In a recent issue of my Energy & Income newsletter, I talked about some maneuvering by congressional Republicans to attach a pipeline amendment to the payroll tax cut bill. The Obama administration had been dragging its heels on this issue and didn’t intend to reach a decision before 2013.

The amendment forced the administration to make up its mind and officially give a thumbs-up or thumbs-down in 60 days. In case you haven’t heard, the verdict is in.

On Jan. 18, the Obama administration formally denied the necessary permits for the proposed pipeline project to move forward.

I can’t say that I’m terribly surprised by the decision to scuttle the Keystone XL project, but I am disappointed nonetheless.

In a terse press release, the U.S. State Department announced that its rejection wasn’t a ruling on “the merits of the pipeline.” Rather, it blamed the deadline imposed by Congress as leaving insufficient time to gather enough evidence.

To be blunt, that’s a ridiculous line of defense. The deadline wasn’t until Feb. 21, so there were still several more weeks on the clock. And the application was initially submitted back in 2008 — the government has studied, reviewed and picked apart the proposal for the past three and a half years.

Most would say that’s ample time (most similar reviews take just 18 months or so).

I don’t usually like to take sides on a political issue. But since my job is to help readers of Energy & Income invest profitably in energy stocks, any decision that threatens the financial well-being of this important industry is obviously near and dear to my heart.

The President claims to be in support of “shovel ready” construction projects that will create jobs. He claims to feel the pain of middle-class Americans paying sky-high gasoline prices. And he claims to be committed to reducing the U.S.’s dangerous dependence on foreign oil (particularly in light of provocative acts by Iran).

The Keystone Pipeline would have addressed all three of those goals simultaneously.

Keep in mind, pipeline permits are often little more than a formality — the U.S. already has 168,000 miles of liquid pipelines transporting products safely around the country without incident. And the State Department has already admitted there is little real environmental threat.

The first phase of the Keystone pipeline was installed in 2010, creating 9,000 private sector jobs in the construction field alone. Since then, it has already brought more than 160 million barrels of oil to U.S. refineries. The second phase would have done even more in both regards.

Yet all of that has been sacrificed to appease radical environmental groups. Apparently, the government can squander taxpayer dollars on failed alt-energy experiments with companies such as Solyndra (the now-bankrupt solar firm that received $500 million in subsidies before it collapsed), but it can’t see fit to stand behind a project that would actually generate real income and bring in dependable energy from a friendly ally.

In my mind, the President has put ideology above the public good. It’s hard to argue that putting thousands of workers on the payrolls, securing stable energy supplies and generating $5 billion in property tax revenue for cash-strapped states isn’t in the national interest.

Still, debating this issue is better left to the politicians. As investors, we’re better served trying to see where all of this is leading…

TransCanada (NYSE: TRP), the original applicant, has already promised to reapply as soon as possible. The company will be working closely with the Nebraska Department of Environmental Quality to trace out a route that avoids the sensitive Ogallala aquifer and Sand Hills.

With more time to examine the project and find an agreeable solution, a second permit could prove successful — particularly after the 2012 elections. The pipeline could be in service by 2014. If not, Congress is already looking for ways to circumvent the executive branch.

A green light wouldn’t just be a boon for TransCanada — it would be a major boost for the entire energy complex.

More takeaway capacity would benefit Bakken shale producers such as Whiting Petroleum (NYSE: WLL) and others looking to get their products to refiners in the Midwest and Gulf Coast. And that’s just the beginning. The 1,700 mile project would generate billions in business for an estimated 1,000 U.S. equipment vendors, triggering orders for everything from concrete to pumps and valves to monitoring systems.

Action to Take –> One way or another, Canada’s vast oil sands resources will find their way to market. With luck, they’ll make the trip south to the United States. If not, then they’ll travel west to China and other Asian importers.

Either way, I think TransCanada will ultimately be called upon to make it happen. The stock hasn’t budged since the announcement, so the market was already pricing in a rejection. Any positive news in the months to come could be a positive catalyst.

For now, I’m keeping the stock (and its 4% dividend yield) on my radar screen and will be ready to tell Energy & Income readers to pounce when the time is right.

P.S. — This is just the tip of the iceberg when it comes to dividend-investing opportunities in the energy sector. Last year, one of my picks distributed nearly $10 per share to its each of its shareholders. That’s almost $10,000 in income each year for every 1,000 shares you own. In our presentation, we’ll tell you more about this stock and several others like it.