US delays massive oil pipeline from Canada

November 10, 2011
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photo - Demonstrators march with a replica of a pipeline during a protest to demand a stop to the Keystone XL tar sands oil pipeline outside the White House on Sunday, Nov. 6, 2011, in Washington.  Photo by THE ASSOCIATED PRESS
Demonstrators march with a replica of a pipeline during a protest to demand a stop to the Keystone XL tar sands oil pipeline outside the White House on Sunday, Nov. 6, 2011, in Washington. Photo by THE ASSOCIATED PRESS 

WASHINGTON — The State Department has ordered the developer of a pipeline that would carry oil from western Canada to Texas to reroute it from environmentally sensitive areas of Nebraska, possibly delaying a final U.S. decision until after the 2012 election.

The decision, described to The Associated Press by two senior State Department officials familiar with the project, will require an environmental review of the new section. That review probably would take at least a year.

Calgary-based TransCanada Corp. is seeking to build the $7 billion pipeline to carry oil derived from tar sands in Alberta, Canada, to refineries on the Texas Gulf Coast.

Part of the 1,700-mile pipeline would pass through Nebraska's Sandhills region and the massive Ogallala aquifer, which supplies water to eight states.

The officials spoke on condition of anonymity because they weren't authorized to discuss the decision before an official announcement.

The heavily contested project has become a political trap for President Barack Obama. He risks angering environmental supporters if he approves the pipeline and could face criticism from labor and business groups for thwarting job creation if he rejects it.

Some liberal donors have threatened to cut off contributions to Obama's re-election campaign if he approves the pipeline.

The project has become a focal point for environmental groups, which say it would bring "dirty oil" that requires huge amounts of energy to extract. They also worry that the pipeline could cause an ecological disaster in case of a spill.

Thousands of protesters gathered across from the White House on Sunday to oppose the pipeline, and celebrities including "Seinfeld" actress Julia Louis-Dreyfus have made videos urging Obama to reject the pipeline. The State Department has authority over the project because it crosses a U.S. border.

The Keystone XL pipeline would carry as much as 700,000 barrels of oil a day, doubling the capacity of an existing pipeline operated by TransCanada in the upper Midwest. Supporters say the pipeline to Texas could significantly reduce U.S. dependence on Middle Eastern oil while providing thousands of jobs.

TransCanada has said any delay in the approval process could cost it millions of dollars and keep thousands of people of from getting jobs.

State Department spokesman Mark Toner said Wednesday that deliberations over whether to reroute the pipeline were part of a broad review of issues that include environmental concerns, energy security, jobs, economic impacts and foreign policy.

The department's inspector general has begun a review of the administration's handling of the pipeline request. That examination follows complaints from Democratic lawmakers about possible conflicts of interest in the review process.

The inspector generator will look at whether the State Department and others involved in the project followed federal regulations.

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Follow Matthew Daly on Twitter (at)MatthewDalyWDC

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