Obama administration on verge of delaying Keystone XL project

The Obama administration is preparing to announce a delay in the controversial Keystone XL oil pipeline project, according to an official who has been briefed on the plans.

The announcement could come as early as Thursday, and would likely delay the politically charged project until after the 2012 presidential election.

The State Department has been considering extending the permit process to allow a new assessment of the proposed route of the oil pipeline from Canada to Texas.

Such a delay could cause significant uncertainty for the proposal to build a 1,700-mile oil pipeline from Canada to Texas, possibly enough to weaken investor support.

Until recently, the plan to pipe crude from Canadian oil sands to U.S. refineries appeared to be moving toward approval. In order to proceed, the project needs a permit from the State Department allowing it to cross a national border.

But the issue has become a major rallying point for environmentalists, who object to the extraction from oil sands because of the greenhouse gases it produces. They’re threatening to retaliate against Obama’s reelection campaign.

On the other side, though, is another important Democratic constituency. Labor leaders have joined ranks with business in pressuring the Obama administration to approve a permit because of the jobs it would create.