Obama administration to deny Keystone XL oil pipeline permit

The Obama administration has decided that it will not issue a permit before Feb. 21 for the controversial Keystone XL oil pipeline from Canada, according to people with knowledge of the decision.

The announcement, which could come as early as Wednesday, comes in response to a 60-day deadline Congress imposed in late December on the decision-making process for the permit as part of a deal to extend a payroll-tax break and unemployment benefits for two months.

Today’s decision, expected from the State Department, would make official what the administration has said from the outset: that under current law, it cannot accelerate the permitting process, especially in light of the need for additional environmental reviews of a new path for the pipeline through Nebraska.

Nebraska hasn’t identified possible alternate routes that would allow the pipeline to circumvent a key aquifer.

“It’s a fallacy to suggest that the president should sign into law something when there isn’t even an alternate route identified in Nebraska and when the review process is” not yet done, White House spokesman Jay Carney said Tuesday. “There was an attempt to short-circuit the review process in a way that does not allow the kind of careful consideration of all the competing criteria here that needs to be done.”

It’s unclear whether the administration will reject the pipeline project outright or will revert to the longer time line that it announced in November, which calls for a final decision to be made in early 2013, the people familiar with the decision said.

The decision is sure to intensify a bitter political fight over the pipeline. Republicans believe they can further damage President Obama’s shaky standing in the polls by arguing that his refusal to approve Keystone XL robs Americans of thousands of construction jobs.

“President Obama is about to destroy tens of thousands of American jobs and sell American energy security to the Chinese,” said Brendan Buck, a spokesman for House Speaker John Boehner. “The president won’t stand up to his political base even to create American jobs. This is not the end of this fight.”

The petroleum industry asserts that the Keystone XL project would create at least 20,000 jobs, but the State Department and independent groups estimate that no more than 6,000 jobs would be generated.

Environmentalists have pushed the administration to turn down the permit, arguing that the transportation of petroleum from Canada’s oil sands would profoundly damage the environment. They also contend that much of the gasoline and other products refined from the Canadian oil would be exported, doing little for American energy security.

A denial of the permit now would not prevent the State Department from considering the application in the future. But the department can’t do that until the application is complete, one administration official said, suggesting the permitting process could stretch out for months, possibly into next year.

“You can’t permit what doesn’t exist,” the administration official said.

In a new report, Obama’s jobs council urges him to expedite the production of fossil fuels close to home, in part by “allowing more access to oil, gas and coal opportunities on federal lands.”

Obama has said that a shift away from dependence on foreign oil is a priority, without suggesting how that stance would affect the Keystone project.