Nebraska Governor Approves TransCanada’s Keystone XL Route

Nebraska Governor Dave Heineman approved TransCanada Corp. (TRP)’s revised route for the Keystone XL pipeline, clearing the way for a final decision from U.S. regulators on the project that would bring Canadian oil to the Texas coast.

The new route avoids Nebraska’s Sand Hills, an environmentally sensitive region overlaying the Ogallala aquifer, the state’s main source of groundwater. The pipeline will still cross the aquifer, though in a less sensitive area, according to a letter Heineman, a Republican, sent today to President Barack Obama and Secretary of State Hillary Clinton informing them of his decision.

“Keystone would have minimal environmental impacts in Nebraska,” Heineman said in the letter. “The concerns of Nebraskans have had a major influence on the pipeline route, the mitigation commitments and this evaluation.”

Heineman requested that Nebraska’s environmental review and route approval be added to the study underway by the U.S. State Department, which has authority over the project because it crosses an international border. TransCanada executives have said U.S. approval for the pipeline may come by the end of March. Victoria Nuland, a spokesman for the State Department, said the review won’t be ready by then.

‘Minimal Impact’

“Keystone XL is the most studied cross-border pipeline ever proposed, and it remains in America’s national interests to approve a pipeline that will have a minimal impact on the environment,” Russ Girling, chief executive officer for the Calgary-based pipeline company, said today in an e-mailed statement.

Supporters of the 1,661-mile (2,762-kilometer) project have said it will provide thousands of jobs and help the U.S. avoid dependence on energy sources from politically unstable places. Critics have turned the pipeline proposal into an environmental debate over Canada’s oil sands and the heavy crude’s contributions to air and water pollution. Blocking pipeline transport of the oil to markets in the U.S. and overseas may jeopardize development of the resource.

Producing and using western Canadian crude adds annual carbon dioxide emissions equivalent to 6 million cars compared to conventional crude, said Anthony Swift, staff attorney for the Natural Resources Defense Council.

Inconsistent Policy?

Approving the pipeline would be inconsistent with the environmental vision the president described in his second inaugural address yesterday, Swift said in a telephone interview today.

“We’re running out of time for action, and the problem with Keystone XL is that it locks in a dirtier source of energy for 50 years,” he said.

Obama can offset any potential increase in emissions from oil sands by encouraging more use of cleaner-burning natural gas in U.S. power plants instead of coal, said Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy analysis company.

TransCanada’s original permit request to build the $7.6 billion pipeline, planned to stretch from Alberta’s oil sands to Gulf Coast refineries, was delayed and ultimately rejected last year by the U.S. State Department after Heineman and other Nebraska officials criticized the route.

Final Approval

The project should now get “the final green light,” U.S. Senator Mike Johanns, a Nebraska Republican who opposed TransCanada’s original route, said in a statement. “I hope President Obama will swiftly approve the project so we can take a significant step forward in meeting our energy needs.”

Jane Kleeb, executive director of Bold Nebraska, a group that opposes the project, said Heineman’s approval was “one of the biggest flip-flops in Nebraska political history.”

“He approved the pipeline route that crosses the aquifer after he asked Obama to deny the route that crossed the aquifer,” she said in an e-mail today.

After the initial proposal was rejected last year, TransCanada broke the project into two pieces, one running from Alberta to Steele City, Nebraska, and the other from Oklahoma to Texas refineries. Construction has begun on the southern portion of the pipeline, and environmental activists have been arrested in several areas of Texas after staging protests or chaining themselves to construction equipment.

The Nebraska decision now shifts the debate to larger economic and national security questions, Steven Paget, an analyst at FirstEnergy Capital Corp. in Calgary, said in a telephone interview.

“I always believe local opposition is usually the most powerful opposition,” said Paget, who has a market perform rating on TransCanada and doesn’t own any of its stock. The Obama administration must now decide, “does the U.S. want to source more oil from Canada, versus continuing to supply from other areas of the world?”

TransCanada fell less than 1 percent to C$48.78 at the close in Toronto.

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

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

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