Obama rejects high-stakes Canada oil pipeline

Obama's political rivals had given him 60 days to make a decision on whether to approve the $7 billion, 1,700-mile (2,700-kilometer) pipeline route through the Great Plains to Texas, forcing him to choose between environmentalists and industry.

The Obama administration said TransCanada Corporation could resubmit the Keystone XL project but that officials were not able to assess its plan by a February 21 deadline put into law by the Republican majority in Congress.

"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.

"I'm disappointed that Republicans in Congress forced this decision but it does not change my administration's commitment to American-made energy that creates jobs and reduces our dependence on oil," said Obama, who initially hoped to make a decision in 2013.

TransCanada quickly said it planned to reapply for a permit. Senior State Department official Kerri-Ann Jones said that the administration would undertake a "completely new review process" for any resubmitted plan.

The oil pipeline has turned into a major issue in US politics, with environmentalists waging months of street protests against it and the oil industry funding an advertising blitz saying the project would immediately create shovel-ready jobs amid a weak economy.

Canadian Prime Minister Stephen Harper expressed "profound disappointment" in a telephone call to Obama and repeated warnings that he would look to other markets such as China to sell oil.

Harper, a conservative and critic of efforts to curb climate change, voiced hope for the future of the project "given the significant contribution it would make to jobs and economic growth" in both countries.

Mitt Romney, the frontrunner for the Republican nomination to challenge Obama in November, meanwhile called the Democratic president's decision "as shocking as it is revealing."

"The president demonstrates a lack of seriousness about bringing down unemployment, restoring economic growth and achieving energy independence," Romney said in a statement as he campaigned in South Carolina.

House Speaker John Boehner, the top Republican in Congress, accused Obama of failing to stand up to his political base "even in the interest of creating jobs."

"President Obama is destroying tens of thousands of American jobs and shipping American energy security to the Chinese," Boehner said.

But environmentalists have raised fears of an accident along the proposed route, which would run through sensitive terrain like the Sand Hills of Nebraska, where residents are widely opposed to the pipeline.

"His decision represents a triumph of truth over Big Oil's bullying tactics and its disinformation campaign with wildly exaggerated jobs claims," said Frances Beinecke, president of the Natural Resources Defense Council.

In an assessment submitted to Congress, the State Department said TransCanada's stated plans would result in 5,000 to 6,000 US construction jobs for two years but not lead to significant longer-term employment.

The pipeline would carry crude oil from Alberta's tar sands, which emit an unusually high amount of carbon -- blamed by scientists for the planet's rising temperatures and chaotic weather.

Representative Ed Markey, a Democrat and leading US advocate of fighting climate change, said TransCanada could not guarantee the oil would stay in the United States.

"This pipeline would have taken the dirtiest oil on the planet, sent it snaking across the Midwest in an already-leaky pipeline, only to be exported to foreign markets once it reached the Gulf Coast," he said.

Anti-Keystone protest leader Bill McKibben, founder of the activist group 350.org, said Obama's decision took bravery.

"The knock on Barack Obama from many quarters has been that he's too conciliatory. But here, in the face of a naked political threat from Big Oil to exact 'huge political consequences,' he's stood up strong," McKibben said.

Damon Moglen, climate and energy director at Friends of the Earth, called the decision "an iconic victory" in the fight against climate change.

"The Keystone XL fight was David versus Goliath -- no one thought we could win," Moglen said.