Keystone timing unchanged, State Dept. says

The U.S. State Department insists a deal to re-route the Keystone XL pipeline in Nebraska has not shortened the period for overall approval.

On Monday, Calgary-based TransCanada, which is proposing to build the $7 billion US oil pipeline, said it had reached an agreement with Nebraska to remedy its concerns about where the project would go through the state.

The company said on Monday the deal might mean state approval could come in under a year.

But the State Department said on Tuesday the timing of final approval hasnt changed.

"My best estimate is that the timeline has not changed at all with regard to what we said last week, that based on previous assessments of similar distance we anticipate that the evaluation could conclude the first quarter of 2013," State Department spokesman Mark Toner said.

TransCanada's president for energy and oil pipelines, Alex Pourbaix, had estimated on Monday that with state and federal officials working together, it was possible to get a decision in six to nine months.

"As long as we're able to stay on the shorter time-frame, that keeps costs down very significantly," Pourbaix said in an interview with the Canadian Press from Lincoln, Neb.

The deal announced Monday would change the route to avoid the ecologically sensitive Sandhills region and further away from the part of the Ogallala aquifer that would be most vulnerable to oil spills.

The aquifer provides water for human consumption and for farming across eight states.

The pipeline would carry mostly oilsands oil from Alberta 2,700 kilometres across six states to refineries on the U.S. Gulf Coast.

If the deal reached in Nebraska is approved by state senators, the state government will commission a study of alternative routes and propose a new one.

"For months, Nebraskans have been clear about our position on the pipelinewe support the pipeline. However, we're opposed to a route through the environmentally sensitive Sandhills," Nebraska Gov. Dave Heineman said in a statement posted onlineTuesday.

He said a change in theNebraska route of the proposed pipelinewas "common sense" and praised Nebraskans for working in a "co-operative" manner.

"With regard to the current bills, we still have work to do, but we are headed in the right direction," the governor said.

Opposition from Nebraska ranchers added weight to environmental concerns, which together led the U.S. State Department on Nov. 10 to delay a decision on approval until 2013, while TransCanada came up with a more acceptable route.

The State Department decision had been expected by the end of the year and some have asked whetherObama pushed it back in order to avoid a backlash from two factions of his political baseunions concerned about jobs on one side and environmentalists on the otherahead of the 2012 presidential election.

Though an exact route hasn't been determined, Pourbaix told a news conference earlier Monday it would likely require about 48 to 64 kilometres of additional pipe and an additional pumping station.

What that adds to the project's $7-billion price tag is still unclear.

Still, an analyst said an agreement to reroute thepipeline was a good outcome, even if it meant the project is built later and at a higher cost.

Philip Adams with Gimme Credit said in a report the delay is actually good for TransCanada's credit profile, as it gives the Calgary-based pipeline giant more free cash flow to play with in 2012.

But federal NDP environment critic Megan Lesliesaid she still has concerns about thepipeline, even if it is rerouted around the Ogallala aquifer.

Still needs 'rigorous' review

"If you go back to the original statement by the State Department ... it said specifically to take into account climate change impacts. So a rerouting doesn't, as far as we're concerned, address those impacts," Leslie said.

Anychange in the route shouldstill be subject to"a rigorous environmental review," she said.

"Just because there is a reroute doesn't mean that it solves the issues that were specifically written up in the State Department statement," Leslie said. "I don't think it addresses the issue."

Leslie and fellow NDP MP Claude Gravelle travelled to Washington Tuesday to lobby against the pipeline, something Natural Resources Minister Joe Oliver described as a "disgrace."

"It's appalling they are undermining our economic interests in this way," Oliver said outside the Commons after question period.

Noah Greenwald, a spokesman for the Centre of Biological Diversity, said his group remains opposed to the pipeline and still believes it poses an environmental threat.

The centre is one of three environmental groups that have sued the U.S. State Department, seeking a judge's order to block the project.

"Even with the reroute, we still feel like we can push forward," he said. "We're going to keep up the public pressure on the administration as this moves forward."

TransCanada shares closed Tuesday up 27 cents at $40.78 on the Toronto Stock Exchange.