Canada toughens tone on Keystone approval

Reuters News

10/31/2011 4:28:46 PM - Reuters News

By Bruce Nichols

HOUSTON (Reuters) - Canada is toughening its tone on the Keystone XL pipeline, warning the Obama administration that rejection of TransCanada Corp's $7 billion project could prompt Ottawa to concentrate on selling its oil-sands-derived crude to Asian customers instead.

"What will happen if there wasn't approval -- and we think there will be -- is that we'll simply have to intensify our efforts to sell the oil elsewhere," Joe Oliver, Canada's natural resources minister, told Reuters on Monday.

In the face of rising environmental opposition to the planned pipeline, which would carry 700,000 barrels per day of supply from Canada's oil sands projects to refineries on the U.S. Gulf Coast, the Obama administration has signaled that it may miss a year-end target for approval.

Oliver said a delay by the Obama administration would not be fatal to the project, and that TransCanada has multiple options -- including customers in Asia.

"It may be other parts of the United States, it may be a rerouted pipeline, and then, of course, there's Asia," Oliver said in an interview.

The increasingly heated debate pits environmental groups and some politicians raising fears over ecological destruction against other lawmakers and TransCanada, who say the project will create jobs and bolster energy security.

"While we still hope to make a decision by the end of the year, we are first and foremost committed to a thorough, transparent and rigorous review process," a U.S. official said last week on condition of anonymity.

The ruling falls to the State Department because the line crosses national borders. The decision has already been pushed back once.

Following Environmental Protection Agency complaints about its initial analysis, the State Department said it would undertake a supplemental review.

ENERGY SUPERPOWER

Oliver said delay or disapproval of the U.S. segment would not change the fact that Canada is "a global energy superpower" with 174 billion barrels of oil reserves, the vast bulk of it in the oil sands of northern Alberta.

He argued that thousands of miles of oil and gas pipelines already cross the Ogallala aquifer, the focus of environmental concern, and that Keystone would have more safeguards and newer technology than all of them.

He noted Enbridge Inc has proposed a $5.6 billion pipeline from northern Alberta to Canada's Pacific Coast to export oil to Asia, and regulatory approval is a year or a year and a half away.

That proposal is also controversial. Several native groups in British Columbia have said they will not support the line crossing their lands under any circumstances.

"What we want to do in respect to Asia, that objective is not mutually exclusive with the Keystone pipeline. We have a lot of oil and we want to get it to welcoming markets and open markets," Oliver said.

"And there are also possibilities of moving it east as well. We just have to look at the whole picture. But there would be a delay, and that wouldn't be positive for either country in our view," he said.

There have been no private assurances between the U.S. and Canadian governments that the pipeline will be approved, although analysts have suggested the Obama administration will eventually back the project.

(Additional reporting by Arshad Mohammed in Washington, editing by Chris Baltimore and Dale Hudson)