The Obama administration denied a permit for the controversial Keystone XL oil pipeline from Canada, leaving the door open for the builder to reapply this year but prolonging a bitter political fight that has raged for months and energized each party's political base.
The State Department, responding to a 60-day deadline Congress imposed in late December, said Wednesday that it did not "have sufficient time to obtain the information necessary to assess whether the project, in its current state, is in the national interest."
For Republicans, the oil industry and the U.S. Chamber of Commerce, Keystone has become a one-word campaign slogan: synonymous with the themes of regulatory overreach and environmental activism they have tried to pin on President Obama.
For environmentalists and many other Democratic constituencies, the administration's willingness to deny the permit has become a test of whether Obama has the resolve to stand up to big business.
As a result, the fight over the pipeline has become one of those battles that each side finds useful, and both are likely to prolong it.
The State Department said that TransCanada Corp., the company seeking to build the 1,700-mile pipeline to carry heavy crude oil to Gulf Coast refineries, is free to reapply for a permit using a new, and presumably less environmentally sensitive, route. Officials in Nebraska are expected to identify possible alternative routes in coming weeks that would allow the pipeline to circumvent the Ogallala aquifer, the main source of drinking water in the Midwest.
In November, the administration delayed what seemed an imminent decision on the pipeline until early 2013, allowing Obama to sidestep a potentially explosive issue during a tough reelection campaign. The decision Wednesday comes in response to the deadline Congress imposed as part of a deal to extend a payroll-tax break and unemployment benefits for two months.
The permit's denial makes 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.
"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.
Canadian Prime Minister Stephen Harper, an ardent proponent of Keystone XL, "expressed his profound disappointment with the news. He indicated to President Obama that he hoped that this project would continue," according to a statement from the prime minister's office.
TransCanada said that it planned to reapply for a new route in hopes of getting an expedited review based on the assessments done so far and putting the pipeline into operation in late 2014. U.S. Assistant Secretary of State Kerri-Ann Jones said it was too early to say whether TransCanada would go through an expedited process when it reapplied.
"They will have to go through all the requirements needed for the permit," Jones said. "We do have guidelines to use the information that is already out there, but we would have to look at this as a completely new application."
Congressional Republicans and conservative Democrats, the oil industry, the U.S. Chamber of Commerce and construction workers unions decried the decision. House Speaker John A. Boehner (R-Ohio) said the decision was another example of how Obama's policies were making the American economy worse.
"The president is selling out American jobs for politics," Boehner said.
Democrats facing tough Senate races in conservative-leaning states also criticized the move.
"I am disappointed in the president's decision," said Sen. Jon Tester of Montana. "I have long supported responsibly building this pipeline with the highest safety standards and with respect for private property rights."
The pipeline project provides Republicans with a jobs agenda they sorely need — their answer to the stubbornly high unemployment rate that is tops on voters' minds. Republicans running for the House and Senate can tout the project's job creation potential and try to blame Obama for standing between voters and a paycheck.
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, nearly all temporary.
Christi Parsons in the Washington bureau contributed to this report.