The Obama administration on Wednesday denied the controversial Keystone XL oil pipeline proposal on the recommendation of the U.S. State Department, saying at this time it is not in the U.S. national interest to build the 1,700-mile link from Alberta, Canada to the Gulf of Mexico (GOM).

"The president concurred with the [State Department] recommendation, which was predicated on the fact that the department does not have sufficient time to obtain the information necessary to assess whether the project in its current state is in the national interest," said a State Department spokesperson, adding that the current denial does not "preclude any subsequent permit application or applications for similar projects."

After dealing with the proposal from Calgary-based TransCanada Corp. since 2008 in a "transparent, thorough and rigorous" process, the State Department concluded last November it could not make a national interest determination without more information from an additional review that would take until the first quarter of 2013. Congress subsequently provided a 60-day time limit on making the national interest determination when last Dec. 23 it passed the Temporary Payroll Tax Cut Continuation Act.

TransCanada CEO Russ Girling expressed disappointment but said the decision was not unexpected. He committed to reapplying for U.S. approvals and eventually moving forward with the project. "TransCanada expects that consideration of a renewed application will make use of the exhaustive record compiled over the past three-plus years," Girling said.

"This outcome is one of the scenarios we anticipated. While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL. Plans are already under way on a number of fronts to largely maintain the construction schedule of the project. We will reapply for a presidential permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014."

Industry reaction was swift and highly critical of the decision to resist congressional pressure following President Obama's decision to postpone a final decision until early next year after elections in November. In the end, critics said the president put "politics over jobs" and economic recovery.

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