The company behind the Keystone XL pipeline asked Monday to suspend its U.S. permit application beyond the 2016 U.S. elections, throwing the politically fraught project into an indefinite state of limbo.
Calgary, Alberta-based Trans- Canada Corp. sent a letter to the State Department, which reviews cross-border pipelines, to suspend its application while the company goes through a state review process in Nebraska that it had previously resisted.
TransCanada’s move comes as the State Department was in the final stages of review, with a decision to reject the permit expected as soon as this week, according to people familiar with the matter. The State Department could reject TransCanada’s request.
“To allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the Presidential Permit application for Keystone XL,” the company said in the suspension request reviewed by The Wall Street Journal. “This will allow a decision on the Permit to be made later based on certainty with respect to the route of the pipeline.”
The announcement marks a turning point for the company’s effort to get the pipeline approved. Its executives have said over the years they wouldn’t back down from seeking a permit in the face of political or economic uncertainty.
Low oil prices have called into question to what extent oil companies would need the pipeline, and President Barack Obama has repeatedly said he doubted the pipeline would benefit the U.S.
A State Department spokesman didn’t respond to a request for comment.
For seven years, the fate of the pipeline has languished amid debates over climate change, the intensive process of extracting Alberta’s oil and U.S. energy security. If completed, the pipeline system would span 1,700 miles and cross six states.
In September, TransCanada signaled it was shifting its strategy when it dropped state legal challenges and efforts to seize land in Nebraska for the pipeline. Company officials hoped those moves would extend the review process in Washington while details on the Nebraska portion of the route were worked out.
The shift reflects headwinds the project continued to face from the Obama administration.
In public remarks made after the November midterm election, Obama said he had doubts about the project. He has said it would create few jobs, would not lower gasoline prices and could affect climate change, an important second-term priority for his administration.
As proposed, the Keystone XL pipeline would move as many as 830,000 barrels of oil a day, mostly from Canada’s oil sands to Steele City, Neb., where it would connect with existing pipelines to Gulf Coast refineries. Up to 100,000 barrels of that oil would come from North Dakota’s booming oil fields.
TransCanada first applied for a permit with the State Department, which reviews cross-border pipeline projects, in September 2008. The company has faced many setbacks in Washington and in Nebraska, where opposition from landowners and environmentalists delayed the permitting process.
TransCanada has spent at least $2.5 billion on the project, whose total cost if built was estimated to be at least $10 billion because of delays and increased permitting costs.
The company has insisted it won’t abandon the pipeline route as long as shippers continue to back it. The company’s chief executive, Russ Girling, has said Canadian oil producers want a more direct way to access the U.S. Gulf Coast.
No major oil-sands player has publicly backed away from a commitment to Keystone XL, but the urgency of market access as an issue has waned in line with the drop in crude oil prices.
The cancellation or suspension of several large oil-sands projects, including one abandoned by Royal Dutch Shell PLC last week, might further ease concern about limited pipeline capacity.
Keystone XL also has faced unexpected resistance in Alberta, home to Canada’s oil sands, with the election in May of a left-leaning government.
