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Demonstrators protest against the Keystone pipeline outside of the Canadian consulate in downtown Chicago on May 17, 2012.

NAM Y. HUH/The Associated Press

Battle lines are drawn and both sides claim Barack Obama's long-deferred decision on a massive pipeline project that would funnel Alberta's oil sands crude to U.S. refineries will show whether the President will pick energy security or bold action on climate change as his second-term legacy.

The Harper government and the oil industry on both sides of the border champion the project, claiming it will create thousands of jobs and wean the United States off uncertain Middle Eastern oil.

Environmentalists in Canada and the United States, along with disparate groups of landowners along the pipeline route, oppose it, claiming it will spur oil sands development and spew massive amounts of carbon dioxide into the atmosphere.

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"The Obama administration should stop the Keystone XL tar sands pipeline in its tracks," Danielle Droitsch, Canada Project director of the U.S. National Resources Defense Council, said Thursday in Washington. The group, whose one-million-plus members have been in the forefront of the environmental campaign to block Keystone XL, released two new reports – both claiming greater damage than had previously been forecast would result if the pipeline were approved.

Keystone advocates heaped scorn on the warnings.

"This is an act of desperation by a group bent on halting all oil and natural gas production while destroying jobs and our economy," said Cindy Schild, the American Petroleum Institute's senior refining manager. She said "approving the pipeline is a no brainer [because] it's good for consumers and it's in our national interest to secure strategic oil supplies from our upper plains states and Canada that could otherwise be shipped to Asia."

Canadian Ambassador Gary Doer has led a long and sustained lobbying effort promoting Keystone XL and will keep pressing. He's watching Nebraska, where Governor Dave Heineman will soon announce whether the revised routing that keeps the pipeline away from the sensitive Sand Hills and a delicate underground aquifer is sufficient to win his endorsement. Mr. Heineman is now considering a report from the state's environmental department that essentially endorses TransCanada's new route as posing no real environmental problems.

"The new part is what happens in Nebraska," Mr. Doer said yesterday.

He believes that Keystone XL is winning in the court of American public opinion, as well as on the merits of job creation and energy security for the United States.

But the pressure is on before Mr. Obama even takes the oath of office for his second term.

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Saskatchewan Premier Brad Wall, joined by 10 U.S. governors, released a letter Thursday urging Mr. Obama to "swiftly" approve the Keystone XL pipeline project. The co-signatories on Mr. Wall's letter included governors from four of the six states Keystone XL would cross: South Dakota, Kansas, Oklahoma and Texas.

"Mr. President, we consider the Keystone XL pipeline fundamentally important to the future economic prosperity of both the United States and Canada," Mr. Wall wrote. There was, however, a notable omission among the letter's signatories: Alberta Premier Alison Redford, a long-time Keystone advocate. Aides said she didn't sign the letter because her position is already well known.

If completed, the pipeline would traverse two provinces and six states to deliver 830,000 barrels daily of thick, heavy, Alberta oil-sands crude to specialized Gulf Coast refineries capable of handling the bitumen-laden oil. Many of the refined products – including gasoline – are expected to be exported.

Keystone XL will provide a safe, secure supply of Canadian and U.S. crude oil to U.S. Gulf Coast refineries, forcing out higher priced, unstable conflict oil from regimes that do not share North American values, said James Millar, a spokesman for TransCanada Corp., the project's sponsor.

The politics of Keystone remain finely balanced in the United States. While Keystone proponents were elected or re-elected in several states along the route, there's plenty of political opposition, too.

"After Hurricane Sandy, devastating drought, unprecedented wildfires and the warmest year on record in the United States, we know that climate change is happening now," said Henry Waxman, the ranking Democrat on the House of Representatives' powerful Energy Committee. "We have to fight it now and say 'no' to this pollution pipeline."

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In a new report, the Calgary-based Pembina Institute took direct aim at the initial conclusion by the U.S. State Department's contention that the pipeline would not result in more greenhouse gas emissions because the oil would be produced in any case. State is currently re-assessing although it remains unclear what aspects are being re-reviewed.

Citing concerns raised by analysts in Canada, Pembina said the industry needs new pipeline capacity to move expanded production out of landlocked Alberta, and that the Keystone XL pipeline is the most critical component of that expansion plan.

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