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Obama pitches clean-fuel car plan in Chicago but signals retreat on Keystone

Category : Business

President unveils $200m-a-year plan to fund research into clean fuels but advisers suggest Keystone pipeline will be approved

Barack Obama’s grand vision of action on climate change shrank to $200m a year to fund research into clean fuel cars, with signs of retreat on the big environmental issues of the day.

Friday’s initiative – hyped in advance by the White House – marked the first move by Obama to make good on the stirring promises of climate action offered in his inaugural speech and state of the union address.

But on the most immediate environmental decision in his in-tray — the future of the controversial Keystone XL pipeline project – White House officials indicated on Friday that Obama’s green and liberal supporters would be in for a disappointment. Officials signalled that the president was inclined to approve the project.

Meanwhile, there were signs that the Environmental Protection Agency was retreating on a move to curb carbon emissions from new coal-fired power plants.

Like other climate actions now in the works, Friday’s announcement of a $2bn research fund was small-bore, or intended to fly beneath the radar of a Congress still dominated by Republicans hostile to environmental protections.

Earlier on Friday, the president’s economic council, in a report to Congress, called for a switch to cleaner fuels to prevent the worst effects of climate change. Meanwhile, the president’s team of scientific advisers are expected to release a finding on the urgency of acting on climate change.

In a visit to Argonne research labs, outside Chicago, the president called on Congress to support his plan to use revenues from offshore oil and gas drilling to fund research into advanced vehicle technologies.

Obama, in describing the Energy Security Trust, put it squarely in the context of his “all-of-the-above” energy strategy, noting that oil and natural gas drilling had risen during his presidency. He said the development of alternative fuels would help America’s energy security and would protect consumers from gas price spikes.

“Let’s take some of our oil and gas revenues from public lands and put it towards research that will benefit the public so we can support American ingenuity without adding a dime to our deficit,” Obama said. “Let’s set up an Energy Security Trust that helps us free our families and our businesses from painful spikes in gas once and for all.”

The Energy Security Trust, as envisaged by the White House, would raise $2bn over the next decade, or $200m a year, for cutting edge research, which Obama said was under-funded by the private sector.

The White House said the money would help fund research into “breakthrough” technologies, such as advanced batteries for electric cars, or biofuels made from switch grass rather than corn ethanol.

Officials chose Argonne Labs because the facility led research into electric car batteries.

As Obama noted, the fund was first proposed by a non-partisan group of former generals and military executives, called Securing America’s Future Energy. However, the original proposal called for a much larger fund, with some $500m in annual investment.

Obama incorporated the idea into his state of the union address, pitching the trust as part of his plan for job creation, arguing that America needed to retain its technological edge to remain competitive in the global economy. White House officials said the fund would free research labs from Congress, and the uncertainties of appropriation cycles.

Even so, the initiative is on a much more modest scale than campaigners had hoped for during Obama’s second term. The White House has all but conceded that there is no chance of moving a climate law through Congress. Officials have also ruled out the idea of a carbon tax, leaving Obama to focus on relatively small-scale projects like the Energy Security Trust.

Obama’s proposal to use oil and gas revenues to fund research that would get cars off gas was also problematic for environmental groups.

The White House said Obama’s proposal would not open up areas where drilling is currently banned. But they are counting on increased production to spin off additional revenues that could be used to fund research. The government currently collects more than $6bn in oil and gas royalties.

There was virtually no reaction from environmental groups to Obama’s announcement.

Meanwhile, White House officials briefing reporters on the plane gave strong indications that the president is inclined to approve the Keystone XL pipeline – which activists have cast as a test of Obama’s commitment to the environment.

A few dozen protesters from the group, which has led opposition to the Keystone XL pipeline, held a demonstration outside Argonne labs on Friday afternoon.

The official dismissed environmental groups’ contention that building the pipeline would open up vast deposits of the Alberta tar sands, and so increase the emissions that cause climate change. “There have been thousands of miles of pipelines that have been built while President Obama has been in office, and I think the point is, is that it hasn’t necessarily had a significant impact one way or the other on addressing climate change,” the official said.

