Obama delays oil pipeline; Neb. claims victory

[November 11, 2011]  LINCOLN, Neb. (AP) -- Nebraska rancher Bruce Boettcher was ecstatic when he learned the rumors swirling out of Washington were true: Plans to build a 1,700-mile oil pipeline from Canada to Texas were on hold to study how environmentally sensitive areas in his state could be avoided.

He'd fought the project with neighbors whose land also sits atop the Ogallala aquifer, a massive underground water supply in the pipeline's path -- and at the epicenter of the national debate. Nebraska officials including its Republican governor pushed against the project, as had environmentalists and national groups.

Until Thursday, when the U.S. State Department announced a delay in its federal permitting decision for the TransCanada Corp. pipeline, Boettcher wasn't sure if the protests and public hearings had made a difference.

"I didn't think we'd get this far this quick, to tell you the truth," the 55-year-old, fourth-generation rancher said. "TransCanada is persistent. But when they get persistent, I get persistent."

The Obama administration said other potential routes for the Keystone XL through Nebraska needed to be studied, creating a delay that likely puts off a final decision until after the 2012 election -- a move that didn't go unnoticed by supporters and opponents of the project.

The $7 billion pipeline would carry oil from the tar sands in Alberta, Canada, to refineries on the Texas Gulf Coast. TransCanada is seeking to build the 36-inch pipeline through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

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

But Thursday's announcement means the Calgary-based company will have to figure out how to move the pipeline around the Nebraska Sandhills region and the aquifer, which flows under eight states and provides water crucial to huge swaths of U.S. cropland.

An environmental review of the new section is expected to be completed in early 2013. The State Department has authority over the project because it crosses a U.S. border.

President Barack Obama said the 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.

The heavily contested project has become a political trap for Obama, who risks angering environmental supporters -- and losing re-election contributions from some liberal donors -- if he approves it, and criticism from labor and business groups for thwarting job creation if he rejects it.

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 Midwest. Supporters say the pipeline could significantly reduce U.S. dependence on Middle Eastern oil while providing thousands of jobs.

Among its supporters are Oklahoma's governor, congressional delegation and even the oil and gas industry. They say the Keystone XL would provide additional takeaway pipeline from large oil storage facilities in Cushing, a city in northwest Oklahoma dubbed the "Pipeline Crossroads of the World."

"The influx of crude oil from Canada and increased production in the northern United States has overwhelmed outbound pipeline capacity at Cushing, forcing more oil into storage," said Cody Bannister, a spokesman for the Oklahoma Independent Petroleum Association.

Bannister said the excess oil is resulting in the estimated 60 million barrels of oil produced each year in Oklahoma selling for an average of $15 less per barrel than crude oil from other parts of the globe.

"In one year, the state would lose $63 million in gross production taxes," Bannister said, adding the overall economic impact would be "far greater."

But the project has become a focal point for environmental groups, which say the pipeline 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 against the pipeline.

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

"A done deal has come spectacularly undone!" he wrote.

But fellow environmentalist Matthew Tejada, executive director of the Houston Air Alliance, was more cautious.

"We just got a stay of execution," Tejada said. "I don't know that we've actually fundamentally changed the mind of anyone in the Obama administration."

Tejada said the pipeline wouldn't lead the U.S. toward a sustainable energy policy, but he doesn't think that played into the State Department's decision.

"This is more of a political calculation to get Keystone off the books of this next election cycle," he said.

TransCanada said in a statement it was disappointed in the delay but confident that the project ultimately would be approved. The company previously said a delay could cost millions of dollars and keep thousands of people from getting 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," said Girling, the company's president and CEO.

The American Petroleum Institute, the oil industry's chief lobbying group, said the decision put election-year politics above job creation. House Speaker John Boehner, R-Ohio, 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, through a spokesman, said he was disappointed. He also noted the lost job opportunities and "billions in economic growth on both sides of the border," but remained hopeful the project would eventually 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, a region that includes a high concentration of wetlands and the Ogallala aquifer.

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

"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," said Sen. Bernard Sanders, I-Vt., who requested the review.

[Associated Press; By MATTHEW DALY and GRANT SCHULTE]

Matthew Daly reported from Washington. Associated Press writers Dina Cappiello in Washington; Rob Gillies in Toronto; Ramit Masti in Houston; and Sean Murphy in Oklahoma City also contributed to this report.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.