By Valerie Volcovici
WASHINGTON, Jan 31 (Reuters) - The U.S. Environmental Protection Agency's critical assessment of the proposed northern leg of the Keystone pipeline could have outsized influence on the final decision of whether to approve the project, experts familiar with the process said.
Friday's State Department report contained the EPA's evaluation that crude produced from Canada's oil sands, which the pipeline would carry, are 17 percent more greenhouse gas intensive than average oil used in the United States. The EPA also said oil sands imports would be 2-10 percent more greenhouse-gas intensive than imported oil from Mexico or Venezuela that would probably replace it.
The Departments of Defense, Commerce, Commerce, Energy, Justice, Transportation and Homeland Security are also evaluating the State Department's environmental assessment of the Keystone proposal. Of the eight agencies that have 90 days to weigh in, the EPA's evaluation is expected to be the most influential because of its expertise on the environment.
"The EPA has been very consistently critical. If the report does not make significant changes from the draft version released last March, the EPA would be in a position to be critical in its review," said Danielle Droitsch, Director of the Canada Project with the Natural Resources Defense Council, a green group.
"I don't think Obama would ignore the EPA being critical," she said.
The EPA has been in consultation with the State Department since the draft environmental impact statement was released in March, and some of the comments flagged by the agency have already been discussed, an official close to the process said.
"When we make comments on a draft, typically what happens is we go back and forth with the lead agency to work those comments through," said one official familiar with the process.
Last April, the EPA said the State Department should take a harder look at the climate and related impacts of the Canada-to-Texas pipeline. The agency said it was concerned about carbon emissions from the oil sands region of Alberta, which oil production is energy intensive.
The EPA last also flagged issues about the safety of transporting Canadian crude via pipeline following a high profile spill in a Michigan river in 2010.
The agency also urged the State Department to estimate the "social cost" of emissions from the pipeline, an attempt to assign dollars and cents to the potential damage to agriculture, human health and property from climate change.
"We will look to see the extent to which the comments we raised are addressed," the official told Reuters before the release of the State Department's latest massive review.
The various federal agencies are expected to cooperate. Still, the National Environmental Protection Act has a formal process to resolve any interagency conflict.
If the EPA has strong objections it could refer the matter to the White House Center for Environmental Quality (CEQ), President Barack Obama's internal environmental advisory group. But experts said there is little precedent for this.
Comments by the EPA can also be influential in the event that the lead agency's decision on the project is challenged.
"The EPA can have quite a bit of influence," said Lucinda Low Swartz, former deputy chief counsel to the CEQ who is now an environmental consultant. "The agency itself is given substantial deference by the courts."
However, there is little precedent for legal challenges to the Keystone decision, lawyers have said.
"Presidential permits have a long history, but have no statutory basis, few regulatory guidelines and only a handful of federal district court opinions that offer guidance on decision-making or review," Robert Hogfoss and Catherine Little, attorneys who specialized in pipeline issues for Hunton & Williams, said in a report.
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