He added that Obama’s environmental policies would more than make up for any negative impacts from the Keystone XL project. “There’s no question of that.”

Environmental groups were also dismayed by a report in the Washington Post on Friday suggesting that the administration may be backing off from its move to curb emissions from new coal plants.

“We’re now in the fifth year of the Obama administration and industrial carbon pollution remains unregulated,” said Larry Schweiger, president of the National Wildlife Federation.

Boehner on sequester: ‘I don’t think anyone quite understands’ how it ends

Category : Business

US lawmakers on both sides show little room for negotiating way out of possibly devastating spending cuts that kicked in Friday

Billions of dollars in sequester-induced budget cuts appear set to stay for the time being, with leading political figures in Washington indicating no early resolution to the impasse, as they eye next year’s congressional elections.

John Boehner, the Republican speaker of the House of Representatives, said on Sunday he saw no path to agreement with the president over the $85bn in automatic cuts, about half to military spending, that kicked in on Friday after the two sides failed to agree a package of budget reductions and tax rises to tackle the deficit.

“I don’t think anyone quite understands how it gets resolved,” he said on NBC’s Meet the Press.

Pressed on why he does not agree to the president’s demand to increase revenues by closing tax loopholes, Boehner turned the question around and accused Barack Obama of failing to keep his side of the implicit bargain that higher taxes already agreed should be matched with spending cuts.

“The president got $650bn of higher taxes on the American people on January the first. How much more does he want? When is the president going to address the spending side of this?” said Boehner.

“You can’t tax our way out of this problem. We’ve got to deal with the spending side, just like every American family has to.”

Boehner said he made the same point at a “very frank” but polite meeting with the president on Friday.

Obama emerged from the encounter saying he saw little prospect of an agreement with Republicans in Congress in the near future. The president, apparently with one eye on the 2014 mid-term elections, predicted that it will take public opinion to shift the GOP.

“What I can’t do is force Congress to do the right thing,” he said after the meeting. “The American people may have the capacity to do that.”

Obama suggested that voters, sick of lurching from one financial crisis to another, will pressure their representatives.

“After some reflection, as members of Congress start hearing from constituents who are being negatively impacted … that they step back and say, all right, is there a way for us to move forward on a package of entitlement reforms, tax reform, not raising tax rates, identifying programmes that don’t work, coming up with a plan that’s comprehensive, and that makes sense,” he said.

“It’s going to mean hundreds of thousands of jobs lost. That is real. We’re not making that up. That’s not a scare tactic, that’s a fact.”

The president has said he did not know how long it will take for the cuts to shift the Republican position.

“It may take a couple of weeks. It may take a couple of months,” he said.

Gene Sperling, director of the White House National Economic Council, said Obama called a select group of Republican members of Congress on Saturday who may be more likely to consider “tax reform that raises revenues to lower the deficit”. The president also spoke to Democrats open to tackling entitlement spending long-term.

But the Republican leader in the Senate, Mitch McConnell, said his party will not be backing down and remains committed to $1.2tn in spending cuts over the next decade without increasing taxes.

“I’m absolutely confident we’re going to reduce spending the amount of money we promised the American people we would in a law the president signed a year and a half ago,” he told CNN.

“We said we’re open to discussing how to reconfigure those spending reductions without raising taxes … So far I haven’t heard a single Senate Republican say they would be willing to raise a dime in taxes to turn off the sequester.”

A report in the Washington Post on Sunday suggested that Obama had all but given up on attempts to push for bipartisan solutions to problems in Washington. Instead he was focusing on winning back the House in next year’s mid-term elections to force through his remaining agenda.

But McConnell said he does not think voters will be swayed against Republicans.

“The American people look at this and say: gee, I’ve had to cut my budget more than this – probably on numerous occasions over the last four years because we’ve had such a tepid economy now for four long years,” he said.

Boehner said he did not know what the long term effect of the sequester will be.

“I don’t know whether it’s going to hurt the economy or not. I don’t think anyone quite understands how the sequester is really going to work,” he said.

Still, the Republican leaders kept the door open to further negotiation at least on how the sequester cuts are distributed. They are keen to reduce the impact on the military and shift more of the burden to welfare spending which is already severely hit.

