TransCanada’s Keystone XL clears major hurdle

Hollywood actors, climate experts and other opponents of the proposed Keystone XL oil pipeline will have 90 days to prevent the project’s final approval after the U.S. State Department ruled that the pipeline would have “no significant impact” on the environment. The State Department will make a final decision on the pipeline by the end of the year, after a public comment period and more hearings in the various states the pipeline would pass through.

Protests in front of the White House entered their second week  in late August with at least 275 arrests so far, according to the Rain Forest Action Network. Those arrested include Hollywood actress Darryl Hannah and NASA scientist and global-warming proponent James Hansen.

TransCanada‘s (TRP-T, TRP-N) proposed 2,700-km pipeline would carry more than 500,000 barrels of oil per day from Alberta’s oilsands to refineries in Texas. The pipeline would begin at Hardisty, Alta., and snake eastwards through Saskatchewan and Manitoba before making a sharp right turn and heading straight south to Cushing, Oklahoma and then to a delivery point near existing terminals in Nederland, Tex.

“Support for Keystone XL continues to grow because the public, opinion leaders and elected officials can see the clear benefits that this pipeline will deliver to Americans,” Russ Girling, TransCanada’s president and chief executive, said in a statement announcing the news that the State Department had “reaffirmed the environmental integrity of the project.”

Girling added that a fundamental issue is energy security. “Through the Keystone system, the U.S. can secure access to a stable and reliable supply of oil from Canada, where we protect human rights and the environment, or it can import more higher-priced oil from nations who do not share America’s interests or values.”

During its operation, the pipeline will also contribute over US$5 billion in property taxes to the communities it passes through, Girling noted, and the project is expected to create US$20 billion in economic stimulus to the U.S. during its construction phase alone. The pipeline builder also argues the project will “put 20,000 Americans to work” and will create “an additional 118,000 indirect and spin-off jobs for local businesses.”

TransCanada expects that, if construction gets underway in early 2012, the pipeline can be completed by 2013.

Environmental groups argue that oilsands production releases more carbon dioxide into the air than conventional oil production. Opponents of the pipeline also worry that an oil spill would severely damage the Ogallala Aquifer, a key source of water in states through which the pipeline will pass. There have already been spills from TransCanada’s existing Keystone pipeline, and in July, Exxon’s Silvertip pipeline spilled about 1,000 barrels of crude oil into Montana’s Yellowstone River. Enbridge also experienced two major oil pipeline spills in Michigan and Illinois last year. 

If the pipeline goes ahead, Keystone XL will have to comply with 57 conditions that have been tailored specifically to the project. The conditions were drawn up by the U.S. Pipeline and Hazardous Materials Safety Administration, according to the Energy Intelligence Group. 

At presstime in New York TransCanada traded at US$42.77 per share, near the higher end of its 52-week range of US$34.77-US$45.09.