US regulator warns over Canada oil pipeline plan

President Barack Obama became significantly more likely to block the Canada-to-Texas Keystone XL oil sands pipeline after the US environmental regulator said a government report that in effect endorsed the project was based on "insufficient" research.

Six weeks after the US State Department concluded in a 2,000-page draft review that there were no significant environmental reasons why TransCanada's proposed $7bn (£4.6bn) pipeline should not go ahead, the Environmental Protection Agency (EPA) criticised the analysis.

The 1,664-mile long Keystone XL pipeline is intended to carry heavy oil from Canada's tar sands in Alberta to refineries in Texas, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma.

While the southern leg of the pipeline has already been approved, planning permission for the 1,179-mile northern section, from Hardisty, Alberta to Steele City, Oklahoma, has been pending for more than four years.

The hold-up centres around concerns about environmentally damaging oil leakages from the pipe as well as increased carbon emissions associated with the energy-intensive process of producing oil from tar sands.

Last month, the State Department concluded that the pipeline "is unlikely to have a substantial impact" on the rate of Canada's oil sands development because "the oil would be extracted anyway even if the pipeline wasn't built".

However, the EPA has agreed with opponents of the pipeline, arguing that trains would not be able to carry anything like the amount of oil that Keystone could – so blocking it would feed through into lower carbon emissions.

Cynthia Giles, from the EPA's Office of Enforcement and Compliance Assurance, said the State Department's "analysis should include further investigation of rail capacity and costs, recognising the potential for much higher per barrel rail shipment costs".

Ms Giles said the State Department needs to "more clearly acknowledge" the dangers of an oil spill from the pipe to the surrounding environment. Last month, the dangers of oil spills were underlined when an Exxon Mobil pipeline spilled thousands of barrels of Canadian crude in Arkansas.

The spokesman for the State Department downplayed the importance of the EPA report, saying it had "always anticipated" that it would "conduct additional analysis and incorporate public comments received on the draft". She asked the State Department to address her concerns in its final version of the review.

The department is in charge of determining whether Keystone should get a presidential permit, but Mr Obama is expected to weigh in as the final referee, especially in light of the EPA's reservations about its report.

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