No Major Objections To Proposed Keystone XL Pipeline Project From State Department

In a recently-relesed enviromental review, the US State Department raised no major objections to the construction of the proposed Keystone XL pipeline that would traverse the US/Canada border as it brought oil down from Alberta's tar sands to refineries on the Gulf Coast. However, the lengthy report stops short of reccomending that Calgary-based Transcanada's [NYSE- TRP] 1700 mile pipeline is built.

The lengthy report says Canadian tar sands are likely to be developed, regardless of whether the U.S. approves Keystone XL, which would carry oil from western Canada to refineries in Texas. The pipeline would also travel through Montana, South Dakota, Kansas, Nebraska and Oklahoma.

The report acknowledges that development of tar sands in Alberta would create greenhouse gases but makes clear that other methods to transport the oil -- including rail, trucks and barges -- also pose a risk to the environment.

The State Department analysis for the first time evaluated two options using rail: shipping the oil on trains to existing pipelines or to oil tankers. The report shows that those other methods would release more greenhouse gases that contribute to global warming than the pipeline. The Keystone XL pipeline, according to the report, would release annually the same amount of global warming pollution as 626,000 passenger cars.

A scenario that would move the oil on trains to mostly existing pipelines would release 8 percent more greenhouse gases such as carbon dioxide than Keystone XL. That scenario would not require State Department approval because any new pipelines would not cross the U.S border.

Another alternative that relies mostly on rail to move the oil to the Canadian west coast, where it would be loaded onto oil tankers to the U.S. Gulf Coast, would result in 17 percent more greenhouse gas emissions, the report said.

In both alternatives, the oil would be shipped in rail cars as bitumen, a thick, tar-like substance, rather than as a liquid.

Because the new pipeline would cross the US/Canada border, the decision was initially left up to the State Department. However, the Obama administration initially blocked the pipeline claiming it posed a risk to the environment as it passed through the ecologically sensetive Ogallala Aquifer. The White House has yet to weigh in on an altered route that circumvents the Ogallala Aquifer and Sand Hills region of northern Nebraska.

The Athabasca Oil Sands in northern Alberta are said to be the world's largest known deposit of bitumen oil sands, and have prompted increased interest from China in recent years. As the KeystoneXL project has been held up by years of red tape, bureaucratic foot-dragging and use as a political football, Canada plans on going ahead with a second pipeline run by Enbridge [NYSE- ENB] called the Northern Gateway pipeline that would run from Alberta to British Columbia's Pacific coast where the oil would be exported to China.