By Christopher M. Matthews and Anne Steele 

The Trump administration has given final approval to the Keystone XL project, bringing the mammoth oil pipeline a step closer to fruition more than a year after former President Barack Obama blocked its construction.

The U.S. State Department said Friday it had issued a presidential permit to TransCanada Corp., the company behind the Keystone XL, to build the pipeline.

It still faces state-level legal challenges in Nebraska and South Dakota that could cause further delays. TransCanada needed approval from the State Department because the pipeline crosses the U.S.-Canadian border.

"This is a significant milestone for the Keystone XL project," said TransCanada Chief Executive Russ Girling.

If completed as planned, Keystone would send up to 830,000 barrels of oil a day, mostly from Canada's oil sands, to Steele City, Neb., where it would link to existing pipelines to Gulf Coast refineries.

The pipeline has become a flashpoint over the debate on fossil fuels and the approval, while expected, reflects President Donald Trump's broader directives to ease regulations on infrastructure projects. Secretary of State Rex Tillerson, the former chief executive of Exxon Mobil Corp., had earlier recused himself from the issue.

Environmentalists have urged rejection of the pipelines as part of a commitment to fighting climate change, and were quick to condemn the permit Friday.

"The Trump administration may be furiously propping up an obsolete energy system at the behest of his fossil fuel cronies, but the majority of people in this country want action on climate change and want support for renewable energy," Greenpeace USA Executive Director Annie Leonard said Friday.

Fossil-fuel companies have argued the projects are essential for energy security and the economy, and industry groups praised the move.

"We applaud President Trump's decision to approve the project and prove to the world that America is capable of tackling the major infrastructure improvements necessary for a modern economy," said Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce.

Debate over the project is unlikely to abate. Environmental activists have increasingly targeted pipeline projects like Keystone and the Dakota Access Pipeline with protests. Furor over the project in Nebraska, where state approval is still needed, derailed the project initially.

"While Presidential approval is a major step forward for the pipeline, the battle is far from over as the company still needs to secure some of the land rights with landowners, still needs a permit in Nebraska and is expected to be met with protester opposition," Tudor, Pickering, Holt & Co., an energy investment bank, said in a note to investors.

TransCanada said Friday it will continue to engage key stakeholders and neighbors along the pipeline's planned route throughout Nebraska, Montana and South Dakota to obtain the necessary permits and approvals.

While oil and gas companies have welcomed Mr. Trump's support of energy infrastructure projects, his assertion that such projects must use U.S. steel has confounded them.

Mr. Trump's executive order approving two pipeline projects in January also mandated the use of American-made steel, a requirement Mr. Trump has reiterated in the months following. But in March, an administration official said the order won't apply to the construction of Keystone but only to new pipelines.

Steel analysts have long doubted that the president's executive order would require the use of U.S.-made steel in the Keystone project, because the pipe for the project has already been purchased. Additionally, it is questionable whether U.S. producers can make the necessary grade of steel for the 36-inch diameter pipe for the project.

In a statement, a spokesman for Canada's Resources Minister Jim Carr said the federal government was encouraged by the Trump administration's decision. "Nothing is more essential to the American economy than access to a secure and reliable source of energy. Canada is that source. This pipeline underscores that," the spokesman said.

Paul Vieira contributed to this article.

Write to Christopher M. Matthews at christopher.matthews@wsj.com and Anne Steele at Anne.Steele@wsj.com

 

(END) Dow Jones Newswires

March 24, 2017 10:43 ET (14:43 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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