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Texas governor asks Clinton to back Keystone XL

Texas governor Rick Perry has written to US Secretary of State Hillary Clinton asking her to approve a controversial pipeline from the Canadian oil sands to the US Gulf coast

In the letter, leaked to Petroleum Economist, Perry said the project would “benefit not only Texas, but a good portion of the US”, adding “I urge you to approve a Presidential Permit for Keystone XL as soon as possible”.

“Given the unrest in the Middle East,” he wrote, “turning to Canada for secure oil supply is logical.”

The project, Keystone XL, would pipe 0.51m barrels a day (b/d) of synthetic crude from Alberta to refineries in the US. Because the pipeline will cross the US border, a permit to let Calgary-based TransCanada build it must be granted by the State Department. TransCanada already ships oil-sands crude to the US Midwest through its Keystone system. The expansion project would double its capacity.

Last year, Clinton said she was “inclined” to endorse the project. But environmentalists and other opponents of the pipeline claim it is unnecessary and, because it transports bitumen – more corrosive than other forms of oil – risks ecological catastrophe in the event of a spill.

Henry Waxman, a representative from California, has led dozens of congressional Democrats in opposing the project. Last year, he wrote to Clinton saying the project was a “step in the wrong direction” and would “expand our reliance on the dirtiest source of transportation fuel available".

The Environmental Protection Agency, meanwhile, has demanded that the State Department expand its environmental assessment of the project. The State Department said a decision will be made by the end of the year.

But in his letter to Clinton on 6 April, Perry pointed to an independent study of Keystone XL’s economic impact on the US. It would “stimulate $20bn in new spending for the US economy, spur the creation of 20,000 jobs and generate more than $0.585bn in state and local taxes for the states along the pipeline route,” he wrote.

“When Keystone XL is operational, the states along the pipeline route are expected to receive an additional $5.2bn in property taxes during the operating life of the pipeline,” he added.

And he pointed to the pipeline’s strategic significance, too. The project would provide a “safer and more reliable supply of oil than the product imported from unstable regions of the world”, he wrote. “It is safe to assume that Keystone XL has the ability to replace a number of oil tankers a year delivering oil to the Gulf coast from these sources.”

A quarter of the pipeline’s capacity would also carry oil produced in Texas, Oklahoma, Montana and North Dakota, Perry added, referring in particular to new shale-oil production from Bakken, a field straddling the US prairie states.

Greg Stringham, vice-president of oil sands at the Canadian Association of Petroleum Producers, said he hadn't seen the letter, but welcomed Perry's endorsement. "We believe support is growing for canadian oil to access the Gulf coast market," he said, adding that Canadian oil-sands crude would help offset a decline in imports from Mexico and Venezuela, which also export to refineries in Texas.

"Given all the uncertainties happening in the global oil market right now," Stringham said, "Canada continues to look like a safe and secure supply source … the need to connect the [oil sands to the Gulf coast by] pipeline is important for us and the US." 

Supporters of the project claim Keystone XL will also help soften oil prices in the US, where events in the Middle East and North Africa have helped to push WTI, the North American benchmark crude, close to $110 a barrel.

Despite that rally, WTI has opened a wide discount to UK benchmark Brent, which is trading above $120/b. Analysts say fresh imports into the US of Canadian oil-sands crude has helped keep a lid on similar prices for US crudes, including WTI.

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