Keystone Pipeline fate in U.S. in limbo but construction moves forward in Canada

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Rejected pipeline company looks to new markets in Asia

Developers say they're taking their business elsewhere

HARDISTY, Calgary – On an unusually warm February morning -- at least by the rugged standards of rural northern Alberta-- a dozen construction workers were bundled up welding together the steel framework for the huge oil containers that will mark the starting point for the Keystone XL pipeline.

But where the pipeline goes remains a question for Canadian and U.S. officials.

Progress on building the three 350,000-barrel containment vats -- each of which covers the size of a city block -- may have slowed a bit after President Obama's decision last month to block a permit allowing for the pipeline to cross into the United States, but that hasn't stopped the work here.

Nor has it quelled the optimism of leading officials in Alberta that the pipeline will be built -- if not to the United States, as planned and still wanted, then to somewhere else-- perhaps even west to access the insatiable demand of Asian markets.

"Our job is to build pipelines," TransCanada CEO Russ Girling told Fox News in an interview at his downtown Calgary office building.

Girling said it's only logical for a pipeline that starts in Alberta to go through the U.S. and end up next to the large refineries on the Gulf Coast.

"I'm confident that the Keystone XL pipeline is going to get built. The U.S. imports some 10 million barrels a day of oil. It only makes sense for them to get as much as they can from their friendly northern neighbor."

But what made sense to administration officials in Washington last month was the need for additional time to review the environmental impact of the project. A well-publicized effort by congressional Republicans to expedite the approval process failed when Obama, working with the State Department's recommendation, denied TransCanada's construction permit.

Ostensibly, the major sticking point in the Keystone XL plan is a re-route through Nebraska. TransCanada officials are waiting on state officials to identify that adjusted route before resubmitting their entire plan -- largely unchanged -- to the State Department. They hope it will receive expedited review but government officials haven't committed to a timetable.

What's unclear is whether environmental groups who have made shutting down tar sands oil production a priority will successfully convince the administration to again deny the permit. "I think there's this argument that says 'if we can stop this pipeline we can stop the development of the Canadian oil sands.' And that's just not realistic," Girling said.

The pipeline's proponents in Washington have made repeated reference to the expected economic benefits from the pipeline -- namely an estimated 20,000 jobs. It's an obvious point that's also noted by officials in Canada, but it's not the primary reason why they think the pipeline is in America's best interests.

"Besides the fact that Alberta and the United States have always been strong energy partners, we believe it's important to remember why," Alberta Premier Alison Redford told Fox News. "We think that has to do with energy security and economic development."

The national security dynamic has two prongs. First, generations of U.S. politicians have bemoaned the nation's dependence on foreign oil -- or at least oil that comes from OPEC nations that are primarily in the Middle East. Second, the emergence of China as an economic power --with growing energy needs -- suggests there's value in keeping oil close to United States and not shipped to Asia.

"We have always enjoyed and have a very close relationship with the United States," Redford said. "You know, a lot of Alberta's energy sector was built as a result of Americans coming to Alberta to invest in our energy industry. And that's something that's very important to us. But we're not going to be able to rely on the sentimentality of that. We'll go to where the markets are."

Last week Canadian Prime Minster Stephen Harper made a much publicized -- at least in Canada -- and successful trip to China where he met with that country's present and future leaders.

"We have abundant supplies of virtually every form of energy," Harper told Chinese businessmen in Guangzhou. "And you know we want to sell our energy to people who want to buy our energy. It's that simple."

The timing of Harper's visit and the apparent warming of relations between the two nations has raised concerns with some in Washington.

"I think it is a terrible mistake for our country," Sen. John Barrasso, R-Wyo., recently told Fox News. "So you have the prime minister of Canada in China saying America doesn't seem to want our oil, we will sell it to China. Those are good jobs here on the ground, almost 20,000 jobs here at home, direct jobs in constructing the pipeline, and it is energy security for our nation."

For all of the talk about blocking Middle Eastern oil, Canada has been the leading exporter of oil into the United States for many years. The proposed pipeline would bring in an additional 700,000 barrels per day from the Hardisty terminal and also allow for at least another 100,000 barrels from oil fields in Montana and western North Dakota.

TransCanada's most recent financial statement said the haggling in Washington has pushed back their target operational date to early 2015. Meanwhile, regulators in Canada are reviewing another pipeline starting in Alberta that will move west to deliver oil to Asia. Additional western pipelines are likely and could even possibly include the one now under construction in Hardisty.

"We're going to need a lot of facilities to move that crude oil to whatever market is going to exist," Girling said. "So I'm pretty confident that under any scenario we'll be using these (Keystone XL) facilities."