“We’re willing to talk to him (Obama) about reconfiguring the same amount of spending reduction over the next six months,” said McConnell.

Boehner said he did not think the spending crisis would reach the point of a government shutdown later this month, and that Congress will approve the funding to keep federal agencies open after March 27.

“We should not have any talk of a government shutdown so I’m hopeful that the House and Senate will be able to work through this,” he said.

Barack Obama: ‘These cuts are not smart’ – video

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The US president makes clear his disappointment that the sequester will go ahead

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Scale of sequestration cuts becomes clear as Obama attacks Republicans

Category : Business

Office of Management and Budget report outlines extent of $85bn cuts triggered by failure to reach deal by Friday deadline

The scale and reach of the sequestration spending cuts that will hit the US has been laid bare by government officials who warn that the order for the cuts, which was signed by president Barack Obama late Friday, would be “deeply destructive” to the economy and national security.

The Office of Management and Budget has compiled an official report on the breakdown of the $85bn cuts package, which was triggered by a failure to reach a broader political consensus on deficit reduction. The document reveals a detailed list of how the cuts will hurt spending at every level of government. It shows that research spending at the Department of Agriculture will be hit by $55m of cuts, while $150m will go from the immigration system at the Department of Homeland Security.

The long list of cuts includes relatively smaller sums – like $1m being lost for a dam project on the Colorado River and $6m cut from the Leaking Underground Storage Tank Trust Fund – to larger budgetary swipes, including $30m being removed from cultural exchange programs at the State Department. The Pentagon faces widespread cuts. It is losing some $2.6bn from its Defense Health Program and $3.4bn dollars from the navy’s operation and maintenance budget. The Army faces losing $4.6bn from its equivalent budget.

The OMB issued a stark analysis of the impact of the cuts in a letter to Congress that was issued with the report and signed by Jeffrey Zients, deputy director for management. “The cuts required by sequestration will be deeply destructive to national security, domestic investments and core government functions,” Zients wrote.

On Saturday, Obama warned of a “ripple effect” through the American economy that would cost hundreds of thousands of jobs. Obama said the sequestration was “not smart”. “The pain will be real,” he said in his weekly address. “Many middle-class families will have their lives disrupted in a significant way.”

He added that up to 750,000 jobs could be lost and a half per cent knocked off America’s economic growth this year. “This will cause a ripple effect across the economy. Businesses will suffer because customers will have less money to spend… These cuts are not smart. They will hurt our economy and cost us jobs.”

The sequester originates in a political crisis in 2011, when debates over deficit reduction almost saw the American government default on its debt payments. In order to avert that crisis Democrats and Republicans agreed that unless they struck a deal on shrinking the country’s debt, cuts would be made to federal spending. The idea was that the prospect of cuts to social services would motivate the Democrats and hurting military spending would do the same for Republicans.

Instead, despite Friday’s deadline no grand bargain was struck and the cuts – which neither side had intended to actually happen – are now coming into force. Over the next 10 years they will represent $1.2tn dollars of slashed spending.

The hardest hit part of the government will be the Pentagon, which must dig out some $40bn of cuts between now and September – about 9% of its budget. Defence chiefs have said that the move will delay deployments, such as a recent move of an aircraft carrier to the Persian Gulf, and hurt national security.

But almost every government department, from aviation to the parks service, will be hit, with cuts amounting to about 5% of overall budgets. Only Medicaid and welfare benefits such as food stamps are exempted. The Federal Aviation Authority has said that it will have to close scores of air traffic control towers and the National Labor Relations Boards has given staff 30 days of notice that they could be suspended from their jobs. Over the next few weeks more and more such letters will go out, threatening school services and the smooth running of scores of other government functions.

In his speech, Obama slammed Republicans as being to blame for inaction, saying that their hostility to any sort of extra tax revenues being generated from rich Americans was the root cause of the problem. In recent weeks, and since his victory over Republican challenger Mitt Romney in last year’s presidential election, Obama has not shied away from attacking his opponents as defenders only of the wealthy.

