New York (Platts)--10Jan2011/640 pm EST/2340 GMT

The US State Department is signaling it could call for a "supplemental" draft environmental impact statement of TransCanada's Keystone XL oil pipeline project, a move one US senator hopes might prompt a review of the pipeline's current route, a spokesman for US Senator Mike Johanns, Republican-Nebraska, said Monday.

"We always knew that these options" of a supplemental draft EIS "were on the table," Johanns spokesman Paul Donahue said in a phone interview Monday. But "it was the first time they [the State Department] had made a specific note about it," he said, refering to a recent letter from Secretary of State Hillary Clinton to Johanns.

Donahue said that "hopefully" an alternative route for Keystone "would be explored." Johanns and other lawmakers in 2010 stepped up opposition to the pipeline, saying the route threatens a Nebraska watershed key to the state's livestock and agricultural interests.

Johanns in November asked Clinton for a supplemental draft EIS to review "additional pipeline entry points" into the US and consider a route "parallel to the existing Keystone pipeline route" that "avoids the Sandhills region" in Nebraska.

The Keystone expansion would carry Western Canadian crude 1,959 miles from Hardisty, Alberta, through Cushing, Oklahoma, to terminals in Nederland and Port Arthur, Texas. The 36-inch diameter XL pipeline would cross through the states of Montana, South Dakota, Nebraska and Kansas.

In the letter to Johanns's office late last week, Clinton said her office is "currently reviewing public comments on the draft Environmental Impact Statement (EIS) and making edits to that document."

"We have not yet determined whether the next version of the EIS will be a supplemental draft EIS or a final EIS," Clinton said, according to a copy of the letter provided by Johanns, who received the letter January 6.

The State Department last April issued a draft EIS that said the Keystone project would have "limited adverse environmental impacts" during its construction and operation. It also said that if the line is not built, then "[Western Canadian Select Blend] crude oil would likely be shipped to countries outside of North America, which would require new infrastructure that would result in environmental impacts at least as great as those of the proposed project."

ENVIRONMENTALISTS HAD PANNED REPORT

Environmentalists criticized the report, saying there were new White House guidelines pending that could affect how environmental impact reviews ought to be conducted. Broader opposition to the pipeline began growing in the aftermath of the BP oil spill in the US Gulf of Mexico.

TransCanada spokesman Terry Cunha said January 7 when contacted by a reporter that he had not heard of a possible supplemental EIS. He said TransCanada hoped to receive a Presidential Permit to proceed with the project "by this summer," adding: "We haven't heard otherwise."

In a subsequent email Monday, Cunha said: "we submitted our application back in 2008 and the State Department has spent over two years reviewing this project. This includes spending hundreds of hours reviewing thousands of pages of information which we have been supportive in providing."

TransCanada is "expecting the State Department to issue a Final EIS in the first part of 2011," Cunha said.

Asked about the possible impact of a "supplemental" draft EIS, he later said that "we've built contingencies into our construction plans and we expect to be operational in 2013."

Johanns, in an interview last October, said he did not oppose the pipeline or "tar sands oil." But TransCanada "could not have picked a more environmentally sensitive area," he said, adding that the route traverses an area with deep environmental value.

In her January letter, Clinton said: "I recognize that ensuring a complete environmental review of the pipeline--including potential impacts on the Nebraska Sandhills and the Ogallala Aquifer--is an important issue for you, your constituents, and the state of Nebraska.... We are carefully considering your concerns as part of our meticulous environmental review, consistent with the National Environmental Policy Act and Executive Order... We have not made a decision on the Keystone XL pipeline, and will not make one until we complete all steps of our review process."

Paul Blackburn, a South Dakota-based lawyer for the regional environmental law group Plains Justice, said in an email that if the agency seeks a supplemental draft EIS, then construction "would likely be delayed by at least a couple of months, depending on the extensiveness of the supplementation."

State Department spokeswoman Kerry Humphrey said Monday that "no decision has been made on whether a supplemental will be needed."

--Leslie Moore Mira, leslie_moore@platts.com

Similar stories appear in Oilgram News. See more information at http://bit.ly/OilgramNews