In an election-year decision that divided the Democrats' twin pillars of big labor and environmentalists, the Obama administration Wednesday rejected the proposed route for the Keystone XL oil pipeline that would provide up to 20,000 jobs on a project stretching from Canada to the Texas coast.
The pipeline, which would have been the largest infrastructure project in the country, has been a political nightmare for President Obama, with top business groups, Republican presidential candidates, the Canadian government, unions and even some of Mr. Obama's fellow Democrats all slamming Wednesday's rejection.
"This political decision offers hard evidence that creating jobs is not a high priority for this administration," U.S. Chamber of Commerce head Tom Donohue said. "The president's decision sends a strong message to the business community and to investors: Keep your money on the sidelines, America is not open for business."
But environmental groups have long sought to kill the $7 billion, 1,700-mile project, and some of the president's top campaign donors warned that they would stop giving if Keystone was approved.
The application has been under review by the government for three years, and Mr. Obama unsuccessfully tried to put off a final decision until after the November elections.
Mr. Obama issued a statement Wednesday afternoon saying he agreed with Secretary of State Hillary Rodham Clinton's decision to reject the project that would carry oil from tar sands in Alberta to refineries on the Gulf Coast, saying the project as proposed "would not serve the national interest."
The State Department was the lead agency because the project would cross an international border. Officials said that, given a Feb. 21 deadline set by congressional Republicans to decide on the application from Canadian firm TransCanada, they did not have time to evaluate the environmental impact of a revised Keystone route designed to avoid a key regional water source in Nebraska.
Department officials held out the possibility that the pipeline could eventually be built if the company's revised route passes regulatory muster.
"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," Mr. Obama said.
"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."
Canadian Prime Minister Stephen Harper, whose government lobbied strongly for Keystone, expressed what a spokesman described as profound disappointment when Mr. Obama called with his decision. Mr. Harper said Canada would continue to pursue plans to expand oil sales to China and other Asian customers, to reduce the country's reliance on the U.S. market.
Russ Girling, president and chief executive officer of TransCanada, said the company plans to petition again for State Department approval after the proposed new route for the pipeline completes its regulatory review. If approved, the project could have oil from Canada's tar shales flowing as soon as 2014, Mr. Girling said.
Republicans, business groups and even some Democrats immediately blasted the administration's decision as a lost opportunity in a weak economy, and one that ignores America's need for energy from reliable suppliers. House Speaker John A. Boehner, Ohio Republican, said Mr. Obama was breaking his promise to create jobs, and he vowed to keep pressing for the pipeline.
Mitt Romney, the front-runner for the Republican presidential nomination, called the president's decision "as shocking as it is revealing."
"If Americans want to understand why unemployment in the United States has been stuck above 8 percent for the longest stretch since the Great Depression, decisions like this one are the place to begin," the former Massachusetts governor said.
Sen. Joe Manchin III, West Virginia Democrat, said it was "a major setback for the American economy, American workers and America's energy independence."
"Until we are energy-independent, it only makes common sense to get our resources from our friends and greatest allies, like Canada," Mr. Manchin said. "I respectfully urge the president to reconsider this decision."
The move angered the labor unions whose workers were in line to build and maintain the pipeline.
"The score is Job-Killers, two; American workers, zero," Terry O'Sullivan, general president of Laborers' International Union of America, said in a statement. "Once again, the President has sided with environmentalists instead of blue collar construction workers."
But House Minority Leader Nancy Pelosi, California Democrat, said Republicans have only themselves to blame by forcing an arbitrary deadline on Mr. Obama.
"They left him very little choice," she said.
One of the most liberal members of Congress, Sen. Bernard Sanders, Vermont independent, said Mr. Obama made the correct decision. He called the pipeline "a bad deal for the country and for our planet."
The American Sustainable Business Council, one of the few business groups opposed to the project, called the administration's decision "the right move."
"We know that those who are supporting the pipeline are not going to go away," said Frank Knapp, vice chairman of ASBC and president of the South Carolina Small Business Chamber of Commerce.
But American Petroleum Institute President and CEO Jack Gerard, a strong supporter of Keystone, told reporters "the president missed an easy opportunity to do what's in the best interest of the nation. All he had to do was declare this was in the national interest."
The president said the administration couldn't make a responsible decision in the time frame given by Congress, but it would continue to weigh the merits of the project on its own schedule.
White House press secretary Jay Carney said the Feb. 21 deadline demanded by congressional Republicans and included in last month's compromise over the extension of the payroll-tax cut was a "purely partisan effort to score a political point."
When reporters pointed out Mr. Obama signed the law setting the deadline, Mr. Carney responded, "He signed a law that forced a decision to be made in an arbitrary fashion."
Mr. Carney said Nebraska officials were opposed to the original pipeline route and that an alternate route has not been determined.
"You don't grant a permit for a pipeline with a significant portion of it missing," he said.
But officials in Nebraska, including many Republicans who had fought Keystone's original route, said TransCanada has agreed to an alternative route that largely addresses their concerns.
The issue has become wrapped up in presidential politics as Mr. Obama tries to show that he is "all in" on finding domestic sources of energy and reducing America's dependence on Middle Eastern oil. Republicans accuse the president of failing to allow aggressive drilling in the U.S. and kowtowing to environmental groups that are an important part of his liberal base.
Just a day earlier, the president's advisory council on jobs and competitiveness issued a report backing the construction of more oil pipelines in the U.S., although the report did not specifically address Keystone.
"It is dumbfounding that President Obama's decision to deny the Keystone XL pipeline permit ignores his own [council's] report," the Chamber of Commerce's Mr. Donohue said.
And Mr. Boehner said Capitol Hill Republicans do not consider the battle to be lost.
"This fight is not going to go away," Mr. Boehner said. "You can count on it. We're not going to give up."
• Sean Lengell contributed to this report, which is based in part on wire service reports.
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