RPT-UPDATE 4-US EPA demands extensive review of oil sands pipe

Tue Jun 7, 2011 5:07pm EDT

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 (Repeats, adds UPDATE 4 to headline)
 * State Dept slated to decide on permit by end of year
 * EPA wants ground-level inspections of proposed pipeline
 * Unless resolved, row could force White House ruling
 * Green group says will take legal action to stop pipe
 (Adds EPA expects State to address its concerns, paragraph 9)
 By Timothy Gardner and Ayesha Rascoe
 WASHINGTON, June 7 (Reuters) - The U.S. Environmental
Protection Agency raised new concerns about TransCanada Corp's
(TRP.TO) proposed $7 billion Keystone XL pipeline that would
bring oil sands crude from Canada to refineries in Texas.
 In a letter to the State Department, the EPA cited two
small leaks on an existing Keystone line last month as cause
for alarm. The letter came at the end of the public comment
period for a second environmental analysis on the line,
considered a crucial link for easing a growing glut of crude in
the U.S. Midwest.
 While it remains uncertain whether the EPA's views could
cause further delays, they will stoke debate over a project
that has become a flashpoint for environmentalists concerned
over the carbon emissions related to oil sands and the dangers
of a new oil line bisecting the United States.
 The State Department expects to decide whether the 700,000
barrel-per-day pipeline can go forward before the end of the
year, but has faced sustained opposition from the EPA. State's
approval, which is required because it is an international
line, has been pending since November 2008.
 In its letter, the EPA reasserted familiar objections about
potential leaks from the pipeline that would hurt groundwater
and that the heavy oil it carries would raise health-damaging
emissions at U.S. Gulf Coast oil refineries.
 But it also said that two recent leaks on TransCanada's
existing line from Canada to Cushing, Oklahoma, known simply as
Keystone, underscored the need for the State Department to
"carefully consider" both the route of the planned expansion
and what measures are needed to prevent and detect spills.
 "With respect to the spill detection systems proposed by
(TransCanada), we remain concerned that relying solely on
pressure drops and aerial surveys to detect leaks may result in
smaller leaks going undetected for some time, resulting in
potentially large spill volumes," the EPA said.
 Requiring ground-level inspections of valves and other
parts of the pipeline several times a year, in addition to
plane patrols of the pipeline, could improve the ability to
detect leaks or spill and limit any damage, the agency said.
 The EPA said the State Department has made progress on its
previous complaints that it did not study the environmental
issues. The EPA added it expects State to address its concerns
when it finalizes the environmental review at some point in the
future. But if the disagreement continues, the EPA could force
the White House's Council on Environmental Quality to make the
ultimate decision.
 The pipeline would help drain a buildup of crude in the
U.S. Midwest that has grown as Canada and North Dakota boost
production of unconventional oil that have helped put downward
pressure on U.S. crude prices. The premium of Brent crude
futures traded in London to U.S. light sweet crude CL-LCO1=R
reached a record above $17 a barrel on Tuesday.
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 TAKE A LOOK-Brent crude at record premium [ID:nN07122934]
 FACTBOX-Year of Canadian pipeline ruptures [ID:nN31290944]
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 EVERY AVAILABLE ACTION
 The EPA was commenting on the State Department's
supplemental environmental impact assessment that EPA forced it
to do after it found an initial report inadequate.
 The EPA said it will work with State as it finalizes the
assessment.
 The State Department plans to finalize the supplemental
assessment in coming weeks or months, and will hold public
meetings on the project in Montana, South Dakota, Nebraska,
Oklahoma and Texas as well as a meeting in Washington, D.C.
 But environmentalists said they would do everything they
can to stop the pipeline.
 Jeremy Symons, a senior vice president at the National
Wildlife Federation, said his group would take every legal
action available to block the project.
 Friends of the Earth applauded the EPA's objections. The
green group said State would have to push back its final
decision on the project until next year to fully meet the EPA's
requests for more analysis.
 "All eyes are on Secretary of State Clinton. Will she
comply with the law and ensure that these impacts are studied,
or not?" asked Alex Moore, of Friends of Earth, in a
statement.
 A TransCanada spokesman said the company hopes the decision
will not be delayed any further. "We feel enough review has
been done on this project and we feel we have answered the
questions," said TransCanada spokesman James Millar. "Let's
move forward."
 (Additional reporting by Tom Doggett and Scott Haggett in
Calgary; Editing by Lisa Shumaker; Editing by David Gregorio)


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