CALGARY (Dow Jones)
The U.S. State Department said Tuesday it will require an additional environmental review of TransCanada Corp.'s (TRP, TRP.T) much-debated Keystone XL pipeline expansion, a project that politicians and industry executives on both sides of the U.S.-Canada border have hoped would ramp up Canadian crude-oil exports to U.S. markets.
The State Department said it plans to issue a "supplemental draft environmental impact statement" next month, rather than what had been expected to be a "final" version of that document.
That could set back the Canadian pipeline company's plan to push forward the 1,700-mile oil-pipeline expansion by several months. The project would bring up to 1.1 million barrels of crude oil a day from Canada's oil-sands region to refineries along the Gulf of Mexico.
The potential delay comes as Washington scrambles to cope with the current run-up in oil prices. Although crude prices have eased recently amid uncertainty over demand in the wake of the Japanese earthquake and tsunami, they recently had surged above $100 a barrel for U.S. benchmark oil owing to Mideast turmoil. Canadian crude has been a stable source of foreign oil, and some politicians in Washington have pushed ways to boost Canadian imports.
The State Department said it will make a final decision on whether to approve the pipeline by the end of this year.
"We are pleased the Department of State has committed it will conclude its review of Keystone XL by the end of the year," TransCanada Chief Executive Russ Girling said.
Still, TransCanada had sought to lower expectations about an imminent approval by saying last month that the decision could be delayed until year-end, rather than coming within a few months as it had previously anticipated.
Because the pipeline crosses the U.S.-Canada border, the decision over whether to approve it is held by the State Department.
The Keystone XL project has been criticized by environmental groups and some U.S. lawmakers for a variety of reasons--from the higher environmental damage and greenhouse gases created by Canada's oil-sands industry to fears about the potential of spills from the pipeline, which would stretch across Montana, South Dakota, Nebraska, Oklahoma and Texas.
The pipeline's proponents say Canada's oil-sands industry isn't substantially more polluting than many other sources of U.S. oil; that crude would come from a stable nation friendly to the U.S.; and that the pipeline will be built to high standards, relieve a glut of crude accumulating at a key hub in Cushing, Okla., and provide about 13,000 new jobs and $20 billion in new spending to the U.S. economy.
Canada ships about 1.9 million barrels of oil to the U.S. each day and is the U.S.'s largest single source of oil. About half of the oil Canada ships to the U.S. comes from the oil-sands region in northeastern Alberta.
TransCanada had also said the regulatory delay was partially responsible for a higher expected cost for the Keystone pipeline system, up to $13 billion from $12 billion.
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