“It’s happening because Republicans in Congress chose this outcome over closing a single wasteful tax loophole that helps reduce the deficit. Just this week, they decided that protecting special-interest tax breaks for the well-off and well-connected is more important than protecting our military and middle-class families from these cuts,” Obama said.

But Republicans want only cuts, on welfare rather than defence, and have insisted on no new taxes. The Republican House speaker, John Boehner, pictured, was adamant at the end of the White House talks Friday that he would not contemplate any new taxes. “The discussion about revenue is over,” Boehner said. That hard line is popular with his party’s right-wing base but has left the party vulnerable to being attacked as being too entrenched in its ideology – especially after Obama’s resounding election victory.

In seeking to lay the blame for the sequester at the door of the Republicans, the Obama administration has run a carefully orchestrated image campaign aimed at focusing on the impact on middle-class American workers and their families. Obama continued that theme on Saturday, saying Republican leaders were out of touch with ordinary people and their own voters. “We just need Republicans in Congress to catch up with their own party and the rest of the country,” he said.

But on Saturday Republicans were still standing firm. In the party’s own weekly address, the congresswoman Cathy McMorris Rodgers attacked “out-of-control government spending” and said there was no point in new taxes, as the money would just be wasted. “Instead of campaigning for higher taxes, the president should lead an effort to begin addressing our nation’s spending problem,” Rodgers said.

But for many observers the fiasco of the sequestration – which has effectively meant both parties are implementing a policy that neither wants and each thinks is damaging – has left many complaining about a broader American political dysfunction. Yet the sequester is just one of several rolling crises that are threatening the smooth running of the world’s biggest economy that is still stuttering to recover from recession.

If Congress does not reach an agreement on a budget for this year by 27 March, the federal government faces the prospect of shutdown. Soon after that, Congress must approve an increase in the federal debt limit: the same move that two years ago created gridlock in Washington and resulted in the sequester. The House of the Representatives is due to vote next week on a deal to prevent a federal shutdown but there is a risk this could end up in a new stand-off between the Republican-controlled House and the Democratic-controlled Senate.

Keystone XL pipeline report slammed by activists and scientists

Category : Business

Sierra Club leads angry response to ‘deeply flawed’ State Department report into proposed oil sands pipeline

Green activists and climate change scientists have slammed a new report from the Obama administration that raises no serious objections to building a massive and controversial oil pipeline.

The Sierra Club, one of the US’s oldest and most respected environmental advocacy groups, attacked the State Department study into the proposed Keystone XL piepline – which will bring oil from Canadian tar sands deposits down to the Gulf of Mexico – as a “deeply flawed” analysis of the environmental consequences of the project.

Michael Brune, executive director of the Sierra Club, said he was “outraged” by what he described as the administration’s “deeply flawed analysis and what can only be interpreted as lip service to one of the greatest threats to our children’s future: climate disruption”.

The State Department report concluded that the environmental costs of getting oil from Canada to the Gulf by other methods were more harmful to the environment. It evaluated two options using rail: shipping the oil on trains to existing pipelines or to oil tankers. The report said these methods would release more greenhouse gases than the pipeline.

Obama is under strong pressure from the oil industry, business groups and the Canadian government to approve the project, which will open new outlets for the vast crude reserves of Alberta. Oil industry officials and the Canadian government hailed the report as bringing the pipeline a vital step closer to reality. The pipeline is also supported by Obama’s Republican opponents, who claim it will be a source of new jobs and help bring down fuel prices. They called on Obama to give Keystone the green light.

“[The] report again makes clear there is no reason for this critical pipeline to be blocked one more day. After four years of needless delays, it is time for President Obama to stand up for middle-class jobs and energy security and approve the Keystone pipeline,” said House speaker John Boehner.

But the move is strongly opposed by environmental groups, who say it puts an emphasis on fossil fuels at a time when climate change needs to be addressed by fostering alternative energy sources. Last month 35,000 demonstrators opposing the Keystone pipeline came to Washington in what organisers claimed was the largest climate protest in American history.

Though the report stopped short of recommending approval of the project, it would likely give Obama political cover if he wanted to endorse the pipeline. State Department approval of the 1,700-mile structure is needed because it crosses the border between the US and Canada.

