TransCanada Corp. and Nebraska agreed Monday to reroute the controversial Keystone XL oil pipeline away from a vast underground water source in the state.
The move is sure to reignite the fierce debate over environmental concerns about the 2,700-kilometre pipeline versus the appeal of millions dollars in taxes and thousands of jobs for the stagnant U.S. economy. The massive pipeline, if built, would deliver 700,000 barrels a day of crude from Alberta's oilsands to refineries in Texas.
The proposed route would have crossed six states, including Nebraska's ecologically sensitive Sandhills region and the Ogallala Aquifer, which provides water for millions in the area.
"If all of this is about the aquifer, that's an easy thing to fix. If it's a signal that there's deeper-seated issues with oilsands developments that resonate with American voters, we're about to find out," said Warren Mabee, an assistant professor at Queen's University who specializes in geography and environmental policy.
"There's been a blithe assumption that any oil we can produce will be taken up by our friends south of the border. That may not be as true as we thought."
Alberta-based TransCanada said Monday it reached an agreement with the Nebraska government to ensure the pipeline doesn't cross the Sandhills region.
"I can confirm the route will be changed and Nebraskans will play an important role in determining the final route," Alex Pourbaix, TransCanada's president of energy and oil pipelines, said in a release.
The company said it will work with the U.S. State Department and Nebraska's Department of Environmental Quality to define "the best location" for the pipeline.
The change does not come as a surprise. Late last week, the U.S. State Department announced it would delay its decision on Keystone until early 2013 to give TransCanada time to come up with a new route.
"They want to get this done as quickly as possible to try to preserve their commercial interests," said Andrew Leach, assistant professor with the School of Business at the University of Alberta.
The State Department has final say on Keystone because it would cross an international border.
Environmentalists said they still expect a complete environmental impact assessment on any new proposed route.
"We're awfully happy that the Ogalalla Aquifer is going to be safe, and the Sandhills, and that only leaves the entire atmosphere of the planet to worry about," Bill McKibben, co-founder of environmental activists 350.org, said in a release.
On Tuesday, Nebraska State lawmakers will vote on legislation that would ensure any pipeline route developed in the state avoids the Sandhills, a government spokesperson said.
That legislation will be a critical part of the State Department's National Interest Determination.
Following the State Department assessment, which could take as long as a year, a presidential permit would be required to proceed.
The resulting delay means that U.S. President Barack Obama and his administration would likely not have to deal with the issue until after the 2012 election.
"You could say that by requiring a new route, and a locally sensitive route, that opens up space for the president to approve it," Leach said. "Or you could say by introducing the delay the president was hoping the issue would go away, but that didn't happen."
It's also unclear how much the reroute may add to the project's price tag, which now stands at about $7 billion (U.S.).
While Hollywood stars such as Robert Redford and Daryl Hannah made headlines for opposing the Keystone pipeline project, the most heated environmental opposition to the pipeline has come from Nebraska, where many residents were concerned that a spill from the pipeline could pollute the water that it relies on for farming and ranching.
A State Department decision had been expected by the end of the year, but some suggest Obama pushed to avoid a backlash from two factions of his political base - unions concerned about jobs on one side and environmentalists on the other - ahead of the 2012 presidential election.
Environmental lobbyists fighting Keystone, who declared victory following the State Department's delay, are also taking aim at climate change and public health concerns when it comes to oil sands production.
Pourbaix had told The Canadian Press in an interview before the State Department announced the delay that he doubted a change of route through Nebraska would be enough to quell the environmental opposition to the project.
Keystone backers have warned that prolonged delays might compel customers to look for other ways to get their crude to market, such as West Coast shipments to Asia or adding capacity to existing U.S. pipelines.
With files from The Canadian Press
Copyright 2011 Toronto Star Newspapers Limited.