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TransCanada files new application to build controversial Keystone XL

TransCanada is taking another crack at winning a permit to build its Keystone XL oil pipeline after the Obama administration nixed an earlier iteration of it.

The Calgary-based company said Friday that it has filed a new application with the U.S. State Department for a segment of pipe between the Canada-U.S. border and Steele City, Neb.

"Our application for a Presidential Permit builds on more than three years of environmental review already conducted for Keystone XL," said CEO Russ Girling in a release.

"It was the most comprehensive process ever for a cross-border pipeline and that work should allow our cross-border permit to be processed expeditiously and a decision made once a new route in Nebraska is determined."

TransCanada expects to begin construction in early 2013, with oil flowing in late 2014 or early 2015.

The line would run from Hardisty, Alta., to Steele City, Neb. The NEB signed off on the Canadian portion of the line years ago.

The application will include a new route through Nebraska, which the state is also reviewing, that will skirt the ecologically sensitive Sand Hills region. Routes through Montana and South Dakota have already been reviewed.

Federal Natural Resources Minister Joe Oliver, speaking in Toronto, said the new route increases the likelihood the project will be approved.

"I've been cautiously optimistic, I'm a little less cautious now," Oliver said at a news conference Friday.

Though "pleased" to see the pipeline proposal progress, the government will continue to seek new markets for Canadian oil, with a particular eye on the Asia-Pacific region, he added.

"We want that to happen at the same time as we enrich and increase our bilateral relationship (with the U.S.)"

Keystone XL has become a major political flashpoint south of the border as President Barack Obama seeks re-election this fall.

There are environmental concerns about the oilsands crude the pipe would carry and the damage that could result from a spill. But supporters say the pipeline will create sorely needed jobs, reduce U.S. reliance on crude imports from unfriendly countries and spur the development of domestic oil sources in the Dakotas.

Earlier this year, the Obama administration rejected the original US$7.6-billion Alberta-to-Texas proposal in its entirety, not because of the pipeline's merits, but because of Republican manoeuvring to speed up the process.

Shortly thereafter, TransCanada announced plans to break the project into two parts, going ahead first with the most urgently needed leg from Cushing, Okla., to Texas refineries.

The storage hub at Cushing is brimming with crude supplies, which have depressed North American crude prices and eroded the profits of producers.

The Gulf Coast line should help drain some of that glut in early 2013. An Enbridge Inc. (TSX:ENB) project to reverse the flow of the Seaway pipeline between the Gulf and Cushing should be complete shortly.

Keystone XL is an extension to an existing line that delivers crude from Hardisty to Cushing and refineries in Illinois.

TransCanada has firm, long-term contracts to transport more than 500,000 barrels per day of Canadian crude and 65,000 barrels per day from U.S. fields. The line has an initial capacity of 830,000 barrels per day.

TransCanada shares fell 34 cents to $42.61 in morning trading on the Toronto Stock Exchange.

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