* New route would avoid sensitive Sand Hills region-report
* Nebraska governor has 30 days to decide on proposed route
* Report says any spills would be "localized"
* U.S. State Department's Keystone assessment due soon
By Timothy Gardner
WASHINGTON, Jan 4 The controversial Keystone XL
oil pipeline received a boost on Friday when Nebraska regulators
said its proposed new route would avoid many of the
ecologically-sensitive areas that led the U.S. government to
block it last year.
The new route for the $5.3 billion Alberta-to-Nebraska
pipeline, backed by TransCanada Corp, would avoid the
ecologically sensitive Sand Hills region but would still cross
part of the massive Ogallala aquifer, the Nebraska environment
If built, Keystone XL would link Canada's booming oil sands
production with the refineries and ports of Texas' Gulf Coast,
carrying some 830,000 barrels of oil per day. The project has
been targeted by environmentalists concerned about carbon
emissions from oil sands production and the risks posed by oil
spills to water supplies in the Midwest.
The U.S. State Department is working with Nebraska as it
forms its own environmental assessment of pipeline that is one
piece of a continental realignment of oil flows between Canada
and the United States.
Nebraska Governor Dave Heineman now has 30 days to decide
whether he supports the new Keystone XL route.
The State Department has said it will soon release its
environmental assessment of Keystone XL, a necessary step before
the Obama administration decides the fate of the project, which
is expected to be in the coming months.
President Barack Obama last year rejected TransCanada's
initial Keystone XL application after environmentalists raised
concerns about the Nebraska route.
Obama threw his support behind the southern half of the
line, which is already under construction and would drain a glut
of U.S. crude in the middle of the country caused by a surge in
output from new sources in places such as North Dakota. The
section does not need federal approval as it does not cross the
The Nebraska report did not address concerns about the
project's impact on emissions linked to global warming. Many
environmentalists worry about the pipeline's emissions because
oil sands petroleum is more carbon-intensive than average crude
refined in the United States.
"It doesn't analyze climate impacts, it really ignores a lot
of the concerns we had, just a pretty dismal presentation all
around," said Peter LaFontaine, energy policy advocate at the
National Wildlife Federation. Environmentalists hope the State
Department assessment will consider the emissions issue.
Environmentalists and other opponents have pledged to bring
a range of legal action on the pipeline over its impact on
everything from wildlife to landowners. Last month a Texas judge
lifted a temporary restraining order over the southern half of
the line that had halted construction.
The Nebraska report also downplayed risks to the Ogallala
aquifer, a crucial irrigation source for agricultural areas in
the central United States, saying any leaks "should be localized
and Keystone would be responsible for any cleanup."
The report also said that the Canadian oil the pipeline
would carry is physically and chemically "similar to those of
other light crude oils commonly transported by pipeline."
Environmentalists claim diluted bitumen, or dilbit, from the
oil sands is more corrosive than other crude oils, after a
series of recent pipeline spills involving Canadian crude.
As the Keystone XL deliberations drag on, rival projects are
taking shape that aim to cure a deep discount on Canadian heavy
crude and move growing volumes of light oil from the North
Dakota Bakken region.
Enbridge Inc, already the largest transporter of
Canadian oil, moving more than 2 million barrels a day, added
C$600 million ($609 million) worth of new plans on Friday to a
massive C$6.2 billion expansion of its system through Western
Canada, North Dakota, the U.S. Midwest and Eastern Canada,
announced in early December.
The company said it would spend C$400 million on its Western
Canadian system to add 230,000 barrels a day of capacity, mostly
by increasing the horsepower of its pumping stations between
Hardisty, Alberta, and the Canada-U.S. border.
Its U.S. affiliate, Enbridge Energy Partners, will
spend $200 million to further that expansion between North
Dakota and Superior, Wisconsin. The capacity is scheduled to be
on line in 2015, the company said.
FOUR YEARS IN THE MAKING
TransCanada first applied to build Keystone XL more than
four years ago, largely to open up a major new market on the
U.S. Gulf Coast for Canadian producers. In that time, production
has surged across North America, resulting in discounted prices
versus international crudes.
Canadian heavy blends, priced against the U.S. light oil
benchmark, have been doubly hit. One Canadian heavy crude, for
instance, has sold at a discount of $40 to the main U.S.
benchmark, West Texas Intermediate. That has added urgency to a
push by the Alberta and Canadian governments to promote new
Executives with TransCanada have said Keystone XL remains an
important project for Canada and the United States, despite
rival developments and a recent forecast by the International
Energy Agency predicting U.S. energy self-sufficiency in the
next two decades.
TransCanada on Friday said it had not yet reviewed the
latest report from Nebraska.