Analysis: Politics, legacy loom over Obama decision on Keystone XL pipeline WASHINGTON (Reuters) - President Barack Obama will lay out an agenda on jobs, the economy and the environment during his State of the Union speech on Tuesday. But he is unlikely to mention the Keystone XL oil pipeline, a politically charged project that could shape his legacy in each area. Some five years after Keystone XL was proposed, Canadian officials, Republicans and some Democrats in conservative U.S. states are expressing frustration over the lack of a decision by the White House on the initiative. The TransCanada Corp project involves construction of a 1,179-mile (1,900-km) pipeline from Alberta, Canada, to Steele City, Nebraska, where it would connect with a previously approved line. That would create a system that could move more than 800,000 barrels of crude from Alberta's oil sands to refineries on the U.S. Gulf Coast each day. Supporters say Keystone XL would create thousands of jobs and cut U.S. fuel costs by reducing the nation's reliance on oil imports from nations that are less friendly than Canada. They also point to U.S. government reports about the dangers of moving crude oil by rail as an alternative to the pipeline. Critics of the pipeline plan say it would harm the environment and hasten climate change by promoting oil-harvesting methods in Alberta that produce high levels of carbon dioxide emissions. The project is in limbo while the U.S. State Department finalizes an environmental review, a long-delayed process that has irked allies in Ottawa and advocates on both sides of the issue in the United States. Behind the scenes, a complex political calculus is at play on everything from the timing of the decision to the outcome. For Obama, a decision in favor of the pipeline could undermine the Democratic president's environmental credentials and anger activists who have supported him just as his administration is writing new rules to reduce heat-trapping carbon dioxide emissions from power plants. A decision against the pipeline could undercut Obama's pledge to boost employment and U.S. energy security while alienating an important international ally and oil supplier. No matter what Obama decides, an announcement before the midterm congressional elections in November - which many observers expect - could make Keystone a big issue in the races that will determine control of the U.S. Congress. The Keystone project is a particularly sensitive subject for several Democratic senators from politically divided states who support the pipeline, are under pressure from Republican critics who back the project, and are frustrated with what they see as the administration's reluctance to decide the matter. Democratic Senators Mark Begich of Alaska, Mary Landrieu of Louisiana and Kay Hagan of North Carolina are prominent Keystone backers and have supported past Republican-led efforts to circumvent Obama on the decision. For Obama, the political calculus on Keystone extends well beyond the issue of the pipeline itself. As he enters his sixth year in office, Obama has become increasingly focused on building his legacy as a "progressive" president. The cornerstone of that legacy is Obama's healthcare overhaul, which continues to face attacks from Republicans. But Obama also wants to have an enduring impact on the nation's efforts to counter climate change. "The president doesn't have to run for election ever again, increasingly he's going to be thinking about his legacy," said Michael Brune, executive director of the Sierra Club, an environmental group. It's clear that one of the most important ways that he will be judged is what actions has he taken on climate change. Environmentalists and young people - key segments of the Democratic Party's political base - have worked for years to block the Keystone pipeline plan because of what they see as the project's potential to increase climate-warming emissions. Obama needs support from that base for other second-term initiatives such as immigration reform, and a potential Democratic successor such as former Secretary of State Hillary Clinton would need it to gain traction in the 2016 election. "The president wants to make sure his legacy on climate is solid," a former administration official told Reuters. The degree to which this decision impacts the way he's viewed by the progressive community, that's certainly something they need to weigh. So when will Obama make the call? "You have to make a basic decision to answer that question, and that is: How political will the timeline be?" said Jason Grumet, a former energy adviser to Obama's 2008 campaign and now president of the Bipartisan Policy Center. A decision by summer would give the issue legs in the 2014 congressional campaigns. A decision after the November midterms would thrust it into the beginning of the primary season for the 2016 presidential race. Administration officials say the timeline is being determined by the State Department, which has a say in the matter because the proposed pipeline would cross the U.S.-Canada border. On January 17, Secretary of State John Kerry said he hoped an analysis of the thousands of public comments on the project's environmental impact would be done "soon." The American Petroleum Institute, the oil industry's top lobbying group and a big Keystone backer, said it expects the State Department's report to come out as early as Thursday. "It's our expectation it will be released next week," the group's chief executive, Jack Gerard, said last week during an interview, citing sources within the administration. "We're expecting to hear the same conclusion that we've heard four times before: no significant impact on the environment," Gerard said. The report will be critical in determining how the Keystone process plays out this year. If the analysis suggests that there are not substantial increases in carbon emissions, then it's not a tough call. If the analysis suggests that there are significant increases, it tilts the other way," Grumet said. Sources inside and outside the administration said they did not expect Obama to discuss the project in his Tuesday speech. We have no expectation he'll find the courage to address it on Tuesday. That doesn't mean we won't keep talking about it," said Brendan Buck, spokesman for John Boehner, the Republican speaker of the U.S. House of Representatives. All 45 Republican U.S. senators urged Obama on Friday to end the delays and noted in a letter that he had told them in March that a decision would be made before the end of 2013. A senior administration official said the president viewed the issue as one that had become disproportionately symbolic and super-charged for both sides. He does not believe it is the job creator that its backers suggest or the environmental nemesis that its objectors fear, the official said. In June, while announcing a plan to cut U.S. carbon emissions, Obama brought up the pipeline unexpectedly and used words that both sides claimed backed up their arguments. "Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution," he said then. The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward. When Obama makes a decision on Keystone XL, Chief of Staff Denis McDonough and Kerry are likely to be his top confidants. John Podesta, a former chief of staff to President Bill Clinton and a Keystone critic who recently returned to the White House as a counselor to Obama, has recused himself from the process. Editing by David Lindsey and Marguerita Choy