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Obama’s Speedy Keystone Review Won’t Accelerate Cushing Pipe

President Barack Obama’s promise to expedite the review of the southern leg of TransCanada Corp. (TRP)’s Keystone XL pipeline won’t speed up the project, which already is slated to start construction as soon as June.

TransCanada is awaiting permits from the U.S. Army Corps of Engineers, the last it needs to begin construction on the pipeline segment that will carry crude from the oil-storage hub at Cushing, Oklahoma, to Gulf Coast refineries, Terry Cunha, a spokesman for the Calgary-based company, said in an e-mail message yesterday.

TransCanada’s president of energy and oil pipelines, Alex Pourbaix, said in an interview March 6 that construction on the Cushing phase of Keystone may begin as soon as June. The company doesn’t expect the new review process to change that schedule, Cunha said yesterday. The Army Corps typically approves permits for this type of project within 60 days, according to Meg Gaffney-Smith, chief of the Corps’s regulatory program.

Obama appeared in Cushing today as part of a four-state tour to promote his energy policies as Republicans blame him for surging gasoline prices. He announced that the administration is designating the southern Keystone section an infrastructure priority, which will make the project eligible for accelerated review of permit applications.

President Barack Obama's promise to expedite review of the southern leg of the TransCanada Keystone XL pipeline won't change the project timeline. Photo: Jim Watson/AFP/Getty Images Close

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President Barack Obama's promise to expedite review of the southern leg of the TransCanada Keystone XL pipeline won't change the project timeline. Photo: Jim Watson/AFP/Getty Images

“We’re making this new pipeline from Cushing to the Gulf a priority,” Obama said today in prepared remarks. “We’re going to go ahead and get that done.”

Keystone XL Rejected

Obama in January denied a permit for the Keystone XL to bring oil-sands crude from Canada to the Texas coast, citing environmental concerns. TransCanada announced plans Feb. 27 to proceed with just the Cushing-to-Gulf segment of the pipeline. The project is expected to ease a supply bottleneck in Oklahoma by eventually bringing as much as 830,000 barrels of oil a day to Texas refineries.

Since the Cushing phase doesn’t cross an international border, it doesn’t require permission from the U.S. Department of State and president, as the full project did. The Obama administration released a statement in February saying the White House will “take every step possible to expedite the necessary federal permits.”

Obama’s new designation of the pipeline as an infrastructure priority was dismissed by Republicans as political window dressing on a project that’s already well under way to deflect criticism Obama has received for refusing to approve the northern segment of TransCanada’s line.

Obama was “trying to take credit for part of the pipeline that doesn’t even require his approval,” Boehner, on Ohio Republican, told reporters at his weekly news conference in Washington. “This idea that the president is going to expedite this will have no impact on the construction of this pipeline.”

Rising Pump Prices

While on his two-day trip, Obama will also be focusing on natural gas, solar and alternative-energy research. The cost of oil is a political flashpoint as he seeks re-election in November. Even as the broader economy improves, voters are reminded daily by signs at local gas stations that they are spending more to drive.

The average retail price of regular gasoline in the U.S. was $3.84 a gallon as of March 20, up about 17 percent since the start of the year, according to the American Automobile Association’s daily fuel price survey. Crude oil for May delivery rose $1.66, or 1.6 percent, to $107.27 a barrel yesterday on the New York Mercantile Exchange.

The federal permits now needed for the $2.3 billion Cushing segment of Keystone mainly concern the environmental impact of the pipeline where it crosses rivers and streams. The permits required under the U.S. Clean Water Act typically are approved in 45 to 60 days if the project is determined to have minimal environmental impact, according to the Association of Oil Pipelines, a Washington-based trade group.

Tunneling Under

TransCanada plans to tunnel 50 to 100 feet below any rivers it crosses as it builds the pipeline to minimize environmental impact, said Pourbaix, the company’s pipeline president.

“Most large rivers would be crossed using the horizontal directional drilling method, which would install the pipeline well below the active river bed,” according to an environmental impact study of the XL pipeline route completed last year by the U.S. State Department. “As a result, direct disturbance to the river bed, fish, aquatic animals and plants, and river banks would be avoided.”

TransCanada originally requested water-crossing permits for the XL project from the Corps of Engineers last year. Corps officials at district offices in Oklahoma and Texas “suspended all work” on the permits after the State Department raised questions in November about Keystone’s total environmental impact, Gaffney-Smith said in Feb. 3 testimony to a Congressional committee.

New Application

TransCanada is in discussions with the Corps about submitting new permit applications for the Cushing segment, Gaffney-Smith said in an interview yesterday. The company will be allowed to reuse the documentation from the original application if the route doesn’t change, she said. The Corps has a goal of issuing approvals within 60 days, she said.

“Provided there are no issues, I believe we can process this application fairly quickly, but I can’t put a specific timeline on it,” she said.

In a now-separate process, TransCanada plans to submit “within weeks” a new permit application to the State Department for the northern leg of the XL pipeline that would run from Hardisty, Alberta to Steele City, Nebraska, said Pourbaix. The company is developing a new route with regulators in Nebraska.

Northern Segment Decision

The State Department has told TransCanada that it may make a decision on the northern segment application as soon as March 2013, he said.

Michael Brune, executive director of the San Francisco- based Sierra Club (FFDEX), the largest grassroots environmental group in the country, said the president’s decision to issue an executive order to speed up permitting for the southern portion of the Keystone pipeline “may have been a political calculation for the administration.”

“It puts American families at risk and only serves to deepen our dependence on oil,” Brune said in an e-mailed statement.

Obama also is using his trip to emphasize clean energy. Speaking in front of a field of solar panels at the Copper Mountain Solar 1 Facility near Boulder City, Nevada, Obama said yesterday the U.S. must stay ahead of countries such as China and India in the development of alternative energy sources while increasing production of fossil fuels.

“As long as I’m president we will not walk away from the promise of clean energy,” he said.

To contact the reporters on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net; Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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