Exclusive: State Dept: Keystone decision months away

WASHINGTON (Reuters) - The United States is months away from any final decision on a proposed $7 billion pipeline to carry crude from Canada’s oil sands to U.S. refineries and approval is not a foregone conclusion, a senior State Department official said on Wednesday.

Secretary of State Hillary Clinton raised eyebrows this month when she said her department was "inclined" to approve the Keystone XL pipeline, which Calgary-based TransCanada Corp TRP.TO had hoped to start building next year to bring 510,000 barrels per day of crude to refineries along the U.S. Gulf coast.

Critics of the Keystone project, concerned about greenhouse gas emissions and pipeline safety, raised fears the State Department was pushing the project through without giving a full hearing on its environmental impact.

A senior State Department official said those fears were misplaced and that input from the Environmental Protection Agency, other federal agencies and civil society groups would be fully weighed before a final decision is reached.

“No decision will be made on the pipeline project until after the full environmental review has generated a final Environmental Impact Statement, and until after the department has received input from other relevant agencies on whether permitting the pipeline would be in the national interest,” said the official, speaking on condition of anonymity.

Despite the delay, and growing controversy over the project and the crude that would flow in it, TransCanada could still make its target of a start-up in early 2013, a spokesman said.

“We’ve got contingencies built in, and we’re still focused on the 2013 first quarter,” TransCanada’s James Millar said.

The United States is considering importing more crude from oil sands in Canada, despite the environmental impact.

Clinton’s comments on Keystone, made to an audience in San Francisco, hinted that U.S. energy security was a major factor in State Department deliberations on the project, which would bring crude from a close ally, and lessen dependence on oil from Venezuela and the Middle East.

But the State Department official said Clinton had also stressed that no final decision had been reached, and that other issues were also being considered.

“She also noted that there are many factors to balance,” the official said. “All of those factors, including the environmental impacts -- and proposed mitigation of those impacts -- associated with the pipeline will be considered in any decision on the pipeline application.”


The EPA asked the State Department in July to revise its original environmental impact statement for Keystone, saying it needed more information about safety and spill response capabilities.

The State Department official sketched out a timeline that indicates that any final decision is months off.

The Department is assessing input from the EPA and elsewhere in drafting a new version of the environmental statement, which may stand as the final version or may itself be subject to additional comment and review.

And once a final environmental statement is released, federal agencies will have a further 90 days to contribute to a “national interest determination” on the project before the permit is either granted or rejected.

“It’s a careful and deliberative process, but I wouldn’t say that it’s been particularly delayed at this point,” the official said.

The 2,000-mile (3,200-km) Keystone XL project would run through Nebraska, and officials there have urged the State Department to ensure that the pipeline avoids a massive water reservoir that irrigates the nation’s breadbasket.

The official said the State Department would not on its own recommend changes in the proposed route, but would assess the potential environmental impact as well as pipeline safety issues, which were highlighted by recent high-profile leaks in Illinois and Michigan on Enbridge Inc ENB.TO ducts that deliver Canadian oil.

“We took it very seriously before those incidents happened and we continue to look at it seriously,” he said.

Millar said TransCanada hopes that Keystone is weighed on its own merits, as was the case in the draft environmental impact statement.

Additional reporting by Jeffrey Jones in Calgary; Editing by Russell Blinch, Lisa Shumaker and Gunna Dickson