On November 6, President Obama announced his decision to deny TransCanada’s application for approval to build the Keystone XL Pipeline. This decision comes over seven years after TransCanada filed its application and after many significant events in 2015 that culminated in President Obama’s announcement. Although the application denial is a significant setback for the pipeline, it does not necessarily mean that the project will never be approved.

As reported in the February edition of this newsletter, the U.S. Congress passed a bill in January 2015 to authorize the construction of the Keystone XL Pipeline. The pipeline, which would span nearly 1,200 miles from Canada to the United States, ran into a significant obstacle, however, when President Obama vetoed the bill in February 2015. He vetoed the bill because “this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest[.]” Supporters of the pipeline in Congress failed to collect enough votes to override the veto. President Obama’s veto did not terminate TransCanada’s application. Instead, it maintained the authority of President Obama—not Congress—to authorize the pipeline.

Months later, on November 2, TransCanada asked the Obama Administration to suspend its application for approval of the pipeline. TransCanada explained that it filed an application with a Nebraska regulatory agency in October 2015 for approval of TransCanada’s preferred pipeline route through the state. The pipeline’s route in Nebraska had previously been the subject of litigation, which caused the State Department to suspend its review of TransCanada’s application at that time. Thus, TransCanada reasoned, the State Department should again put its review on hold in order to wait for Nebraska’s approval of the route.

The State Department declined TransCanada’s request. Less than a week later, on November 6, President Obama announced that he agreed with the conclusion of the State Department that “the Keystone XL Pipeline would not serve the national interest of the United States.” President Obama cited three reasons for the State Department’s rejection of the pipeline: 1) “[t]he pipeline would not make a meaningful long-term contribution to our economy;” 2) it “would not lower gas prices for American consumers;” and 3) “[s]hipping dirtier crude oil into our country would not increase America’s energy security.”

TransCanada has since withdrawn its application with the State of Nebraska. TransCanada “called the move a ‘pause’ while it considers the next steps” for the pipeline, but the company stated that it “remained committed to completing” the pipeline. Commentators say that TransCanada may pursue options that include filing a challenge under the North American Free Trade Agreement, asking Congress to pass another bill, or filing a new application after the 2016 presidential elections. Thus, although the application denial is a significant setback, it does not necessarily spell the end of the pipeline.