U.S. Keystone Pipeline Decision Will Come 'At The Beginning Of Summer At The Earliest,' Official Claims

* State Dept needs to take series of steps

* Environmental review due any day

* No time frame for national interest determination

By Timothy Gardner

WASHINGTON, Jan 31 (Reuters) - The Obama administration's decision on the Keystone XL oil pipeline will not be made until at least June, a U.S. official said, which would delay the project for months and frustrate backers of Canada's oil sands.

"We're talking the beginning of summer at the earliest," said the source, who did not want to be identified due to the sensitive nature of the TransCanada Corp project, which has been pending for more than four and a half years. "It's not weeks until the final decision. It's months."

A series of steps still have to be taken by the State Department, where the decision will be made because the 830,000 barrels per day crude oil pipeline crosses the national border. The pipeline will link Alberta's oil sands and North Dakota's Bakken shale fields to refineries and ports in Texas.

The State Department did not comment for this story, but last week a spokeswoman said it did not anticipate making the decision before the end of March. Previously, the department had hinted the decision could come in the middle of the first quarter.

The administration may be delaying because the pipeline has become a symbol for both opponents and supporters of development of Canada's vast oil sands.

Environmentalists concerned about the carbon footprint of the oil sands have seen the decision as the most important President Barack Obama will make on climate change.

Proponents say the $5.3 billion project would pour capital into the dismal economy, provide thousands of jobs, and hasten North American energy independence.

"The fact the administration is taking its time suggests ... that it wants to succeed with an airtight story that pleases the primary concerns of both sides," said Kevin Book, an analyst at ClearView Energy Partners in Washington.

The administration could be figuring out how to balance environmental actions, such as getting tough on coal plant and vehicle emissions, with the impact of pipeline, if it ultimately approves Keystone. Book estimated a final decision would not come till the end of June.

The delay is painful in Canada which is suffering persistent, discounted prices for its oil because tight pipeline capacity. The premier of the Western Canadian province of Alberta warned last week that it faced a $6 billion revenue shortfall due to current pipeline constraints.


Pipeline watchers have been waiting since mid-December for the State Department to take the next step, issuing a supplemental environmental impact statement, or SEIS, on the project. The State Department, has only said the assessment is expected "in the near future."

Once the SEIS is issued, a public comment period of at least 45 days would ensue.

The State Department would then consider the comments before finalizing the assessment which could also take time if agencies such as the Environmental Protection Agency or Army Corps of Engineers express any concerns.

Then the State Department will determine whether the project is in the national interest, a decision it makes in consultation with other agencies considering issues such as jobs and economic impacts. The department has not yet decided when it would carry out the determination or about how long it would take, an official there said.

Even if the State Department's environmental review gives the go ahead, the project could still be delayed by lawsuits. The department would issue a "record of decision," and once that happens, legal challenges to the process may begin.

Danielle Droitsch, director of the Canada Project at the Natural Resources Defense Council, said her group was focused on trying to push the administration to deny the pipeline. But if it moves forward with the project, her group and others would consider all legal options at that point, she said.

Robert Johnston, the director of energy at risk management firm the Eurasia Group, said he believes Keystone will ultimately be approved, even as Obama has pledged to move ahead with climate initiatives.

"We still think it's a 65 percent chance it gets approved, and a 35 percent scenario that you get, essentially, another extended climate study," Johnston said. The United States would be denied a reliable source of oil its currently in a position to get if it rejected the line, he said.

Any delay past April 1 could set Congress in action. Last week a majority of the U.S. senators urged Obama to approve the project. Senator John Hoeven, a Republican from North Dakota, said he would introduce legislation enabling Congress to approve the pipeline if the late March date comes and goes. The pipeline would take also drain oil from his state, which is undergoing a drilling boom. (Reporting by Timothy Gardner and Jeffrey Jones in Calgary; Editing by Marguerita Choy)



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