Obama directed federal agencies to expedite a 485-mile line from Oklahoma to refineries on Texas' Gulf Coast that would remove a critical bottleneck in the U.S. oil transportation system, backing a segment of the larger Keystone XL project that he rejected earlier this year.
Dave Collyer, president of the Canadian Association of Petroleum Producers, said while Obama's directive is a step in the right direction, it neglects the most vital leg of the pipeline for Canada.
"I think the important thing to keep in mind is that it doesn't help move incremental volume out of Canada so we still need the northern leg of the pipeline to be built or some other alternative," said Collyer.
Travis Davies, a spokesman for the association, said Obama's move reflects the findings of State Department that the large KXL project is in the national interest and has economic, energy supply and environmental merit for the U.S.
"That said, while the project will help with the oversupply at Cushing in the near term, Canadian producers are obviously more concerned with getting oil from Canada down to the Gulf coast refining market via the full KXL project," he said.
American oil industry executives have also stressed Obama needs to greenlight the entire $7.6 billion pipeline, not just a portion of it.
The full proposed pipeline, which would cross the U.S. border in Montana, is designed to bring between 500,000 to 700,000 barrels a day from the Canadian oil sands region to refineries on the Gulf Coast. It would shortcut to an existing pipe that goes through much of Canada before cutting into the United States in North Dakota on the way to the oil storage center in Cushing, Oklahoma.
Approval of the southern part of the pipeline is not really the Obama administration's call because it does not cross borders. The northern portion of the pipeline needs administration approval because it would cross the Canadian border.
The U.S. State Department has yet to make a decision on the entire length of the proposed pipeline, saying it needs more time to conduct a thorough environmental review of a new route around an environmentally sensitive aquifer in Nebraska.
The longer 1,700-mile (2,735-kilometer) pipeline became a political flashpoint late last year when congressional Republicans wrote a provision forcing Obama to make a decision, and environmental groups waged a campaign to kill the project. In January, Obama delayed it, saying the deadline didn't leave enough time for review.
Pipeline proponents cried foul, accusing Obama of making a cynical political move aimed at pacifying the environmentalists in the president's political base and improving his chances of re-election.
Outraged Republicans then successfully inserted pipeline provisions into payroll tax cut legislation in late December.
But within a month, facing a mid-February deadline imposed by that measure, Obama nixed TransCanada's existing permit outright, saying there wasn't enough time to thoroughly review a new route before giving it the green light.
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