The Obama administration rejected the application of a Canadian firm TransCanada to build the Keystone XL pipeline. The issue has become a national political story, sparking rebukes from both left and right of Obama’s handling of the issue. As Juliet Eilperin and Steven Mufson reported:

President Obama, declaring that he would not bow to congressional pressure, announced Wednesday that he was rejecting a Canadian firm’s application for a permit to build and operate the Keystone XL pipeline, a massive project that would have stretched from Canada’s oil sands to refineries in Texas.

Obama said that a Feb. 21 deadline set by Congress as part of the two-month payroll tax cut extension had made it impossible to do an adequate review of the pipeline project proposed by TransCanada.

“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 the information necessary to approve the project and protect the American people,” the president said in a statement.

The decision and the language that accompanied it made clear that the White House, far from deflecting a political issue until after the election, was fully engaged in a battle with pipeline proponents. Obama said that his administration had worked to improve energy security through higher fuel-efficiency standards, and that it would explore ways to relieve the pipeline bottleneck slowing oil shipments between a major terminal in Cushing, Okla., and the nation’s gulf coast refineries.

The administration will allow TransCanada to reapply for a permit after it develops an alternate route around the sensitive habitat of Nebraska’s Sandhills. The administration’s decision includes language making it clear that TransCanada can reapply, stating, “The determination does not preclude any subsequent permit application or applications for subsequent projects.”

Industry officials and analysts said they expect TransCanada to submit a new route proposal for the Nebraska leg of the pipeline within two weeks. TransCanada declined to comment on the matter Wednesday.

So what is next for the Keystone XL pipeline after their initial failure? As Ezra Klein wrote:

As my colleagues Juliet Eilperin and Steven Mufson report, the Obama administration is all set to officially nix the Keystone XL pipeline, which would’ve carried oil from Canada’s tar sands down to the Gulf Coast. So why did Obama reject it? And what happens next?

White House officials have blamed Republicans in Congress for imposing an arbitrary deadline on the project that made a proper review of the pipeline all but impossible. Back in November, President Obama said that the Keystone pipeline needed to be rerouted in response to concerns that leaks could taint Nebraska’s water supplies. That process would’ve stretched into 2013, past the election. And so, in last month’s payroll tax cut extension, Republicans included a provision that forced the administration to make a final decision on the pipeline by Feb. 21 of this year. White House officials bristled at what spokesman Jay Carney called “an attempt to short-circuit the review process.” And, in the end, the administration decided to block the project outright.

Now, this doesn’t mean the pipeline is dead and buried. TransCanada will reportedly be allowed to reapply for permits once it comes up with an alternative pipeline route that doesn’t run through Nebraska’s Sandhills. This will delay the project further, because the company probably will have to grind through the permitting process all over again, but it’s possible that the company could eventually win approval. (TransCanada’s share price plunged when rumors of the rejection first emerged, but the stock now seems to be slowly recovering.)

Environmentalists are, understandably, hailing this as a big victory. They had argued, among other things, that developing the carbon-intensive tar sands would be an enormous setback in the fight against global warming. (University of Chicago climate scientist Raymond Pierrehumbert has detailed just how much carbon is locked beneath Alberta’s Athabasca oil sands field, although note that it would take many centuries to burn all of that oil at current extraction rates.)

Many analysts have speculated that Obama’s decision to reject the pipeline proposal will hurt his chances of reelection in November and will open him to further GOP criticism over energy policy. As Chris Cillizza reported :

Judging from the reaction in the immediate aftermath of the decision, you might assume that the Keystone pipeline will mark a seminal moment in President Obama’s 2012 re-election race.

But there are at least three reasons to think it won’t.

1. Regular people don’t care: While the Keystone pipeline is a HUGE deal in the environmental community — there were concerns that the oil might leach out along the way and that it would have run through a protected habitat in Nebraska — it’s simply not an issue that has broken through with the average person.

There is no — we repeat no — credible polling on how many people are even aware of the pipeline (or the debate over it), a fact that suggests that it’s not penetrated anywhere close to broad public awareness. (There is polling galore about virtually everything that any significant group of people care about these days.)

Republicans have and will continue to argue that whether or not people know anything about the Keystone pipeline specifically, it’s a stand in for an administration more focused on their environmental base rather than creating jobs. Former Massachusetts governor Mitt Romney, the frontrunner for the Republican presidential nomination, said the Keystone decision “shows a president who once again has put politics ahead of sound policy.”

Maybe. But Keystone seems like a very minor point in that overall argument that may not persuade people. After all, if you think the president is doing his best to turn the economy around, does him vetoing an oil pipeline you have never heard of change your mind?

In short: If you care about the issue, you really care. But most people don’t.

2. Philosophical not political: Yes, environmental groups — a key part of the Democratic base — badly wanted the Keystone pipeline stopped. But organized labor, another foundational bloc of the Democratic base, wanted the pipeline approved in order to create jobs.

That split within the party’s base will allow President Obama to frame the decision as one not motivated by partisanship — since he went against labor — but rather driven by genuine concerns about the environmental impact the pipeline could have.

Independents — the key voting bloc in 2012 — may in fact react positively to the principle over politics pitch the President will make on this issue.

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