Aside from the Sierra Club, other prominent scientists and environmental groups have criticised the State Department report. They say that the report ignores the idea that building the pipeline will encourage greater development of the tar sands and boost oil production of deposits that are seen as a highly pollutive resource which can cause widespread ecological damage as it is mined.

“The State Department is overlooking the fact that the pipeline is likely to trigger at least 450,000 barrels per day of additional tar sands production capacity,” said Stephen Kretzmann, executive director of Oil Change International, in a statement.

James Hansen, a Columbia University professor who is one of the world’s most respected experts on climate change, also issued a statement attacking the report’s findings. “To say that the tar sands have little climate impact is an absurdity,” he said.

Obama on spending cuts: ‘none of this is necessary’ – video

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The US president speaks on Friday as the sequester cuts come into force

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Congress fails to act on sequester – as it happened

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Follow live coverage as lawmakers give speeches ahead of scheduled across-the-board cuts, now less than 40 hours away

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State of the union: the president proposes | Editorial

Category : Business

Barack Obama laid out a plan to restore growth and rescue the middle class, adopting a tougher approach for his second term

The presidency of Barack Obama has been a lesson in American civics for the rest of the world and perhaps for many Americans themselves. We have learned that the most powerful man in the world is not that powerful. We have learned that he can be frustrated on an almost daily basis, and that even his most heartfelt appeals for help can be, and have been, routinely spurned.

We have grasped that even the most effective rhetoric, words that sway the nation, may not sway a stubborn opposition. We have seen the inheritor of Lincoln’s office, at the very moment when a new and commanding film is reminding Americans of the achievements of one of their greatest presidents, struggling to craft compromises with grudging and ungiving opponents, and often failing to do so.

President Obama’s speeches were at first accorded a special deference, not because he is a gifted orator, although he is, but because they were seen as having a predictive quality. They were, it seemed, about what he was going to do for America and for the rest of us. But as time passed their wishful character became more apparent. The president got a number of important things done in his first term, notably in pulling America back from the brink of economic collapse, but much of his agenda languished. Will it be the same story with the two speeches, the inaugural last month and the state of the union this week, in which he sets out his ambitions for his final term?

He laid out a plan to restore growth and rescue the American middle class, by investing in education and in energy and other infrastructural programmes, and backing innovations in modernising technology. But he did not confine himself to the middle-class plight, also proposing measures, like an increase in the minimum wage, to help the underpaid and unemployed. This is the modestly interventionist programme on which he campaigned and one which he said would not increase “our deficit by a single dime”. Yet it was instantly denounced by Republicans as meaning more “big government” and more spending. In the same vein of renewal and long overdue reform, Obama called on lawmakers to overcome their differences to establish fairer and more realistic rules about immigration, to create a better voting system, to adopt a more active approach to climate change, and to bring in real gun controls. Republicans are open to progress on the first and opposed or ambivalent on all the others.

Obama’s overall strategy is clear: he seeks to crush Republican obstructionism between the hammer of his own renewed resolve and the anvil of a public opinion that he believes is on his side and can be further won over to it in the coming months. His programme is not radical. From a European point of view it looks more like common sense than socialism, even in the diminished meaning of that word today. His hope must be that most Americans will continue to see it that way, and that their views will eventually erode the position of the Republican hardliners in Congress.

After all, something happens to even obdurate politicians when they grasp that citizens are not going to vote for them. After the farce of the Republican presidential selection and the missteps that marked Mitt Romney’s campaign, the more intelligent men and women in the party know they are out of touch with key constituencies such as Hispanics, women, gay people, and many of the young.

They can fix on the objective of wrecking Obama’s second term and then hoping to obfuscate the reasons for it, perhaps repeating their midterm success last time. Or they can trim, offering Obama some support and retaining some themselves. But the remaking of America’s conservative party, captured as it has been by delusional and extreme views, is going to be a long business, if indeed it can be done at all. Obama cannot wait for a better American conservative party to emerge. He tried the bipartisan approach the first time round. This time he is taking a tougher approach. Let us hope it works.

