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Demonstrators carry a giant mock pipeline while calling for the cancellation of the Keystone XL pipeline during a rally in Washington in this Nov. 6, 2011 file photo.

Joshua Roberts/Reuters/Joshua Roberts/Reuters

TransCanada Corp. plans a 32-kilometre detour – at no extra cost – for its long-delayed Keystone XL pipeline, and hopes the change will be sufficient to win approval from the U.S. State Department.

In a filing with the government of Nebraska, the Calgary-based pipeline company said the new route should allay concerns that the pipeline will threaten the state's Sandhills region, considered a fragile environmental zone.

"The primary goal of the Nebraska reroute effort is to avoid the area defined by the [state's Department of Environmental Quality]as the Sandhills region," the report says.

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In December, the Nebraska environment department provided TransCanada with a map that identified the extent of Sandhills region, saying the company needed to know what area to avoid.

The proposed new route cuts through a narrow alley between two sections identified on the state's maps as no-go zones. TransCanada rejected an alternative route, which would have swung northeast of the controversial areas, because that route would have added to the overall length and cross the Niobrara River in an area designated as a wilderness zone.

"Generally, the goal is to minimize the length of the pipeline, which decreases the project footprint and impacts on the environment and landowners," the company said.

As a result, TransCanada is proposing a route that deviates only slightly from its original plan – adding 32 kilometres to a 2,700-kilometre pipeline and keeping the projected cost at $7.6-billion (U.S.).

The company has divided the project and is proceeding with construction of the southern leg, which will carry crude from overflowing terminals at Cushing, Okla., to the huge refining hub on the U.S. Gulf Coast. But it still needs State Department approval for the cross-border portion that would stretch from Hardisty, Alta., to the Oklahoma-Nebraska border.

Both TransCanada and Calgary-based competitor, Enbridge Inc., are rushing to provide pipeline capacity to move crude out of Cushing, which is currently a landlocked destination for growing supplies of oil from Canada and the northern U.S. The glut at Cushing has created a large price differential between internationally traded crudes that are benchmarked against the North Sea Brent blend and North American crude that have their prices set against West Texas Intermediate.

But the Keystone XL project is seen as part of the needed infrastructure to relieve the oversupply of Canadian oil in the mid-continent of the U.S. and ease the pressure on Canadian crude prices.

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TransCanada is hopeful the Nebraska review will clear the way for a federal permit to commence construction early in 2013 of the pipeline, which would carry up to 800,000 barrels a day of oil sands bitumen crude from Alberta and oil from the northern U.S. to the Gulf Coast.

After opposing TransCanada's original plan, Nebraska Governor David Heineman and the state legislature have been eager to work with the company to get a new route and have it begin construction.

Nebraska's environment director Mike Linder said the new proposal will be subject to public hearings and further evaluation by his department before being finalized. However, critics complain that the state government is prepared to rubber stamp the TransCanada route.

The Obama administration postponed a decision on the permit last fall, saying the company needed to reroute the pipeline to avoid the Sandhills region. In January, the State Department rejected TransCanada's initial submission after being forced by the Republican-led Congress to make a decision before the new route was completed.

The State Department said it was not rejecting the Keystone XL project on its merits and invited the company to reapply.

"Once again, this process is back in the hands of Nebraskans, who overwhelmingly support the safe construction and operation of this critical North American energy infrastructure project, TransCanada spokesman Shawn Howard said.

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However, Jane Kleeb, of citizens group Bold Nebraska, said the pipeline route remains unacceptable, arguing that the map used by TransCanada misrepresents the extent of the Sandhills. She accused the state government of being prepared to ram through TransCanada's new route.

Ms. Kleeb said she has no confidence that the Governor will block the project, but remains hopeful that President Barack Obama will protect the Sandhills and Ogallala aquifer, should he win re-election in November.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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