Obama Administration Grants Approval to Begin Construction of Keystone XL Southern Leg

Today the Army Corps of Engineers granted approval for TransCanada to begin construction on the southern portion of the Keystone XL pipeline that would end at the Gulf of Mexico. Last January, President Obama denied a National Interest Determination permit for the high-profile project that is opposed by many environmental groups because it moves large amounts of oil sands crude that have a more energy intensive extraction process than conventional crude oil. Today's announcement generally aligns with Administration's proposal from last March where they urged TransCanada to reapply for a construction permit by breaking up the project into two portions: a southern leg which needs no additional Presidential permits and a northern leg crossing the international border into the US which does.

The $7 billion project, which was first submitted for review at the State Department in 2008, would travel roughly 1,700 miles from Alberta, Canada through the Midwest and ultimately to refineries in the Gulf Coast region of the United States. Since the pipeline crosses international boundaries, a Presidential Permit must be obtained through a National Interest Determination process for the northern leg of the Keystone XL project which is led by the State Department under the National Environmental Policy Act (NEPA). This requires the State Department to conduct a full environmental review and coordinate with all federal agencies that have jurisdiction on potential policy implications of a major project such as Keystone XL. The State Department has previously conducted two such reviews and approved two large-scale Canadian oil sands pipelines; ironically one included the first phase of the Keystone line (2010) and the other is the Enbridge Alberta Clipper project (2009). TransCanada expects the new review process for the northern leg of the Keystone XL project to last until at least the first quarter of 2013.

The President has come under withering criticism by Keystone XL's supporters for denying the project which they expect will create thousands of private sector jobs and needed infrastructure to aleve crude oil supply gluts at the nation's pipeline hub in Cushing, Oklahoma; as well as providing improved energy security by bringing additional supplies to market from Bakken shale plays and a trusted ally. In response to those claims, the President augmented his stance on Keystone XL at a much publicized event in Cushing where he expressed his support for expediting the southern route of the project that would run from Oklahoma to the Gulf Coast. He stated his opposition to the project was based on arbitrary review deadlines set by Congress and concerns raised by the state of Nebraska that the original route selection of the project could negatively impact the Ogallala Aquifer - an important drinking water source for the region. In his remarks he stated, "Today, I'm directing my administration to cut through the red tape, break through the bureaucratic hurdles, and make this project a priority, to go ahead and get it done."

Although today's decision gives the greenlight to begin construction for pipe segments in Texas, the Administration is still reviewing additional permits for a 400-mile section of the project that originates from the Cushing pipeline hub itself. TransCanada estimated they may likely get those approvals by late summer so construction can actually begin on the entire southern leg, according to information they provided to the New York Times.