Obama state of the union details free trade deal between US and Europe

Category : Business

Move could forge closer ties between two trading powers as they face slower growth at home and competition from China

President Barack Obama unveiled plans for a new free trade agreement between and the US and Europe in his annual state of the union speech.

Announcing new talks on a “comprehensive transatlantic trade and investment partnership”, Obama told Congress: “Trade that is free and fair across the Atlantic supports millions of good-paying American jobs.”

Obama gave no further details but the talks with the European Union, which follow a year of exploratory discussions, will center on phasing out tariffs and reduce regulatory barriers in a move that would create closer ties between the two trading powers at a time when they face slower growth at home and increasing competition from China.

The president concentrated most of his speech on domestic economy – concentrating on the overspill from the fiscal cliff budget crisis at the end of 2012. The argument left the US facing deep cuts to defense and social programmes next month – known as sequestration – as Washington tries to tackle its $16tn in debt.

Obama called for cross-party support to head off those cuts and find a compromise. “The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next,” he said.

“I realise that tax reform and entitlement reform won’t be easy. The politics will be hard for both sides. None of us will get 100% of what we want. But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans,” he said.

The president set out proposals he believes will help the US recovery and called on Congress to pass legislation he has already proposed to help homeowners and the job market.

Obama called for the federal minimum wage to be raised to $9 an hour, currently $7.25, and to tie it to the cost of living.

Obama announced the creation of three new innovation centres meant to encourage growth in manufacturing within the US. The first innovation institute opened in Youngstown, Ohio, last year.

He also unveiled a “Fix-It-First” programme to put people to work on urgent repairs, “like the nearly 70,000 structurally deficient bridges across the country”.

The US economy is on the mend, Obama said. “We buy more American cars than we have in five years, and less foreign oil than we have in 20. Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before,” he said.

“But we gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded. Our economy is adding jobs – but too many people still can’t find full-time employment. Corporate profits have rocketed to all-time highs – but for more than a decade, wages and incomes have barely budged.

“It is our generation’s task, then, to reignite the true engine of America’s economic growth – a rising, thriving middle class,” he said.

He said the looming sequester would jeopardise military readiness, devastate education, energy and medical research and “cost us hundreds of thousands of jobs”.

Republicans have suggested stopping the defence cuts and making bigger cuts to education and job training. “But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful,” he said.

Obama said the US’s massive Medicare national insurance programme was in need of reform. The president said he would enact reforms to reduce spending to levels suggested by the bipartisan Simpson-Bowles commission. Obama said he would cut taxpayer subsidies to drug companies and change the way government pays for Medicare “because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive”.

He said he was open to suggestions for more reforms but added. “Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.”

Aside from the European venture Obama’s speech contained no major new economic policies.

Richard Sotell, president of investment adviser Kraematon Group, said he was disappointed that a “grand bargain” to tackle US debts and spending now appeared to be off the table.

“The real issue is we are on a completely unsustainable course. Medicare and Medicaid will totally crowd out every aspect of the budget unless we deal with it. And yet the government continues to kick the can down the road.”

Obama stalls for time after Nebraska approves Keystone XL oil pipeline

Category : Business

President’s spokesman says action on climate change is ‘one of a host of priorities’ as critics demand meaningful action

Barack Obama has ducked a decision on the Keystone XL pipeline, a key environmental issue, just one day after delivering a stirring call to action on climate change.

In the first test of Obama’s renewed commitment to climate, the administration said on Tuesday it was putting off until April a decision on the project, which is designed to pump crude oil from the Alberta tar sands to refineries on the Texas Gulf Coast. Meanwhile, the White House told reporters that climate change was just “one of a host of priorities” for the president’s second term.

The decision on Keystone XL is widely seen as a key test of his administration’s commitment to the environment. The project was propelled to the top of Obama’s inbox on Tuesday when the the governor of Nebraska signed off on the pipeline, leaving it up to the White House to decide on the fate of the project.

“Construction and operation of the proposed Keystone XL pipeline… would have minimal environmental impacts in Nebraska,” Dave Heineman, the governor of Nebraska, wrote in a letter to the White House. The approval from Nebraska leaves the fate of the project entirely in Obama’s hands.

