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TransCanada Corp.’s Keystone XL pipeline.NATHAN VANDERKLIPPE/The Globe and Mail

Stopping the Keystone XL pipeline could put a chokehold on Canada's energy sector and ultimately slow oil-sands growth, American climate groups argue in a new report.

The Sierra Club and 13 other environmental groups released a new report following U.S. Present Barack Obama's pledge in June that Keystone will only go ahead if it doesn't "significantly exacerbate" carbon pollution. The environmentalists' report argues that since Keystone is regularly cited as a key factor in easing a pipeline bottleneck as oil production is set to soar, killing the pipeline would therefore discourage production and lead to lower emissions.

Industry officials dismissed the report and pointed to findings of the U.S. State Department, which has previously said the Keystone project, whether approved or rejected, wouldn't significantly affect production and therefore wouldn't significantly impact emissions.

Environmentalists, however, have seized on the Keystone XL pipeline as a watershed moment in the battle over climate-change policy. "The Obama administration's decision on a proposed Keystone XL pipeline is a test of the President's commitment to delivering on the promise he made," Sierra Club executive director Michael Brune said Thursday.

The State Department has also said crude from Canada's oil sands is 18 per cent more carbon-intensive, from mining to consumption, than average oil, while some. But emissions are set to grow quickly along with production levels.

TransCanada Corp., the company behind the Keystone project, said Keystone won't substantially sway emissions. The pipeline itself would use electric motors and have "little direct emissions," a spokesman said, while arguing oil-sands bitumen will be shipped by other pipelines or by rail if Keystone is rejected.

"The people who are credited with preparing and reviewing it are paid professional activists who continue to distort and mislead the public about this pipeline," spokesman Shawn Howard said in an e-mail.

The Canadian Association of Petroleum Producers said it hadn't read the new report, but that the oil sands represent a fraction of global carbon emissions. Keystone "is not about whether the U.S. should use oil. It is about where that oil comes from. And the responsible choice is Canada," the CAPP statement said.

Mr. Brune dismissed the notion that other projects will be able to ship the oil if Keystone is rejected. "We have seen rail growth increase, but it's also clear that rail growth can't meet production forecasts," he said.

"The industry is now saying we can go either way [with rail or Keystone]. OK, if it can go either way, why are they pushing so hard for the pipeline?" added Steve Kretzmann, founder of Oil Change International, one of the groups behind the report.

Canada's Natural Resources Minister, Joe Oliver, wasn't available to comment on the report. A spokesman said rail and other methods would "likely deliver the crude intended for the Keystone XL market" if the pipeline were rejected. Mr. Oliver has frequently promoted the pipeline by citing strong trade ties between Canada and the U.S. His spokesman echoed that Thursday, saying in an e-mail that the U.S. will continue to need to import oil, and Keystone will deliver "stable and secure oil" that would otherwise come from Venezuela and other countries.

Documents made public this month, after being released to the Pembina Institute think-tank under access to information laws, show that Mr. Oliver's "key messages" once included that "in order for crude oil production to grow, the North American pipeline network must be expanded through initiatives, such as the Keystone XL pipeline project." Other documents don't include the same suggested message.

"The documents certainly suggest that the government saw KXL as being essential to increasing oil sands production until the State Department concluded otherwise," said Clare Demerse, Pembina's federal policy director. "I think it's quite significant that his department took the opposite view as recently as earlier this year."

Another report released this month by a Massachusetts-based consulting firm, IHS CERA, found that no "material change in oil-sands production growth" would be expected if Keystone is rejected. That report assumes that other projects will proceed, including proposed pipelines and expansions through British Columbia, and the recently announced Energy East pipeline project to New Brunswick. None of those projects have been approved, and some have faced strong opposition by environmentalists, political leaders and First Nations groups.

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