The Obama administration has rejected TransCanada’s (NYSE, TSX:TRP) proposal for the Keystone XL pipeline project. The decision comes after seven years of considered review. The proposed crude oil pipeline would have carried an estimated 830,000 barrels of oil 1,179 miles from oil sand fields in Alberta, Canada to Steele City, Nebraska, every day.
The proposal was ultimately denied because it did not fit well with the White House’s environmental protection initiative.
“America is now a global leader when it comes to taking serious action to fight climate change, and frankly approving this project would have undercut that leadership” said President Obama.
Obama also decried the suggestion by critics that the Keystone pipeline would provide a considerable economic benefit. The pipeline would not lower fuel prices for the American public, argued the administration. Reference was made to the current declining gas prices as proof that the pipeline is not necessary to provide the people with affordable fuel. The president also argued that the funneling of "dirtier crude oil into our country would not increase America's energy security.”
The decision has electrified environmentalists and liberals alike.
"President Obama's decision to reject Keystone XL because of its impact on the climate is nothing short of historic, and sets an important precedent that should send shockwaves through the fossil fuel industry," said environmental activist, author and journalist Bill McKibben.
McKibben’s elation comes after years of lobbying against the proposal and using his influence as one of the leading voices of the U.S. environmental movement to get others to join the effort to block the project.
Those on the other end of the spectrum, however, argue that the Obama Administration has done the American people a great disservice. Detractors have criticized what they consider to be poor economic practice on the part of the administration.
Newly-minted House Speaker Paul Ryan labeled the decision “sickening.” Ryan went on to accuse the President of pandering to special interest groups while neglecting the will of not only the “bipartisan majority of Congress” but the American public in general.
Senior Energy Analyst at Oppenheimer & Co. Inc. (NYSE:OPY), Fadel Gheit, argued that the denial of the project would deprive both the United States and Canada of a fruitful revenue stream. Gheit believes that Obama was fed erroneous information before coming to his conclusion. “It doesn't make any economic sense to block a pipeline that will create an enormous amount of wealth to certain areas of the country, for Canada...
"It will create jobs, it will increase our energy security because we are importing oil from a trusted and the end-all friend like Canada," Gheit contested.
The political wrangling over the Keystone XL pipeline strained relations between the Obama Administration and the conservative Canadian government. In an election last month, Canada’s Conservative Party lost its majority in Parliament.
TransCanada’s shares fell 5 percent by mid-Friday after the denial was announced.
"Today, misplaced symbolism was chosen over merit and science—rhetoric won out over reason,” said President and CEO of TransCanada, Russ Girling.
TransCanada, however, has not given up on the proposal.
The company announced that it would review the reasons for the rejection and present a new proposal in the coming years. If a Republican takes the White House in the upcoming presidential election, chances are TransCanada will get the opportunity to move forward with the project. One presidential candidate, in particular, possesses an unwavering confidence in his ability to bring about this change.
Florida Senator Marco Rubio vowed, "When I'm president, Keystone will be approved, and President Obama's backward energy policies will come to an end.”
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