Though the report acknowledged that tapping the Canadian oil sands for the pipeline would produce more greenhouse gases, the assessment also said that blocking the project would not prevent development of those resources.
The report "is not a decision document," said Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs. "This document is only one factor that will be coming into the review process for this permit" sought by TransCanada, an energy giant based in Calgary, Alberta.
The $5.4 billion pipeline, which would transport heavy crude from Canadian oil sands in Alberta into the heart of the U.S. pipeline network, has become the focus of intense controversy. Foes say it will contribute to climate change; supporters say it will secure U.S. oil supplies from a friendly neighbor and create U.S. construction jobs.
The release of the long-awaited Final Environmental Impact Statement is certain to trigger an avalanche of lobbying aimed at Secretary of State John Kerry, who has made climate change a central focus of his career and will now begin preparing a decision.
Obama said in June that he would sign off on the proposal only if it "does not significantly exacerbate the climate problem."
The decision remains politically fraught for Democrats. Environmental activists fiercely oppose it, arguing the pipeline could leak, would accelerate development of the greenhouse gas-intensive oil sands in Alberta and would increase America's dependence on fossil fuels.
Wendy Abrams, founder of the Chicago-based nonprofit group Cool Globes and a major Democratic campaign contributor, said she felt a "gut-wrenching pain for my kids" when she read the report. She said it made her question her past support for Obama and Kerry. "If they can't get it done, what am I hoping for?"
The State Department's report includes 11 volumes of analysis on how the proposed pipeline would affect heavy-crude extraction in Canada's oil sands and reaches the same conclusion as its draft report did in March: No single infrastructure project will alter the course of oil development in Alberta.
The report said that "the proposed Project is unlikely to significantly affect the rate of extraction in oil sands areas (based on expected oil prices, oil-sands supply costs, transport costs, and supply-demand scenarios)."
Last week, TransCanada began shipping oil through the southern leg of the Keystone pipeline, which runs from Cushing, Okla., to Port Arthur, Texas. But the company is still waiting for a State Department permit for the 1,179-mile northern leg that would carry heavy crude from Canada into Montana and run to the small town of Steele City, Neb.
"We're very pleased with the release and about being able to move to this next stage of the process," said Russ Girling, chief executive of TransCanada. "The case for the Keystone XL, in our view, is as strong as ever."
He said it would take about two years to construct the northern leg, but he cautioned that summer is best for construction and that a long permit process could further delay the project.
Jones, the State Department official, said that the report does not answer the question of how this pipeline decision fits into the "broader national and international efforts to address climate change, or other questions of foreign policy or energy security."
She added that the study relied on assumptions about pipeline capacity, oil prices and transportation and development costs that were "uncertain and changeable."
Oil industry officials welcomed the fact that the department had affirmed the idea that the pipeline decision did not have a major climate impact.
"Time and time again, State reaches the same conclusion despite the unprecedented and thorough environmental review," said Cindy Schild, the American Petroleum Institute's senior manager for oil sands policy. She said that "it is hard to figure out how they could conclude that it is not in the national interest."
The report estimated the project would generate about 1,950 annual construction jobs in Montana, South Dakota, Nebraska and Kansas over a two-year period and contribute approximately $3.4 billion to the U.S. gross domestic product. It would generate about 50 jobs once in operation.
In an interview this week, AFL-CIO President Richard Trumka said members of his labor federation back the project. "We think that anything that's going to create jobs, help the country and do it in an environmentally sound way ought to be done," he said.
The high-profile decision now enters a new phase, in which Kerry and his deputies will field public comments and internal feedback from eight agencies, including the Environmental Protection Agency and the departments of Defense and Energy. The State Department will open a 30-day comment period on Feb. 5, and the agencies will have 90 days to weigh in. After a decision is issued, other agencies have 15 days to object. If one does, the president must decide whether or not to issue the permit.
"It is hard to imagine how the president could justify rejection without turning the United States into a poster child for what the energy industry terms 'above-ground' risk," said Robert McNally, president of the Rapidan Group consulting firm. "I don't see how logically the president can reject it if he applies the criteria he laid out at Georgetown last year, i.e. whether or not the pipeline would severely exacerbate climate change."
The EPA has questioned whether the State Department has given sufficient weight to the project's negative environmental impact. The final environmental impact statement notes that bitumen, the substance that is extracted in Canada and diluted in order to be transported to U.S. refineries, is more difficult to clean up than lighter crude if it spills.
The report concludes that crude extracted from the oil sands results in 17 percent more greenhouse gas emissions than the average barrel of crude used in the United States but only 2 percent to 10 percent more than the heavy crude it would likely replace at gulf coast refineries.
The report also said that a variety of rail transportation options would result in 28 percent to 42 percent more emissions than the pipeline. State has cited rail as a reason why blocking the pipeline would not slow oil sands development, although a spate of oil train derailments - including a derailment Friday in southeast Mississippi - have highlighted the dangers of that alternative.
When asked Friday whether the president will directly weigh in on the decision, Jay Carney, the White House press secretary, said, "At this point, the process is now at the State Department, and we're going to let that run its course."
The administration has some flexibility on timing; the State Department could issue a decision either before the end of the 105-day agency comment period or long afterwards.
"Secretary Kerry is just really beginning his involvement in this process," Jones said. "There is no timeline for his deliberations."
Environmental groups are organizing a "Day of Action" on Tuesday during which they plan to flood Kerry's office with phone calls and emails.
"To some extent, Secretary Kerry has gotten a pass to date," said Tiernan Sittenfeld, the League of Conservation Voters' senior vice president for government affairs. "Now that changes. This is a really a pivot point, and this is a real opportunity for him to live up to the climate record he has established through his very accomplished career."
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