(Adds reaction from Oil Sands Fact Check)
By Valerie Volcovici
WASHINGTON, Aug 29 (Reuters) - Environmental groups on Thursday used statements by supporters of the proposed Canada-U.S. Keystone XL pipeline to undermine the argument that Canada's tar sands will be developed without the project, so the impact on greenhouse gases will be the same.
A report put together by more than a dozen green groups compiles statements by industry and government officials, financial analysts and green groups to argue that the 830,000 b/d oil pipeline is essential for the development of the tar sands, and would in fact increase greenhouse gas emissions.
President Barack Obama, who has final say over the pipeline, has said that he would only approve the project if it "does not significantly exacerbate the problem of carbon pollution."
The U.S. State Department, which issued an initial environmental review of the project in March, found that Keystone XL is "unlikely to have a substantial impact" on the development of Alberta's oil sands, and that it would not result in a "substantial change in global greenhouse gas emissions."
That assessment is under inspector general investigation after complaints the report's authors had conflicts of interests. That will likely delay a final recommendation until 2014 and give opponents more time to sharpen their attacks.
"The more scrutiny there is on this, the more the argument falls to pieces," said Eddie Scher of the Sierra Club, one of the groups behind the report, entitled "Fail: How the Keystone XL Tar Sands Pipeline Flunks the Climate Test."
"This report is a single comprehensive answer to the president's climate challenge to the pipeline."
Approving the Keystone pipeline would open the floodgates to rampant development of the northern Alberta oil sands, which in turn would have a major impact on the rate of greenhouse gas emission growth, the report said.
The pipeline, designed to deliver Alberta oils sands crude to the U.S. Gulf Coast, would contribute 181 million tonnes of carbon dioxide equivalent (CO2e) each year for 50 years, according to a recent forecast by Oil Change International.
The report rejected the main finding of the State Department review: That the pipeline is not essential for the development of the tar sands because the oil produced there could be transported by rail instead.
Citing "industry and financial analysts," the report said the pipeline is critical to tar sands development in landlocked Alberta.
It cited a recent research note by oil sands investor Royal Bank of Canada that said: "President Obama's ultimate decision on the Keystone XL pipeline constitutes a watershed event for Canadian oil producers - and the shape of oil sands growth."
It also referred to a December research note by Toronto-Dominion Bank, which called the expansion of Canada's pipelines a "national priority" that is necessary for the oil industry's long-term growth.
Citing figures from the Canadian Association of Petroleum Producers, the report said Canada must add 4.2 million b/d of oil takeaway capacity to meet the industry's target of producing 7.8 million b/d by 2030.
To meet that target, Canada's five proposed pipelines, of which Keystone is the second biggest, would need to be built to close to maximum capacity.
The State Department report said increased tar sands production could be transported by rail without pipeline approval, but the report said that would be too costly.
"With break-even production costs for tar sands ranging from $60 a barrel to over $100 a barrel - and increasing each year - new tar sands projects cannot profitably bear significantly greater transportation costs associated with rail," the report said, citing several different studies on crude by rail.
Another report on Keystone XL, published earlier this month by consulting and research firm IHS CERA, mirrored the findings by the State Department and said the pipeline will have "no material impact" on U.S. greenhouse gas emissions. It said Venezuelan heavy crude oil would likely fill the void for Texas refineries if Keystone is not approved.
Supporters of the pipeline said the Green groups' report was comprised of "old, worn-out talking points" and that the anti-Keystone movement was just a strategy for "arousing passion."
"There is no question the American public is going to give more credibility to the Department of State, IHS CERA, and even prominent climate scientists, who have all said that Keystone XL will not significantly increase greenhouse gas emissions," said Katie Brown of Oil Sands Fact Check. (Reporting By Valerie Volcovici; Editing by Peter Galloway and Andre Grenon)