In what is being viewed as a victory for the environmental movement, a Canadian company has pulled back from its effort to install the contentious Keystone XL pipeline, for now.
TransCanada sent a letter to the US State Department on Monday requesting of the suspension of a permit application to build the nearly 1,200-mile pipeline from Calgary, Alberta, across the US border and into parts of Montana, South Dakota, and Nebraska.
In its letter, TransCanada cited a legal challenge in Nebraska over the pipeline’s route, saying the process will take seven to 12 months to be resolved.
Environmentalists, however, see the request as a maneuver to buy time until President Obama’s term expires, in the chance that his successor is a pipeline-friendly Republican. Analysts say that the Obama administration had been planning to reject the permit, possibly in the coming weeks.
"TransCanada rightly sensed that the tide has turned against Keystone XL and now they're trying to delay any decision in the hopes that they can get a Republican president to approve it," said Valerie Love with the environmental group Center for Biological Diversity.
Analysts say the decision shows a change in strategy for the company, which owns vast swaths of land in the tar sands of Alberta. Some suggest that falling oil prices may be influencing TransCanada’s decisions.
It has been more than 10 years since TransCanada first proposed constructing the pipeline. Since then, prices have plummeted by roughly two-thirds, to $50 a barrel today, while the United States has increased its own oil production.
The high cost of tar sands production has only added to the TransCanada’s challenges, along with increasingly limited options for entry into the United States.
TransCanada Chief Executive Russ Girling has said access to the Gulf of Mexico is too important for the company to back down from its planned route, assuming it still has the support of the US shipping industry, The Wall Street Journal reports.
TransCanada has already invested $2.5 billion on the pipeline. Construction costs were initially projected to be $8 billion,, though after years trying to push the project through they may be as high as $10 billion.
The company’s third-quarter earnings report is due next week, which may shed additional light on the TransCanada’s next move.
TransCanada already has a smaller pipeline in place from Calgary to production facilities in Illinois, though their efforts to install the much larger Keystone to Nebraska would allow the company to send more than 800,000 barrels of crude each day to refineries in Texas.
Keystone appeared to be on course for approval, until environmental groups began pointing out the enormous carbon impact of extracting fuel from tar sands. In August, the White House unveiled its Clean Power Plan, which seeks to reduce carbon dioxide emissions by 32 percent by 2030.
Since Monday’s announcement by TransCanada, environmental groups and others are now pressing the Obama administration to outright reject that pipeline rather than agree to a suspension.
“TransCanada see the writing on the will and it trying to run the clock out, said Sierra Club Executive Director Michael Brune in a statement. “President Obama has all the evidence he need to reject the Keystone XL now.”