Obama Administration Rejects Keystone Pipeline
January 18, 2012 Leave a comment
The Obama administration rejected the long-delayed TransCanada oil sands crude project, a decision welcomed by environmental groups but blasted by the domestic energy industry.
After delaying the project past the November 2012 election, President Barack Obama wascompelled by Congress to decide by Feb. 21 on whether to approve the pipeline that would sharply boost the flow of oil from Canada’s oil sands.
Obama said TransCanada’s [TRP 41.41 -0.33 (-0.79%) ] application for the 1,700-mile pipeline was denied because the State Department did not have enough time to complete the review process.
“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 in a statement.
The deadline was set by a GOP-written provision as part of a tax bill that Obama signed into law just before Christmas.
Republicans, in turn, blasted Obama for breaking his promise to create jobs by scuttling the $7 billion pipeline.
House Speaker John Boehner, R.-Ohio, said Republicans will keep fighting for the Keystone pipeline because it is “good for the U.S. economy because it would create thousands of jobs.”
“All options are on the table” for fighting for the sands pipeline between the western province of Alberta and Houston, Boehner told reporters. “This is not the end of the fight.”
Republicans in the Senate have said they could legislate an approval of the pipeline that could get around any rejection by President Obama.
Proponents have argued the pipeline down the middle of the U.S. would generate jobs and lessen dependence on foreign oil by creating a secure energy supply. Environmentalists say the pipeline will increase the chance of oil spills in environmentally sensitive regions and say oil sands crude is more corrosive than lighter grades in pipelines.
TransCanada’s oil sands pipeline has put Obama in a political bind at the start of what is expected to be a difficult re-election campaign, and has become a useful tool for Republicans seeking to portray Obama as dithering on a project that they say would create 20,000 jobs.
Opponents, quoting a Cornell University study, say the project will create only 2,500 to 4,650 temporary construction jobs.
Meanwhile, a spokesman for Canadian Prime Minister Stephen Harper said Harper told Obama he was “proroundly disappointed” by the decision.
Andrew MacDougall said Harper told Obama he hoped the pipeline would ultimately be approved given the jobs it would create both in Canada and the U.S.
There are some companies that may profit from the scuttling of the pipeline, according to Andrew Lipow of Lipow Oil Associates in Houston.
Enbridge Energy Management [EEQ 34.48 0.12 (+0.35%) ] has a pipeline system from Canada to the U.S. that will be expandable without the need of a permit.
Railroads, including Burlington Northern, a unit of Berkshire Hathaway [BRK.A 118215.00 1265.00 (+1.08%) ], Canadian National [CNI 77.88 1.21 (+1.58%) ] and Union Pacific [UNP 109.82 0.32 (+0.29%) ], are expected to benefit because they will be hauling more of the oil not flowing through the pipeline. So should rail car manufacturers Trinity Industries [TRN 32.16 0.19 (+0.59%) ],Greenbrier [GBX 24.36 -0.40 (-1.62%) ] and American Railcar [ARII 27.64 -1.03 (-3.59%) ].
Canadian refiners could also benefit from discounted crude oil, according to Lipow.
Reuters and the Associated Press contributed to this report.