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TransCanada’s Keystone Pipeline’s Environment Risk Limited, U.S. Finds

By David Lerman and Jim Efstathiou Jr.
August 26, 2011 4:39 PM EDT

TransCanada Corp. (TRP)’s proposed $7 billion pipeline to Gulf Coast refiners poses “no significant impacts to most resources” along its route across six states, a U.S. State Department environmental review found.

The report on the Keystone XL pipeline said the risks are low provided TransCanada complies with U.S. law and follows recommended safeguards, according to the report posted today on the department’s website. A final decision on the project will be made this year, the State Department has said.

Environmentalists oppose the project, citing greenhouse-gas emissions and risks of a spill tainting the Ogallala aquifer in Nebraska’s Sand Hills region that supplies drinking water for 2 million people. Senator Mike Johanns, a Nebraska Republican, wants the line rerouted. Pipeline foes have been arrested daily this week outside the White House as they staged sit-in protests.

“The analyses of potential impacts associated with construction and normal operation of the proposed project suggest that there would be no significant impacts to most resources along the proposed project corridor,” assuming precautions are taken, the State Department found.

TransCanada fell 2 cents to C$41.61 at 4 p.m. in Toronto Stock Exchange trading. The shares have gained 9.5 percent this year.

“Support for Keystone XL continues to grow because the public, opinion leaders and elected officials can see the clear benefits that this pipeline will deliver to Americans,” Russ Girling, TransCanada’s chief executive officer, said in a statement. “The fundamental issue is energy security.”

Clinton Decision

Secretary of State Hillary Clinton has the final say on the pipeline project because it crosses an international border. The State Department was given the authority under an order issued in 2004 by President George W. Bush.

“I’m very pleased,” Canadian Natural Resources Minister Joe Oliver said in a telephone interview from Toronto. The State Department report is “an important step towards getting this finally approved.”

The oil industry, 14 U.S. senators and four unions representing 2.6 million workers have pushed for swift approval of the pipeline, which they said would help keep energy costs down, stimulate $20 billion in spending for the U.S. economy and spur creation of 118,000 jobs.

“The nation’s quintessential shovel-ready project is a step closer to reality,” Cindy Schild, the American Petroleum Institute’s refining manager, said today in an e-mailed statement. “We need this critical project because more jobs and a move to secure energy equal a stronger economy.”

‘Potential Problems’

The State Department’s report failed to back up its conclusions, Susan Casey-Lefkowitz, international program director for the Natural Resources Defense Council in New York, said in an interview.

“When you read through the executive summary, they are noting a lot of real potential problems,” Casey-Lefkowitz said. “For them to do that and then conclude there are no significant impact minimizes the very legitimate concerns of people who depend on the Ogallala aquifer and the 1,000 rivers that this pipeline would cross.”

The 1,711-mile (4,346-kilometer) pipeline would have the capacity to deliver 700,000 barrels of crude oil a day extracted from oil sands in Alberta, Canada, to Oklahoma and Texas. The route would cross Montana, South Dakota, Nebraska and Kansas before delivering oil to Cushing, Oklahoma, and southeastern Texas.

Declining Supplies

The pipeline is needed to maintain supplies of heavy crude oil to Gulf Coast refineries as imports decline, according to today’s State Department report. Imports from Mexico and Venezuela are falling while refining capacity in the Gulf Coast is projected to rise by 500,000 barrels a day by 2020.

Alberta oil is separated from sand and clay with intense heat in a process that releases more greenhouse gases than pumping conventional crude. Representative Henry Waxman, a California Democrat, has said the pipeline will carry “the dirtiest source of transportation fuel” available.

“The development of the oil sands would continue whether or not this pipeline or any other pipeline were put forward,” Kerri-Ann Jones, assistant secretary in the department’s Bureau of Oceans and International Environmental and Scientific Affairs, said today on a conference call with reporters. “This oil sands is going to be developed.”

The State Department review cited studies of a 1979 spill in terrain similar to Nebraska’s that “suggest that impacts to shallow groundwater from a spill of a similar volume in the Sand Hills region would affect a limited area of the aquifer around the spill site.”

Effect on Water

The department’s report said, “Potential surface and groundwater impacts are typically limited to several hundred feet or less from a spill site.”

Johanns said he is “tremendously disappointed” the department is backing a pipeline crossing the Sand Hills region.

“The State Department is now one step away from giving the green light to a project that could have grave consequences for our state,” Johanns said in an e-mailed statement.

The U.S. Environmental Protection Agency asked the State Department in June for information to clarify the potential effect on groundwater from oil spills, the impact on emission levels at Gulf Coast refineries and the amount of greenhouse gases that would be generated by the project, among other issues.

Trucks, Alternate Routes

The State Department concluded that alternatives to the pipeline would be unworkable or in some cases would result in greater environmental damage, according to an executive summary of the report.

Transporting oil from Canada by trucks “would also result in substantially higher greenhouse-gas emissions and a higher risk of accidents than transport by pipeline,” according to the report.

The study examined 14 alternative pipeline routes, all of which were found to be impractical or a greater environmental risk than the route proposed by Calgary-based TransCanada.

In some cases, the report released today imposes requirements on TransCanada that weren’t included in an earlier draft. The company would have to retain an independent consultant to review the placement of valves and the need for an “external leak detection system” in environmentally sensitive areas, according to the summary.

“This is not a final decision,” Jones said. “This is one point in this process.”

Serving ‘National Interest’

The State Department must decide whether the project will “serve the national interest,” Jones said. That review will include concerns such as U.S. energy needs and foreign-policy considerations.

Nine public meetings on the project will be held in Washington and the affected states.

“Our government has taken action to secure Canada’s position as a stable, secure and ethical energy superpower,” Andrew MacDougall, a spokesman for Canadian Prime Minister Stephen Harper, said yesterday in an e-mail. “We have committed to developing Canada’s energy resources in an environmentally sustainable way.”

To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editors responsible for this story: Larry Liebert at lliebert@bloomberg.net; Mark Silva at msilva34@bloomberg.net

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