TransCanada, Nebraska agree to reroute pipeline away from sensitive aquifer

TransCanada Corp. (TSE:TRP), the company behind the $7 billion Keystone XL pipeline project, has reached a deal with the state of Nebraska to reroute the proposed pipeline around an environmentally sensitive aquifer.

The decision was announced late Monday at a news conference from the Nebraska state legislature.

A bill was earlier introduced that would divert the pipeline away from the ecologically sensitive Sandhills area.

Under the deal reached today, and to be voted on Tuesday, the state will pay for studies to find a new route to avoid the Ogallala aquifer which provides water for millions of people in the area.

"I am pleased to tell you that the positive conversations we have had with Nebraska leaders have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline," Alex Pourbaix, TransCanada's president, Energy and Oil Pipelines, said in a statement. "I can confirm the route will be changed and Nebraskans will play an important role in determining the final route."

The pipeline has attracted opposition mostly in the United States, led by a chorus of environmental groups and celebrity activists, who claim the pipeline will increase greenhouse gas emissions, import "dirty tarsands oil" from northern Canada and put precious water supplies around Nebraska at risk.

A decision on the project has been expected by the White House by year-end, but last week the United States said it would not commit to the project for another 18 months, until after the 2012 presidential election. That led the Canadian government, which strongly backed the project, to express bitter disappointment and look at other options for exporting landlocked Canadian oilsands crude. 

If approved, Keystone would help Canada move closer to the international benchmark for crude instead of US pricing which trades at a discount of more than $20/barrel. Canada currently pumps 2 million barrels per day to the US, with more than half coming from the oilsands.