TransCanada’s Keystone Pipeline May Be Rerouted Amid Nebraska Opposition

The U.S. State Department is weighing whether to seek a rerouting of TransCanada Corp. (TRP)’s planned $7 billion Keystone XL pipeline away from the Sandhills region of Nebraska, a department official said.

The department is considering how to respond to concern among Nebraska citizens and public officials about the risk that TransCanada’s current plans may pose to the Sandhills, said the official familiar with the deliberations, who spoke on condition of anonymity yesterday about internal discussions.

Nebraska residents expressed opposition to the route during State Department hearings on the pipeline, calling it a threat to drinking-water supplies, and the department believes it must now consider how to be responsive to them, the official said. The state legislature is currently in a special session weighing measures to force a rerouting of the project.

The State Department, which has jurisdiction because the project crosses an international border, hasn’t made a decision on whether to require examination of a new route, the official said.

Nebraska State Senator Annette Dubas, who participated in negotiations with TransCanada and asked the company to change the route, said the department is listening to her state.

When the department hosted hearings in Nebraska in September, officials assured them that no decisions had been made and promised to take their concerns into consideration.

“This demonstrates that they are doing that,” Dubas said.

Drinking Water

The 1,661-mile (2,673-kilometer) pipeline would deliver 700,000 barrels a day of crude from Alberta’s oil sands to the Gulf of Mexico by crossing Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.

The Sandhills are made up of dunes that rise as much as 300 feet (91 meters). Underneath them flows the Ogallala aquifer, which supplies drinking water to 1.5 million people.

Russ Girling, chief executive officer of Calgary-based TransCanada, has said rerouting delays might kill the project.

“We are not going to speculate on comments from unnamed sources about possible route changes for Keystone XL,” Terry Cunha, a TransCanada spokesman, said today in an e-mailed statement. “We have taken our guidance from the Department of State over the last three years, as it is their review process, and will continue to do so.”

The aquifer isn’t at risk and “the route that has been selected is the most environmentally responsible and has the least impact to the land the pipeline will go through,” Cunha said in an e-mail yesterday.

Governor’s Stance

Nebraska Governor David Heineman said in an interview on Bloomberg Television yesterday that he’d support the pipeline if it were moved away from the Ogallala aquifer. Nebraska lawmakers began committee hearings yesterday in Lincoln, the state capital, on five bills aimed at giving the state the power to reroute pipelines.

The State Department’s interest in the concerns that have surfaced is an encouraging sign, Senator Ken Schilz said in an interview after a full day of hearings.

“As we’ve gone through this process, we’ve always been under the assumption that it was up to the State Department to take on this decision,” Schilz said.

President Barack Obama acknowledged Nebraska’s concerns last week, saying in an interview with KETV, an Omaha television station, that jobs created by the project wouldn’t be worth it if drinking-water supplies were at risk.

“Folks in Nebraska, like all across the country, aren’t going to say to themselves, ‘We’ll take a few thousand jobs if it means our kids are potentially drinking water that would damage their health,” Obama said in the Nov. 1 interview.

‘Less Secure’

The fate of the pipeline has grown “less secure,” Whitney Stanco, an analyst with MF Global’s Washington Research Group, said in a note to clients yesterday.

“The odds favor approval, but an extended delay is looking more and more possible,” she said.

Rerouting the pipeline wouldn’t resolve objections to the project from environmentalists, thousands of whom encircled the White House in a protest on Nov. 6. Groups such as Friends of the Earth also oppose the pipeline because they say extracting crude from Canada’s oil sands produces more greenhouse-gas emissions than conventional oil drilling.

Environmental groups said today they were encouraged that the administration is weighing a change in the pipeline’s route.

‘Pause Button’

“It will show leadership if the Obama administration hits the pause button pending a full review of the flawed Keystone XL tar sands pipeline permitting process and pending a fresh, expert and independent review of the very serious environmental concerns,” Susan Casey-Lefkowitz, director of international programs for the Natural Resources Defense Council, said today in an e-mail.

In August, the State Department issued a final environmental impact statement saying the project will cause “no significant” environmental damage provided that TransCanada complies with U.S. law.

That study was based on criteria that were focused more narrowly than the “national interest” determination that department officials are now preparing, the official who requested anonymity said.

The department has said it expects to make its decision this year.

To contact the reporters on this story: John Lippert in Chicago at jlippert@bloomberg.net; Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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