U.S. edges closer to decision on Canada oil pipeline

Reuters News
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Posted: Aug 26, 2011 11:08 AM
U.S. edges closer to decision on Canada oil pipeline

WASHINGTON (Reuters) - The State Department said on Friday a proposed $7 billion Canada-to-Texas pipeline would not likely boost the amount of crude produced from Alberta's oil sands, suggesting it would have limited impact on the environment.

"The conclusion was that even without pipelines the oil is going to develop and this is going to get to different refineries that are demanding it," a State Department official said about its environmental review of the Keystone XL project released on Friday.

The review brings the department a step closer to a final decision on the controversial pipeline that could come as soon as the end of the year.

A broad environmental movement has coalesced in opposition to the TransCanada Corp pipeline that would bring more than 500,000 barrels per day of oil sands crude from Alberta to refineries in Texas.

More than 320 Keystone XL protesters have been arrested this week in demonstrations in front of the White House. The protest is set to continue until September 3.

The opponents want President Barack Obama to block the line, arguing that producing oil sands emits more carbon dioxide than developing average crudes.

Critics also say the line would pass over a massive aquifer in the center of the United States and risk polluting it, which would hurt surrounding communities. TransCanada's existing Keystone pipeline suffered two small leaks this year.

Backers of the pipeline say it will create thousands of jobs and boost oil imports from a close ally.

The State Department will now begin to assess whether the pipeline is in the "national interest" of the United States.

The environmental review said the pipeline itself "is not likely to impact the amount of crude oil produced from the oil sands," because other transportation systems would likely bring the oil to markets if the Keystone XL is not built. China is also interested in the oil, and one day a pipeline could be built to Canada's western coast for exports to Asia, if the Keystone line were not built.

The State Department said it worked closely on the final review of the pipeline with the Environmental Protection Agency.

The EPA had repeatedly asked the State Department to conduct more analysis on the potential risks of the pipeline project.

"I would say that we're in a very good place regarding what EPA had commented on," another State Department official said about the review.

"We feel that we have been very responsive ... the (EPA) seemed pleased about what we had done and the changes we had talked about and the additional actions that we want to take above and beyond the things that are required," the official said.

Citing the leaks this year on TransCanada's existing Keystone pipeline, the EPA wanted more information about risks of spills to water supplies including the Ogalalla Aquifer, a vast irrigation source across Nebraska and other states in the country's midsection.

Regarding the fragile Sand Hills region of the aquifer, a pipeline leak would likely be limited to an area near the source of the spill, the State Department said.

The State Department did say TransCanada should commission an independent study of risks to water supplies, focusing on valves and external leak detection systems.

The EPA also wanted more analysis of the life-cycle greenhouse gas emissions from the Canadian oil sands.

The review found that the oil sands do not produce much more carbon dioxide than other heavy crudes such as Venezuelan oil, which is widely used in U.S. refineries.

It also said improved extraction techniques may over time cut the greenhouse gas intensity of oil sands crude compared to other oils.

The State Department will hold a series of meetings beginning late next month in the five states the pipeline would pass through before making a final decision on the line.

(Reporting by Andrew Quinn, Ayesha Rascoe and Timothy Gardner; editing by Dale Hudson and Jim Marshall)