HOUSTON (Dow Jones)
Nebraska's governor asked the federal government Wednesday to deny TransCanada Corp. (TRP) the permit needed for a controversial crude oil pipeline expansion that would dramatically boost the amount of Canadian crude oil delivered to refiners in the Midwest and the Gulf of Mexico.
In a letter to President Barack Obama and Secretary of State Hillary Clinton, Gov. Dave Heineman expressed concern that TransCanada's proposed Keystone XL pipeline could damage the state's Ogallala Aquifer, a major source of water in the region, over which the pipeline would cross. The governor said he disagreed with the analysis the State Department issued Aug. 26 that said there would be "no significant impact" from the 1,700-mile, cross-border pipeline, which requires a special permit from the department.
"I disagree with this analysis, and I believe that the pipeline should not cross a substantial portion of the Ogallala Aquifer," Heineman wrote in his letter. "I am concerned that the proposed pipeline will potentially have detrimental effects on this valuable natural resource and Nebraska's economy."
About 250 miles of the Keystone's proposed route would take it over the Ogallala, a stretch that has long been a contentious issue. Sen. Mike Johanns (R., Neb.), who has said he supports the Keystone expansion overall, has in the past asked that TransCanada re-route the pipeline to avoid the aquifer. Johanns said Wednesday he supported Heineman's request to deny the Keystone expansion as currently planned.
"The proposed route is the wrong route," Johanns said in a statement. "TransCanada should be forced to select a more appropriate route."
Promoters of the pipeline expansion have said it will supply U.S. refiners with oil from a source more politically friendly to the U.S. than some other countries where it buys crude. But the project has become a target for criticism from environmentalists, who argue that producing crude oil from Western Canada's tar sands severely damages the region's environment and that the oil produced is especially corrosive. About 70 people were arrested in front of the White House on Aug. 27 during a rally to protest the pipeline.
TransCanada spokesman Terry Cunha said the company "disagreed" with Heineman, adding that the new pipeline would utilize "significant design, construction and operating safety conditions."
"Alternative routes that were considered to avoid the Ogallala Aquifer and the Nebraska Sandhills are not preferable environmentally or otherwise," TransCanada Terry Cunha said in an e-mail.
The State Department "valued the view expressed" by the governor, department spokeswoman Wendy Nassmacher said. The department in September will hold another round of public meetings in Nebraska to listen to residents' concerns, Nassmacher said.
The State Department is expected to make a decision whether to award the permit by the end of the year. But even if the pipeline is approved, opponents could throw up legal hurdles before construction could begin, said Robert Johnston, energy analyst at Eurasia Group.
"One remaining negative scenario for the TransCanada project would be if the political urgency to approve the project by year-end leads to flaws in the regulatory process that could make the eventual permit vulnerable to legal challenges," Johnston said.
(Tennille Tracy contributed to this article.)
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