U.S. denies TransCanada request to pause Keystone review

By Valerie Volcovici

WASHINGTON (Reuters) - The United States formally denied a request on Wednesday to pause the review of the proposed Keystone XL oil pipeline, a decision expected to lead to the project's rejection by the Obama administration.

TransCanada Corp's request for a delay was seen by many as an attempt to avert a rejection from an increasingly environmentally focussed Democratic President Barack Obama and postpone the decision until after the November 2016 presidential election.

The White House declined to comment but hinted on Tuesday that the administration would not be receptive to TransCanada's request.

Secretary of State John Kerry has not given a timeline for making a recommendation on the $8 billion project.

"The secretary believes that, out of respect for that process and all the input that has gone into it, that it is the most appropriate thing to keep that process in place, to continue the review," State Department spokesman John Kirby told a news conference on Wednesday.

The State Department must issue a recommendation because the project crosses the border with Canada.

Since it was proposed seven years ago, the pipeline has been the heart of a struggle between environmentalists opposed to oil sands development and defenders of fossil fuels.

The nearly 1,200-mile (2,000-km) 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.

TransCanada said it respects the State Department's decision and will continue to press for approval.

"The fundamental question remains: Do Americans want to continue to import millions of barrels of oil every day from the Middle East and Venezuela or do they want to get their oil from North Dakota and Canada through Keystone XL? We believe the answer is clear and the choice is Keystone XL," said TransCanada spokesman Mark Cooper.

TransCanada's shares closed up 1.5 percent at C$45.10 on Wednesday.

If the State Department had paused the review, the decision would likely have fallen to the next U.S. president.

All the Democratic presidential hopefuls, including front-runner Hillary Clinton, oppose the project, while most of the Republican presidential candidates support it.

Environmental groups quickly praised the State Department move and urged Obama to follow up by quickly rejecting the pipeline.

"Now that he's called TransCanada for delay of game, it's time for President Obama to blow the whistle and end this pipeline once and for all," said Jamie Henn, communications director of 350.org, one of the most vocal anti-Keystone activist groups.

(Additional reporting by David Alexander in Washington and Nia Williams in Calgary; Editing by Lisa Shumaker and Matthew Lewis)