Should U.S. State Dept. approve presidential permit for TransCanada's US$7B Keystone XL oil pipeline, legal, regulatory hurdles likely to delay project further; in Nebraska, opposition high, bill introduced to put state in charge of pipeline regulation

LOS ANGELES , September 29, 2011 () – Public meetings on TransCanada Corp.’s proposed US$7-billion Keystone XL oil pipeline will begin on Monday as the U.S. Dept. of State considers whether or not to issue a presidential permit for the project, reported Reuters on Sept. 28.

A decision on the federal permit, which would give the 1,661-mile line approval to cross the Canada-U.S. border, is expected by this year-end. The hearings, which will be held along the pipeline’s proposed route, are intended partly to support the Dept. of State in case of any challenges.

However, even if the permit is issued, anticipated legal and regulatory hurdles at federal and state levels are likely to delay the project further, said Paul Sankey, an analyst with Deutsch Bank, in a note to clients.

The project is already about a year behind schedule, and Sankey said he’s “suspected from the beginning” that TransCanada’s target to complete construction by year-end 2012 was “ambitious,” Reuters reported.

Keystone XL faces the fiercest opposition in Nebraska, where a state senator plans to introduce a bill on Monday that would give the state authority to regulate its pipeline. Such legislation would allow Nebraska to reroute the project within state boundaries, causing further delays.

Another line of attack for the project will come from environmental groups, with the first lawsuit on wildlife likely to be filed as early as this week, legal sources said, reported Reuters.

The arguments are expected to be heard in federal court and focus on challenging the environmental impact statement’s coverage of issues such as threats to endangered species or wetlands.

The Dept. of State concluded after a three-year study that Keystone XL would have minimal environmental impact. The pipeline would carry over half a million barrels per day of oil sands-derived crude oil from Alberta to Texas, Reuters reported.

Environmentalists object to the oil spill risks of the pipeline, as well as being against further development of the carbon-intensive tar sands.

At least one challenge to the Dept. of State permit in an effort to delay the project is likely, said Paul Gutermann, partner with Akin Gump Stauss Hauer & Feld LLP.

To force a delay through a court injunction the plaintiffs must cite irreparable damage, which has about a 25% chance of succeeding given that the project has already undergone close scrutiny, Gutermann said, reported Reuters.

The primary source of this article is Reuters, London, England, on Sept. 28, 2011.

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