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The original route for the pipeline

 

TransCanada Corp. said Monday that it has reached an agreement with the Nebraska government to change the route its proposed Keystone XL oil pipeline would take through the state.

The Calgary-based pipeline giant said it supports legislation Nebraska has introduced to ensure the pipeline doesn't cross the ecologically sensitive Sandhills region or the Ogallala aquifer, a vast underground water source.

The 2,700-kilometre pipeline, if built, will carry crude from Alberta's oilsands, through southwest Saskatchewan, to refineries on the U.S. Gulf Coast, traversing six states along the way. It would run within a few kilometres of Shaunavon and the town expects any construction would bring financial benefits to the region. The proposal also has the support of Saskatchewan Premier Brad Wall and Alberta Premier Alison Redford.

"I am pleased to tell you that the positive conversations we have had with Nebraska leaders have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline," said Alex Pourbaix, TransCanada's president of energy and oil pipelines.

"I can confirm the route will be changed and Nebraskans will play an important role in determining the final route."

Some of the most heated environmental opposition to the pipeline has come from Nebraska, where many residents were concerned a spill from the pipeline could pollute water it relies on for farming and ranching.

On Thursday, the U.S. State Department heeded those concerns, announcing it would delay its decision on Keystone XL until early 2013 so that the company could come up with a new route. The U.S. State Department has final say on Keystone XL because it would cross an international border.


A State Department decision had been expected by the end of the year and some have asked whether President Barack Obama pushed it back in order to avoid a backlash from two factions of his political base — unions concerned about jobs on one side and environmentalists on the other — ahead of the 2012 presidential election.

For many environmental lobbyists fighting Keystone, Nebraska wasn't the only issue. They also took aim at what would be inside the pipeline, oilsands crude they consider to be dirtier than crude from other sources.

Pourbaix had told The Canadian Press in an interview before the State Department announced the delay that he doubted a change of route through Nebraska would be enough to quell the environmental opposition to the project.


TransCanada said Nebraska's Department of Environmental Quality will review the best new route for Keystone XL alongside the State Department. But it's unclear whether Monday's development will speed up the federal process in any way. It's also unclear how much the reroute may add to the project's US $7-billion price tag.

Keystone XL backers have warned that prolonged delays might compel customers to look for other ways to get their crude to market, such as West Coast shipments to Asia or adding capacity to existing U.S. pipelines.

Currently, Canada exports 2.1 million barrels of oil a day, almost all of it to the United States. A number of pipelines — including the first phase of TransCanada's Keystone system — already ship Canadian crude to refineries in the Midwest.

Asian exports aren't an easy option to fall back on. Enbridge Inc. (TSX:ENB) if facing stiff opposition to its proposed Northern Gateway pipeline between Alberta and the West Coast and to the tanker traffic along the northern B.C. coast that would result. An expansion to Kinder Morgan's Trans Mountain line to Vancouver and Washington State is in its early stages.

TransCanada says Keystone XL will create thousands of jobs for the ailing U.S. economy and help the United States reduce oil imports from unfriendly regimes like Venezuela.

TransCanada is Canada's largest natural gas shipper and the biggest gas distributor in the country. It is also growing its other energy businesses, including power generation and oil transportation, with Keystone XL one of the biggest projects in the company's history.