The Obama administration is expected to issue a negative verdict on the Keystone XL oil pipeline today, further escalating a standoff with Republicans over the $7 billion project that has become the GOP and industry's top energy goal for 2012.

While the State Department declined to release official word of an announcement on the controversial Canada-to-U.S. pipeline in time for publication, several sources tracking Keystone XL confirmed that a decision is expected this afternoon. One industry source added that the administration is believed to leave "some wiggle room for a compromise" with the project's sponsor, TransCanada Corp., that could allow the company to reapply for a construction permit after agreeing on an alternative route for the pipeline with Nebraska state officials.

Most industry and environmentalist players that have tangled over the pipeline for months expected State to bat down a permit for Keystone XL ahead of its legally mandated Feb. 21 deadline under last month's payroll tax-cut extension deal (Greenwire, Dec. 23, 2011). But the specific phrasing of today's expected rejection, and the next moves made by congressional Republicans, as well as Alberta-based TransCanada, are likely to deliver new twists as the 1,700-mile oil link becomes an even bigger symbol in the near-tribal clash between the parties and their allied interest groups over long-term U.S. energy policy.

Speaker John Boehner (R-Ohio) this morning addressed the likelihood of a denial of the pipeline, telling reporters that "this is not good for our country" and warning that President Obama "wants to put this off until it's convenient for him to make a decision. That means after the next election."

Sen. Richard Lugar (R-Ind.), author of the 60-day XL deadline added to the payroll tax-cut deal, blasted the imminent State denial during remarks in his home state today: "In the face of Iranian threats against oil affordability, the Obama administration once again is trying to blame Congress and the state of Nebraska instead of taking responsibility for American jobs and security."

To be sure, Obama's denial of the pipeline is a victory for green groups that have savaged the project for its promised influx of emissions-heavy Canadian oil sands crude. Yet Jamie Henn, spokesman for the Tar Sands Action coalition that has led grass-roots organizing against the project, warned in a blog post today that any room for a reapplication by TransCanada would trigger resurgent opposition from his camp.

"[A] re-route through Nebraska will help protect the Sand Hills and the portion of the Ogallala Aquifer that's in the state -- that's a huge victory for our friends and allies in Nebraska who have been leading this fight from the start," Henn wrote. "But the re-route will do nothing to address the climate impacts of burning tar sands, the economic downside of continuing our addiction to oil, the risks the pipeline poses to other states along the route, or the political influence Big Oil continues to use to override the interests of the American people. If this pipeline comes back, so will we."

Republicans, who began meeting earlier this week to discuss strategies for overriding an administration denial of Keystone XL, also vowed to keep fighting for a project they hail as a job creator that can lock down reliable long-term fuel imports from a stable trading partner (E&E Daily, Jan. 18).

"President Obama is about to destroy tens of thousands of American jobs and sell American energy security to the Chinese," Boehner spokesman Brendan Buck said via email. "The president won't stand up to his political base even to create American jobs. This is not the end of this fight."

Buck also suggested that State's announcement could tread on the spirit of the pipeline provision included in the payroll tax-cut measure, which states that "the president" must act by Feb. 21 or trigger an automatic go-ahead for Keystone XL. That section of law also requires Obama to submit a report to Congress within 15 days of any official rejection of the pipeline, explaining his reasons for the ruling.

A TransCanada spokesman declined to comment on a potential permit reapplication for Keystone XL until the administration releases an official announcement. The company has previously said that it is waiting for State to sign off on a memorandum that would allow Nebraska to begin assessing an alternative path for the pipeline that avoids the ecologically sensitive Sandhills region of the state.

As the oil industry prepared to "call on Congress" to take control of the Keystone XL review, 25 House Democrats today gave Obama political cover in a letter urging him to reject TransCanada's permit bid.

Rep. Peter Welch (D-Vt.) spearheaded the Democratic entreaty, which warns that approval of the pipeline by the GOP's preferred deadline would step on the progress of a probe of the pipeline's review process by State's inspector general (E&ENews PM, Nov. 7, 2011).

"We believe that the Keystone [XL] tar sands pipeline poses a serious threat to the environment and public health that cannot be mitigated by the benefits of the project," wrote Welch and fellow signatories, including Reps. Steve Cohen (D-Tenn.), Ed Markey (D-Mass.) and Earl Blumenauer (D-Ore.), using greens' preferred term for the bituminous oil-sands crude that the XL line would carry.

Environmentalists oppose continued oil sands development due to the fuel's higher-than-conventional emissions, as well as the potential health and safety risks posed by any spill from the XL line. Industry groups, by contrast, laud the pipeline as a more reliable replacement for current fuel imports from the Middle East and a boon to U.S.-Canada relations.

A White House spokesman did not immediately return a request for comment today on the timing for the review of the pipeline.

Obama spokesman Jay Carney yesterday suggested that the administration's answer on the pipeline, dearly sought by oil companies and business groups as well as Republicans, would ultimately kill or slow down Keystone XL thanks to the GOP's attempt to fast-track the 1,700-mile project.

"A lot of people, and certainly we, made clear back in December that a political effort to short-circuit that process for ideological reasons would be counterproductive because a proper review that weighed all the important issues in this case could not be achieved in 60 days," Carney told reporters yesterday.

Click here to read a copy of the House Democratic letter on Keystone XL.