TransCanada to go ahead with part of controversial pipeline

— -- To capitalize on the boom in U.S. oil production, a Canadian company announced Monday that it will split a controversial pipeline rejected by President Obama and start building the Oklahoma-to-Texas portion.

Calgary-based TransCanada said the southern half of the $7 billion Keystone XL project will ensure that the glut of oil produced in the upper Midwest gets to Gulf Coast refineries. It said this portion, which won't need a presidential permit because it does not cross a U.S. border, will cost about $2.3 billion and be completed next year.

"Gulf Coast refineries can then access lower-cost domestic production and avoid paying a premium to foreign oil producers," Russ Girling, the company's chief executive officer said in the announcement.

The initial 1,700-mile pipeline, intended to carry a heavy crude known as tar sands from Alberta across seven U.S. states, has become a political issue. Citing rising gas prices and the need to create U.S. jobs, Republicans have criticized Obama for denying a permit last month and siding with environmentalists who say the crude's development would exacerbate climate change.

Obama said he denied a permit, because a GOP-imposed, 60-day deadline did not give him enough time to decide on the project given the uncertainty over its route through Nebraska. He suggested a route running south from Cushing, Okla., and welcomed TransCanada's news.

"Moving oil from the Midwest to the world-class, state-of-the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production," White House spokesman Jay Carney said Monday in a statement. He said Obama's Jan. 18 decision "in no way prejudged future applications" by TransCanada for the full project.

TransCanada said it will seek a permit for a pipeline from Alberta to Nebraska once it has worked out a route with Nebraska's legislators to avoid the state's ecologically sensitive Sandhills region.

Martin Tallett of the EnSys Energy consulting firm, said the southern pipeline could slightly lower gasoline prices by allowing more crude oil onto the international market.

Environmentalists disagree. Susan Casey-Lefkowitz of the Natural Resources Defense Council argues the pipeline — as a whole or as a half — will cause more tar sands to be converted to diesel and exported overseas.

TransCanada spokesman Shawn Howard said the southern pipeline will carry a light crude produced in North Dakota, Montana, Kansas, Oklahoma and Texas. He said it still needs permits from local and state officials, as well as the U.S. Army Corps of Engineers.