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Keystone XL oil pipeline in doubt as U.S. asked to pause review

The Canadian company behind the proposed Keystone XL pipeline has asked the U.S. government to suspend review of the $8 billion project that sparked a political war between environmentalists and the oil industry.

If granted by the U.S. State Department, the delay would likely take the decision from Democratic President Barack Obama and put it into the hands of the winner of the November 2016 presidential election.

Read previous Keystone pipeline coverage here

Calgary-based TransCanada  said it had sent a letter to the U.S. State Department to suspend its application while the company goes through a state review process in Nebraska.

The nearly 1,200-mile pipeline would carry 830,000 barrels a day of mostly Canadian oil sands crude to Nebraska en route to refineries and ports along the U.S. Gulf Coast.

The State Department was reviewing TransCanada's request but continuing its assessment of the project in the meantime, a representative said.

TransCanada's move was seen by many as an attempt to avert a rejection from an administration that has become increasingly activist on climate change issues as it closes in on its final year in office.

In addition to political headwinds, U.S. crude prices have plunged to $50 a barrel from almost $150 when TransCanada filed a federal application in 2008.

The request for a delay came on the eve of TransCanada issuing an earnings report, and shortly after the White House said it still expected Obama to make a decision on whether to grant the permit before he leaves office in January 2017.

Asked if TransCanada was asking for a delay because of concerns Obama may block the pipeline, TransCanada spokesman Mark Cooper said the company was not going to speculate on what the decision may be or when it may come.

In the past year a global rout has slashed oil prices by more than 60 percent, prompting drillers to curtail spending and rein in new projects. Companies operating in Canada's oil sands where production costs are high have been hard-hit by the market conditions. Further postponing Keystone deals an additional blow to these producers who have limited pathways to bring their oil to U.S. markets.

TransCanada's request for a delay provoked a sharp reaction from environmental groups, which have made Keystone a symbol of their battle to keep crude oil in the ground.

Green groups issued a blizzard of statements describing TransCanada's move as a desperate attempt to avoid a "no" decision, and urging the president to kill the project anyway.

"TransCanada acknowledged the writing on the wall by requesting to suspend the review of its permit application," said a statement issued by Tom Steyer, the billionaire green activist who heads NextGen Climate. "Today, tomorrow or next year, the answer will be the same: Keystone XL is a bad deal for America, our climate, and our economy."

The pipeline's defenders tried to rally on Monday. North Dakota Senator Heidi Heitkamp, a Democrat, said "halting a basic infrastructure expansion project will not make this country more energy efficient or independent, but it does set a foreboding precedent about our ability to achieve those goals.”

But environmental groups argued that TransCanada was simply playing for time - and the hopes that might come with a new president.

“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. She urged Obama to reject the appeal and the pipeline.

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