Republicans immediately pushed Obama to approve the pipeline. “There is no bureaucratic excuse, hurdle or catch President Obama can use to delay this project any further,” John Boehner, the Republican speaker of the House of Representatives, said in a statement. “He and he alone stands in the way of tens of thousands of new jobs and energy security.”

Campaigners against the pipeline said Obama should immediately shut down the project. “Approving Keystone XL would make a mockery of the commitment he made at the inauguration to take action on climate change,” said, which has led opposition to the pipeline.

Obama’s solution was to stall for time. “We don’t anticipate being able to conclude our own review before the end of the first quarter of this year,” said Victoria Nuland, a spokeswoman at the state department.

The state department has final approval over the project because it crosses the US-Canadian border. Officials had previously said a decision would be reached before the end of March.

Obama called a halt on the Keystone XL project a year ago, citing opposition from Heineman and local landowners in Nebraska to the proposed pipeline route. Heineman, a Republican, had balked on approving the pipeline because of concerns about its proposed route. Now with Heineman signing off on the pipeline, that political cover is gone, leaving it up to Obama to make a decision on a project that has come to symbolise the clash between environmental protection and economic growth.

In the letter, Heineman said he approved of the revised pipeline route, which would avoid the environmentally sensitive Sandhills region. The route would still cross part of a crucial aquifer. However, Heineman said he was satisfied with the safety plan put forward by the pipeline’s operators, TransCanada. “The concerns of Nebraskans have had a major influence on the pipeline route,” he wrote.

TransCanada Corp, the Canadian company building the pipeline, welcomed the decision and said it could help secure approval from the Obama administration. “Today’s approval of the Nebraska re-route by Governor Heineman moves us one step closer to Americans receiving the benefits of Keystone XL,” Russ Girling, the company’s chief executive, said in a statement.

The statement said the company had adopted a number of measures to make this pipeline safer than other projects, including burying the line and installing remote sensors and shut-down valves to speed reaction time in the event of a spill.

Campaigners accused Heineman of selling out Nebraska landowners. “Governor Heineman just performed one of the biggest flip-flops that we’ve in Nebraska political history,” said Jane Kleeb, the executive director of the group Bold Nebraska.

With Nebraska on board, the state department review of the 1,800-mile route is the last remaining hurdle for the Keystone XL. Campaigners say the decision could determine Obama’s legacy.

The project is crucial for landlocked Alberta, which is facing difficulty getting its vast store of crude out of the ground and into American and European markets. But it would also unlock a big source of carbon, and tie America’s economy more closely to the burning of fossil fuels.

Campaign groups are planning a day of protests at the White House and around the country on 17 February, to try to force Obama to block the project. “If President Obama is serious about tackling climate change, he needs to reject KXL once and for all, and we’re not going away until that happens,” and Sierra Club said in a statement.

Even before Tuesday’s developments, Obama’s climate commitment was in the spotlight, because of his inaugural address. The White House spokesman, Jay Carney, appeared to damp down expectations on Tuesday. Climate change was indeed “an important issue” for Obama, he said. But Carney added: “It is not a singular priority. It is one of a host of priorities he believes we can act on.”

Carney went on to reaffirm Obama’s commitment to developing America’s home-grown fossil fuels.

Before Tuesday’s developments, campaigners had been upbeat about the possibility that the incoming incoming secretary of state, John Kerry, would be more inclined to block the project than Hillary Clinton. Kerry has a reputation as a climate champion, for his efforts trying to push a climate law through the Senate. But the Keystone XL decision puts him in a delicate position.

Federal financial disclosure records show Kerry, who ranks among the richest men in Congress, has investments in two Calgary-based energy companies that have lobbied for approval of the pipeline project. The Massachusetts Democrat, whose estimated net worth is $194m, had as much as $750,000 in Suncor and $31,000 in Cenova. Both energy firms have pressed for approval of the pipeline, the records show.

Such investments are usually managed by blind trusts, but campaigners have called on Kerry to divest from firms linked to tar sands development.