Poor’s/TSX Energy Index of 59 stocks.

“At the end of the day it doesn’t really matter what Obama does,” said John Kim, a fund manager at Aston Hill Financial in Toronto. His firm manages about C$3 billion, including TransCanada shares. He plans to buy more shares going forward. “The new president, especially if they are Republican, could come in and reverse this decision. Most Republicans were for it so why wouldn’t they?”

– With assistance from Elizabeth Wasserman, Justin Sink, Phil Mattingly, Angela Greiling Keane and Mark Drajem in Washington, Rebecca Penty in Calgary, Eric Lam in Toronto and Josh Wingrove in Ottawa.