U.S. review gives boost to Keystone oil pipeline

WASHINGTON Fri Mar 1, 2013 6:20pm EST

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.

Credit: Reuters/Richard Clement

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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 fears it would be responsible for additional greenhouse gas emissions.

The report is far from the last word on Keystone. The environmental assessment must be finalized after the public comment. Then federal agencies will have 90 days to work with the State Department to determine whether the pipeline is in the national interest.

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 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.

President Barack Obama rejected the line 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 on the project that has been pending for more than 4-1/2 years is not expected until July or August.

TransCanada Corp 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.

State Department Assistant Secretary Kerri-Ann Jones repeatedly refused to address whether the report offered support for building the pipeline, instead 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."

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 President Obama and Secretary of State John Kerry on the need to take action on climate.

But 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.

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'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 the 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 Canada-United States relations.

TransCanada's Girling has said the lengthy review process has helped ensure that the pipeline will be the safest pipeline ever built in the United States.

The southern half of the pipeline, from Texas to Oklahoma, is more than halfway built. It did not need approval from the State Department because it does not cross the national border.

(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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