Obama rules out trading Keystone pipeline for payroll tax cut

President warns Republicans he will not tie approval of oil sands pipeline from Canada to extension of tax break
Stephen Harper, the Canadian prime minister, turns to Barack Obama after their meeting
Stephen Harper, the Canadian prime minister, turns to Barack Obama after their meeting at the White House, where the US president ruled out approving the Keystone pipeline from Canada if Republicans agreed to extend a tax break for families. Photograph: Carolyn Kaster/AP

Barack Obama has warned Republicans he will not tie an extension of the payroll tax cut to the approval of the Keystone oil pipeline between Canada and the US.

"If the payroll tax cut is attached to a whole bunch of extraneous issues, not related to making sure that the American people's taxes don't go up on January 1, then it's not something I'm going to accept," Obama said after a meeting with the Canadian prime minister, Stephen Harper.

Obama stopped short of a veto threat, saying he did not believe Congress should let it come to that.

The leader of the House of Representatives, Speaker John Boehner, and other senior Republicans have pushed for Obama to approve the pipeline, saying it would create much-needed jobs in the US. They have suggested adding into the payroll tax cut bill a provision speeding up the pipeline's construction.

Payroll tax cuts are due to expire at the end of the year. If they are not extended the White House says the average family will pay an extra $1,000 in tax.

Keystone has become a heavily contested political issue for Obama, who risks angering environmental supporters and losing re-election contributions from some liberal donors if he approves it.

The state department decided last month not to decide on the pipeline until 2013, after the presidential election. The delay is intended to allow the project's developer to figure out a way around Nebraska's Sandhills, an ecologically sensitive region that supplies water to eight nearby states.

The delay was poorly received in Canada, which views the project as critical to its economy. Labour groups in the US, as well as Republicans, want the pipeline built to create jobs.

Obama denied the delay was tied to politics and said it was important for Canadians to understand the need to make sure all issues were covered, especially the environmental impact and the health and safety issues.

"I assured [Harper] we will have a very rigorous process to work through that issue," Obama said.

Harper is critical of the delay and has previously suggested that American politics may be at play. But standing alongside Obama at the White House on Wednesday, Harper was more measured, while showing no sign that their talks had yielded any progress.

"Barack and I have discussed that on many occasions. He's indicated to me, as he's indicated to you today, that he's following the proper process," he said. "I take that as his answer and you can appreciate that I would not comment on domestic politics on this issue or any other issue here in the United States."

The Keystone XL pipeline would carry an estimated 700,000 barrels of oil a day, doubling the capacity of an existing pipeline from Canada. The 1,700-mile (2,735km) structure would carry as much as 700,000 barrels of oil a day from tar sands in Alberta, Canada, to refineries in Texas, passing through five states.

Supporters say it could reduce US dependence on Middle Eastern oil but opponents argue it would bring "dirty oil" that requires huge amounts of energy to extract, as well as the risk of spills.

Senate Republicans have introduced a bill that would require the administration to approve the Keystone XL pipeline within 60 days, unless the president declares the project is not in the national interest. But it has little chance of approval in the Democratic-controlled Senate.