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A yard in Gascoyne, ND., which has hundreds of kilometres of pipes stacked inside it that are supposed to go into the Keystone XL pipeline, is shown on Wednesday April 22, 2015.

Alex Panetta/THE CANADIAN PRESS

The U.S. State Department is poised to approve TransCanada Corp.'s Keystone XL pipeline, moving the $8-billion (U.S.) project one big step closer to reality.

Undersecretary for Political Affairs Tom Shannon is expected to sign off on Keystone by Monday – the deadline President Donald Trump had set for the department to make a decision. A Canadian government source said the approval will land as soon as Friday; U.S. media, citing unnamed sources, also said an affirmative decision is close.

A State Department official said Thursday it had "no decision to announce."

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The move would reverse the decision of the previous administration, which turned down Keystone under pressure from environmental activists, who argue the line will cause more carbon emissions by helping increase oil sands production. Mr. Trump has long promised to make Keystone happen. In his first week as President, he asked TransCanada to reapply for approval and ordered the State Department to make a speedy decision.

Even with State Department approval, however, the pipeline is far from a done deal. It must still receive approval from Nebraska's Public Service Commission, and the federal decision could face a court challenge.

Still, Natural Resources Minister Jim Carr said he was encouraged by the report the pipeline would be approved. Mr. Carr will travel to Washington next week to meet with Energy Secretary Rick Perry and has been promoting cross-border energy co-operation as part of a broader effort by the Canadian government to reinforce the importance of Canada-U.S. economic integration.

"We hope it is [approved]," Mr. Carr said in a brief interview. "We're in favour of the project and we know TransCanada made reapplication, and the President is encouraging us that it is a project he thinks is in the interests of the United States. We think it is in the interests of Canada. And we look for every opportunity to show an example of a project, particularly in the energy sector, that is in the interest of both nations. Jobs will be created, good jobs."

TransCanada spokesman Terry Cunha said the company is expecting a decision from the State Department by Monday.

"We do anticipate a decision by the State Department during the 60 days they have been given. At the moment, we continue to work with the Administration on our Presidential Permit application," he wrote in an e-mail.

It was not immediately clear whether the reported approval would be contingent on any conditions, as Mr. Trump has previously suggested. In January, the President said he would "renegotiate some of the terms;" on the campaign trail last year, he had mused about making TransCanada pay the government a tithe in exchange for letting the line go ahead.

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Mr. Trump has also vowed to have U.S.-made steel used in pipeline construction. But it is unclear whether that edict would apply to Keystone, which is to use steel from multiple countries, including Canada and the United States.

At a fundraiser in Washington this week, Mr. Trump said he had approved a pipeline on condition the company building it drop a lawsuit against the U.S. government. At the National Republican Congressional Committee event Tuesday, a video of which was posted online by The Washington Post, Mr. Trump said he had told National Economic Council Director Gary Cohn to tell the company to drop the suit or he would kill the line.

"I'm approving a pipeline and they're suing us for $14-billion," he said. "'Go back to them and tell them if they don't drop the suit immediately, we are going to terminate the deal.' … Being President gives you great power."

Mr. Trump said the company complied, but did not name the company involved. TransCanada sued the U.S. government for $15-billion in a NAFTA court last year, arguing former president Barack Obama's decision to reject Keystone was unfair.

Anthony Swift, of the Natural Resources Defense Council said his organization will be looking closely at any approval and considering a court challenge. Mr. Swift contended that Keystone's environmental-impact statement, completed in January, 2014, is so out of date that it would open any decision up to legal action.

"It is vulnerable to reversal. There was an assumption that oil prices would stay above $100 a barrel," he said Thursday. "We're looking at a project, the route for which is unknown and the market for which has changed fundamentally."

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Mr. Swift said the pipeline must also be assessed under the U.S. Clean Water Act, providing another hurdle to the project at the federal level.

In Nebraska, meanwhile, environmental groups have joined forces with landowners and First Nations to oppose the project. On top of the concern about climate change, opponents argue spills from the pipe could damage their lands and leach into the Ogallala Aquifer.

The state is expected to decide later this year whether to give the project the go-ahead.

Keystone XL would run from Hardisty, Alta., to Steele City, Neb., where it would connect to existing pipelines that would carry the heavy oil sands crude to refineries on the U.S. Gulf Coast.

With a report from Jeff Jones in Calgary.

map showing keystone pipeline route from Hardisty, Alta., to Texas.
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