By Ben DuBose
(UPDATED at 2:30 p.m. with formal rejection, statements from Obama, Pelosi)
The Obama administration on Wednesday formally denied a permit to TransCanada for its proposed Keystone XL oil pipeline expansion.
US Deputy Secretary of State William J. Burns delivered the announcement early Wednesday afternoon.
The controversial proposal would have resulted in a 1,700-mile oil pipeline stretching from Canada to Texas, carrying nearly 1 million barrels of oil per day.
However, TransCanada and other companies will be allowed to reapply with an alternate route going through Nebraska.
"As the State Department made clear last month, the rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipelines impact, especially the health and safety of the American people, as well as our environment," Obama said in a statement.
US environmentalists have said they want to avoid the Sand Hills in Nebraska, an important aquifer in the region.
TransCanada initially applied for a permit in 2008. The State Department reviewed the project to determine whether it serves the national interest and pledged to make a decision on the project by the end of 2011.
But the president announced in November 2011 that his administration needed more time to consider alternative routes and would delay a decision until after the 2012 presidential elections.
The project has been opposed by environmental groups and citizen activists. The battle to defeat the pipeline culminated in a protest at the White House that attracted thousands of people.
Republicans accuse the US president of succumbing to pressure from this wing of his supporters, and of playing politics with a project that they say will create 20,000 jobs.
Some Democrats, however, say Republicans have been exaggerating the number of jobs that will be created as a result of the pipeline project.
They accuse GOP members of being a mouthpiece for TransCanada and the influential lobby groups that represent the oil industry.
"Keystone oil wasn't for domestic consumption," said House Minority Leader Nancy Pelosi, a California Democrat. "It would go from Canada through the US and then overseas."
A 60-day clock for Obamas decision started late last year, after Republicans fought and won a heated battle to include a deadline in a separate bill that extended payroll tax cuts. The deadline was Feb. 21.
"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering theinformation necessary to approve the project and protect the American people," Obama said.
The full text of Obama's statement can be read by clicking here.
A majority of Hydrocarbon Processing readers said they expected the pipeline to be approved, citing the need for jobs and additional US oil supply.
Industry groups including the American Petroleum Institute (API) sent letters to Obama urging its approval.
-- Additional reporting from Dow Jones Newswires