In its final evaluation report submitted to Gov. Dave Heineman late Thursday, the Nebraska Department of Environmental Quality says spills would be localized and the new route avoids ecologically fragile areas.
"Construction and operation of the proposed Keystone XL pipeline, with the mitigation and commitments Keystone has identified ... could have minimal environmental impacts in Nebraska," the report said.
Heineman has up to 30 days to review the more than 2,000 page report.
"I appreciate the feedback that we have received from citizens, and the hard work of the Department of Environmental Quality in addressing this issue in a thoughtful and deliberate manner," he said in a release.
"I will now carefully review this report over the next several weeks."
Heineman's decision will be shared with the U.S. State Department, which has federal jurisdiction because the pipeline begins in Canada. The State Department recommendation will go to President Barack Obama, who rejected an earlier iteration of the pipeline about a year ago.
The report says the rerouted pipeline avoids the Sand Hills region, an ecologically sensitive area made up of grass-covered sand dunes. However, it would cross the Ogallala aquifer, a crucial drinking water source for the American heartland.
"Impacts on aquifers from a release should be localized and Keystone would be responsible for any cleanup," the report said, adding the reroute avoids "many areas of fragile soils in Northern Nebraska" and a shallow groundwater area.
The DEQ report also said the pipeline would bring $418.1 million in economic benefits.
TransCanada spokesman Grady Semmens said the company has not yet reviewed the report, which it said included extensive public import.
"We have made significant strides to work with Nebraskans to identify the safest route possible for this pipeline project and we look forward to hearing from Governor Heineman regarding this report," he said.
"Safety remains our top priority. We will maintain a Nebraska-based emergency preparedness program with a response team in place, ready to react should an incident occur. The safety of the entire pipeline is our responsibility for as long as it operates. It’s a responsibility we take very seriously."
In a release, Jane Kleeb of Bold Nebraska, a group campaigning against the pipeline, noted that Heineman had previously asked Obama to deny the pipeline permit because it crossed the Ogallala aquifer.
"We continue to stand with Governor Heineman and his valid concerns on the risks of this pipeline route to farmers and ranchers' livelihoods and to our water," she said.
"We look forward to the governor denying the route since it still crosses the aquifer, and since the risks to our state's economy and identity remain at the forefront of this fight."
Nebraska landowner Bob Allpress called the report a "farce."
"There is no physical break in the Sand Hills. The route is still through the Sand Hills and is still a threat to the aquifer," he said in the release.
"Our farm, established in 1886, is not in the report. It omits five potable water wells and three houses on our farm that the proposed pipeline will pass right by. The proposed pipeline route also plows right over a Bald Eagle's nest that also isn't in the report."
Keystone XL was originally designed to carry oilsands crude from Alberta to Texas refineries, but Calgary-based TransCanada (TSX:TRP) has since broken the project into two parts.
The Obama administration rejected the proposal in its entirety about a year ago, but invited TransCanada to apply again.
The $5.3-billion segment the State Department is currently reviewing would carry oilsands crude from Alberta to Steele City, Neb.
Construction is underway on the more urgently needed $2.3-billion southern leg, beginning in Cushing, Okla., and ending at the U.S. Gulf Coast.
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