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US Delays Decision on Tarsands Pipeline

by Dina O'Meara

The U.S. State Department has bowed to pressure from environmental and political lobbies, giving federal agencies until the end of the year to decide if a massive bitumen pipeline from Canada is in the national interest.

Water used in the extraction process is dumped into pools in the northern Alberta oil sand fields. Federal agencies now have until mid-December to comment on the $7-billion Keystone XL project, which would flow bitumen from Alberta to refineries in the U.S. Gulf Coast. (AFP/File/David Boily) TransCanada Corp.' s contentious Keystone XL project has been challenged by groups in the U.S. decrying Alberta's oilsands operations as environmentally unsound.

Monday's move gives federal agencies three more months to comment on the $7-billion project, which would flow bitumen from Alberta to refineries in the U.S. Gulf Coast.

The original directive was for federal agencies to weigh in on whether the pipeline was in the national interest by Sept. 15, the same time analysis of an environmental impact study will be released.

"After further consultation with those agencies, the department has extended the time for all consulted federal agencies to provide their views to the department until 90 days following issuance of the final EIS.," the agency said on its website.

Both national need and environmental approvals are necessary before Secretary of State Hillary Clinton issues the presidential permit required to allow the expansion.

TransCanada said the 90-day delay, half of which was built in to its construction plans as risk, will give it more time to emphasize the benefits of bringing Alberta oil to the U.S.

"I think that what we are seeing here is a discussion that will ultimately come back to the premise of the project, and that is the importance of North American energy security," said Robert Jones, vice-president of the Keystone project. "As we get an opportunity to explain the issues around energy security, we're very confident that people will recognize the overall benefit of the project for North America."

The State Department's announcement Monday comes on the heels of efforts by groups critical of the oilsands.

The effect of a massive oil spill in the Gulf of Mexico has heightened scrutiny of all oil projects, Jones noted.

A time lag between environmental results and a national needs assessment often occurs, he said, conceding the new order would delay construction by at least six weeks. He could not comment on how the delay would affect project costs.

Phase 1 of the Keystone pipeline started flowing 435,000 barrels of oilsands crude a day to refineries in Illinois July 1. The extension would bump up deliveries to Gulf refineries to 510,000 bpd by 2013.

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