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U.S. review gives boost to Keystone oil pipeline

A demonstrator holds a sign during a march against the Keystone XL pipeline in Washington, February 17, 2013. REUTERS/Richard Clement
A demonstrator holds a sign during a march against the Keystone XL pipeline in Washington, February 17, 2013. REUTERS/Richard Clement

By Timothy Gardner

WASHINGTON (Reuters) - The Keystone XL oil pipeline got a boost on Friday when the State Department said the project would not likely change the rate at which Canada's oil sands are developed, discounting warnings from environmentalists that it would lead to a spike in greenhouse gas emissions.

The report is far from the last word on Keystone. The environmental assessment must be finalized after the public comment. Federal agencies will then have 90 days to work with the State Department to determine whether the pipeline is in the national interest, with U.S. President Barack Obama ultimately able to approve or block the project.

TransCanada Corp's proposed project is "unlikely to have a substantial impact" on development of Alberta's oil sands, the world's third-richest oil deposit, the State Department said in a long-awaited report of more than 2,000 pages. It said the pipeline would result in "no substantial change in global greenhouse gas emissions."

The more than 800,000 barrel per day pipeline would have little environmental impact on most resources along its proposed route, provided the company takes certain measures to make it safer, the review added.

Supporters of the project, which would bring oil to Texas refineries, have dismissed concerns it would lead to additional greenhouse gas emissions, saying the oil would reach markets regardless of whether the pipeline is built.

Obama rejected the pipeline in 2011 on concerns about its route through ecologically sensitive regions of Nebraska and after several high-profile spills on lines carrying Canadian crude.

Subsequently, TransCanada issued a new route for the pipeline, which Friday's assessment took into consideration.

PUBLIC TO SHAPE DEBATE

The State Department stressed that the report did not judge the project. The public will have 45 days to comment during a review starting next Friday. A final decision by the Obama administration that has been pending for more than 4-1/2 years is not expected until July or August.

TransCanada's chief executive, Russ Girling, said that construction of the pipeline could be complete by late 2014 or early 2105 if a final decision by the Obama administration comes by midsummer.

Kerri-Ann Jones, assistant secretary of the State Department, repeatedly refused to address whether the report offered support for building the pipeline, telling reporters on a press call that it would be premature to draw conclusions from the environmental assessment.

"We're really looking for the public debate at this point," Jones said. "We're looking for the feedback from the public to help us shape this going forward."

ClearView Energy Partners, an energy consulting firm, said the draft review signals that the administration may be preparing to argue that the construction of Keystone will not play a major role in climate change.

"Today's SEIS could be an indication that the White House is trending towards approval," ClearView said in a research note, although the group warned the administration may not be fully committed to that decision yet.

MOTHER NATURE

Many environmentalists oppose the project because, from wells to wheels, oil sands are more carbon-intensive than average crudes refined in the United States. They had been cheered by recent strong speeches by Obama and Secretary of State John Kerry on the need to take action on climate change.

One of Keystone's top critics said Friday's review was little different from a U.S. assessment in 2011.

"We're hearing the same rehashed arguments from the State Department about why a great threat to the climate is not a threat at all," said Bill McKibben, the founder of 350.org, an environmental group.

"Mother Nature filed her comments last year - the hottest year in American history; the top climate scientists in the U.S. have already chimed in. The rest of us have 45 days to make our voices heard, and we will," said McKibben, who has led protests at the White House.

Environmentalists have also raised concerns that oil sands are more corrosive and toxic than other forms of oil, which could lead to spills that threaten water supplies.

Supporters of Keystone say it would provide thousands of jobs, drain a glut of domestic crude oil from the North Dakota oil boom and strengthen North American energy security.

"The Keystone XL pipeline will make more Canadian and U.S. oil available to us — oil that will not need to be imported from unfriendly places," said Karen Harbert, president of the U.S. Chamber of Commerce's Institute for 21st Century Energy.

Construction of the pipeline would support 42,100 jobs across the United States, directly and indirectly, the review said. The operation of the pipeline would result in 35 to 50 permanent jobs, it added.

Canadian politicians and industry have ratcheted up lobbying in support of Keystone. The stakes have risen for the Canadian pipeline supporters as prices for oil sands crude have slumped, partly due to limited capacity to export the oil.

Ottawa has warned that the oil price discount is taking a toll on Canada's national economy. Unidentified members of Prime Minister Stephen Harper's government told the Globe and Mail newspaper this week that a rejection of Keystone XL by Obama would seriously damage Canadian-United States relations.

TransCanada's Girling said there are now 12,000 pages of documents on the project, including the latest review, and that no stone has been left unturned in terms of environmental or market information.

"I believe this is a very good day for the Keystone project. It's just moved one step closer to approval," Girling said.

The southern half of the pipeline, from Texas to Oklahoma, is more than halfway built. Approval from the State Department was not needed because it does not cross the national border.

U.S. Senator John Hoeven, a Republican from North Dakota, said after four environmental reviews, the administration needs to make a decision on the project.

"While we welcome a finding of no significant impact, yet another indeterminate delay runs counter to both public opinion and reasonable due diligence," said Hoeven, who has crafted legislation that would allow Congress to approve the pipeline.

The pipeline would also move oil from his state, where shale oil production is booming.

(Reporting by Timothy Gardner, Ayesha Rascoe and Valerie Volcovici in Washington, Jeffrey Jones in Alberta, and David Ljunggren in Ottawa; Editing by Ros Krasny, Richard Chang and Dan Grebler)

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