U.S. ruling on Keystone pipeline could slip again - report

Fri Dec 21, 2012 3:31pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - A top risk-management analyst warned on Friday that a decision by Washington on TransCanada Corp's (TRP.TO: Quote) Keystone XL pipeline could get delayed again into next summer, adding more pressure to already deeply discounted Canadian oil prices.

The U.S. State Department has said it will rule on the $5.3 billion Canada-to-Nebraska pipeline by the end of March, assuming Nebraska approves a new route that skirts an environmentally sensitive region in the state.

However, Robert Johnston, director of global energy and natural resources for the Washington-based Eurasia Group, said environmental groups will press for public hearings on the department's new environmental impact statement on the project, expected shortly, and push for an Environmental Protection Agency review of the study.

"This suggests a timetable of presidential approval as early as April but quite possibly one that extends until summer," Johnston wrote in a report on how oil sands producers have few short-term options for new market access and price relief.

If it gets the green light start-up would likely be pushed to the end of 2015 from the current estimate of late 2014 or early 2015, he said.

The stakes are rising. Canadian oil is being heavily discounted as production rises and pipeline capacity additions to new and current markets are slow to be added, partly due to regulatory delays. The price of Western Canada Select heavy blend, a widely quoted crude type, sold at times for $40 under the price of benchmark U.S. crude in the past few weeks, triple the spread of just a few months ago.

This week, the Alberta government, which garners about a third of its revenue from the oil industry, warned it may not meet its deficit-elimination target because of the situation.

Now all eyes are on Keystone XL again, four years after TransCanada first applied to build the project, which became a flashpoint in the U.S. debate over the environment and economy.   Continued...