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Some 15,000 pieces of pipe for TransCanada Corp.’s Keystone XL pipeline lie in a field in North Dakota on April 23, 2013. (NATHAN VANDERKLIPPE/THE GLOBE AND MAIL)
Some 15,000 pieces of pipe for TransCanada Corp.’s Keystone XL pipeline lie in a field in North Dakota on April 23, 2013. (NATHAN VANDERKLIPPE/THE GLOBE AND MAIL)


In Alberta, fresh optimism for Keystone after pivotal U.S. review Add to ...

The U.S. State Department has boosted hopes in Calgary and Ottawa for approval of the long-delayed Keystone XL pipeline with a report that concludes the project would not significantly boost greenhouse gas emissions.

While TransCanada Corp.’s five-year battle for approval is far from over, the report addresses a key concern of U.S. President Barack Obama, who said last summer that he would not approve the pipeline if it drove up carbon pollution from the oil sands.

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“Approval or denial of any single [pipeline] project is unlikely to significantly affect the development of the oil sands,” assistant secretary of state Kerri-Ann Jones said Friday.

However, she said the environmental assessment is only “one factor” in the ultimate decision and is not a recommendation for approval.

While environmentalists vowed to fight on, TransCanada chief executive officer Russ Girling, Alberta Premier Allison Redford and federal Natural Resources Minister Joe Oliver all welcomed the environmental assessment and urged Mr. Obama to quickly approve the project.

Mr. Girling said he’s pleased with the assessment, calling it “another important milestone in completing the regulatory review.”

The TransCanada chief said that 100 per cent of the available capacity on the proposed line is spoken for by major U.S. and Canadian producers and refiners such as Exxon Mobil Corp., ConocoPhillips Co., Valero Energy Corp., Canadian Natural Resources Ltd., Cenovus Energy Inc. and Suncor Energy Inc.

TransCanada has already completed the southern leg of the Keystone XL project to move crude from Cushing, Okla., to the Gulf Coast.

Mr. Girling said the company could begin construction of the northern part of the pipeline as early as this summer if it wins quick approval, and have it completed in two years.

The Keystone XL line would carry 830,000 barrels per day of diluted bitumen from Alberta’s oil sands and light oil from North Dakota’s Bakken fields to the massive refining complex on the U.S. Gulf Coast. The federal and provincial governments have lobbied aggressively in Washington for approval of the pipeline, one of several that will be needed to bring growing oil sands crude to new markets.

Western oil producers are eager for new transportation routes to access the Gulf Coast, eastern Canada and the Asia-Pacific to diversify their export market beyond the U.S. Midwest. Transportation bottlenecks have resulted in Canadian producers having to accept steep discounts for their oil and would, if continue, discourage investment in the oil sands.

“People are looking to the long term, and it’s going to be one of several solutions. But we do need many solutions – it’s not just this one or something else,” said Greg Stringham, vice-president at the Canadian Association of Petroleum Producers. “As we look to the future we’re going to need rail, we’re going to need east and west pipelines and we’re also going to need Keystone XL.”

It remains unclear how quickly the Obama administration will reach a final decision, and environmentalists insist there is enough evidence in the report to persuade the president to reject the project.

The report says oil sands crude produces 17 per cent more greenhouse gas emissions per barrel compared to the average crude processed in the United States. And it spells out a possible scenario in which low crude prices and failure to build other pipelines would increase impact that Keystone XL project would have on oil sands production, and hence greenhouse gas emissions.

The release of the report triggers a 90-day review period in which other U.S. departments and agencies can comment on the assessment as well as other issues involving environmental protection, energy security and economic impacts. After that, Secretary of State John Kerry has no firm deadline for making his recommendation to President Obama as to whether the project is in the U.S. national interest.

“We do have to take this work and look at it against the broader questions about where the project fits in our national and international efforts to address climate change, and foreign policy and energy security,” the State Department’s Ms. Jones said.

Analyst Robert Johnston said he expects a fairly quick approval the pipeline, as both the Obama administration and the environmental movement are turning their attention to bigger fights over climate policy in the United States, namely Washington’s effort to impose emission regulations on new and existing coal-fired power plants.

Despite staunch opposition by Mr. Obama’s supporters in the environmental movement, the Washington-based analyst with Eurasia Group said the president could benefit politically by approving the project before the Congressional elections in November.

“Moving to a timely approval by mid-year would signal that the Obama administration continues to be focused on its economic, job creation credentials heading into mid-term elections,” he said.

Along with Republicans and some more conservative Democrats in Congress, the Harper government has been urging the president to avoid any further delays in the decision making.

“We welcome today’s report and are encouraged that the State Department confirmed that Keystone XL would not have a significant environmental impact,” Mr. Oliver said. “The benefits to the U.S. and Canada are clear. We await a timely decision on this project.”

With files from reporter Jeff Gray in Toronto.

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