TransCanada: Keystone reroute agreement could speed approval process


TransCanada Corp. said it reached a tentative deal with Nebraska officials that would move the planned route of its Keystone XL pipeline project away from an environmentally sensitive region, possibly reviving a stalled approval process for the controversial oil conduit.

The Calgary-based energy company will support a bill introduced in the State legislature Monday that will seek a new route avoiding the Sandhills, a region of sandy soil that sits atop the Ogallala aquifer, one of the world's largest.

"I can confirm the route will be changed and Nebraskans will play an important role in determining the final route," Alex Pourbaix, TransCanada's president for Energy and Oil Pipelines, said in a statement.

TransCanada's move is a rapid response to the US State Department's decision last Thursday to delay its final decision of the cross-border pipeline for up to 18 months because of concerns about its environmental impact.

Approval for the expansion, which would more than double the amount of heavy Canadian crude TransCanada ships from Alberta's booming oilsands to the heart of the US refining industry in Texas, was expected to be given by the end of this year.

The delay was a victory for environmentalists who maintain that oilsands crude contributes more to global warming than other types of oil, but it irked the pipeline's supporters in the Canadian government and in the North American energy industry.

Companies such as Exxon Mobil Corp., Valero Energy Corp. and ConocoPhillips have spent billions of dollars either growing oil production in Alberta's oilsands, or refurbishing their refineries to handle heavy crude.

If the expansion is completed, the Keystone pipeline system would bring about 1.1 million bpd of crude to the US. Without the key oil conduit, oil producers in land-locked Alberta would face a glut that might result in depressed prices for their crude, and US refiners would have to keep sourcing most of their heavy crude from overseas.

Canadian oil production is expected to reach 4.7 million bpd by 2025, up from 2.8 million bpd in 2010, according to the Canadian Association of Petroleum Producers. Due to its thirst for energy and proximity, the US is a key market for that oil, but Canadian officials, ruffled by the State Department's decision, have said the country's producers could be forced to look for other outlets.

"This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products," Canadian Prime Minister Stephen Harper told reporters during a press conference in Hawaii.

The agreement between TransCanada and the Nebraska officials would have the Nebraska government pay for the supplemental environmental impact statement required for the re-route, said Matt Boever, spokesman for Nebraska state senate speaker Mike Flood. The bill of which the agreement is part could come up for a vote as soon as Wednesday, Boever added.

TransCanada executives have said that reaching an agreement with the Nebraska state government could greatly speed up the time needed to win final approval of the project.

"This might take six months, not 18 months," TransCanada's general counsel Sean McMaster said in an interview last Friday.

TransCanada spokesman James Miller said that the company hopes the agreement "will speed up the approval process."

The agreement may not be enough to greatly accelerate the State Department's review, however. Compiling a new environmental impact statement could still take more than a year, said a State Department official familiar with the process.

"Based on prior projects similar in scope, we expect it will take 12-18 months to complete," the official said.

Dow Jones Newswires

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