Despite the Obama administration's move yesterday to delay a ruling on the Keystone XL oil pipeline until an alternate path through Nebraska is vetted, Cornhusker State efforts to reroute the volatile $7 billion project are continuing apace.

Nebraska state legislators are set to begin debate next week on a bill that would give Gov. Dave Heineman (R) final power over the paths of pipelines, including the now-in-limbo XL project -- which takes a controversial turn through the sensitive soil of the state's Sandhills. While it remains unclear whether that proposal would reach a final vote during the special session that Heineman called this month to search for a solution or whether debate would wait until early 2012, the state's GOP senator yesterday urged Obama advisers to rule out the Sandhills route.

In a letter to Secretary of State Hillary Rodham Clinton, whose department announced the Keystone XL delay yesterday (E&ENews PM, Nov. 10), Sen. Mike Johanns (R-Neb.) warned that not disqualifying the route initially submitted by Alberta-based TransCanada Corp. would effectively confirm the perception -- widespread on both sides of the pipeline controversy -- that yesterday's delay was motivated by re-election concerns in the Obama camp.

"If the announcement is a sincere effort to identify a better route within my state, I applaud the decision," Johanns wrote, before expressing concern that the delay "may serve only to" prolong a ruling on the XL link until after the president faces voters next year.

"I would be very disappointed if, after investing substantial additional time -- the department's ultimate decision on TransCanada's permit application approves the current proposed Nebraska route."

TransCanada has yet to officially state its plans for the 1,700-mile pipeline, which would significantly expand U.S. import capacity for Canadian oil sands crude if approved by the administration, but its executives said last week that a new environmental review of Nebraska routes likely would kill the project (E&ENews PM, Nov. 1).

If Keystone XL falls by the wayside, a proposal by competing pipeline company Enbridge Energy Partners LP -- known as the Wrangler line -- could pick up some of its supply slack by creating a path to bring emissions-intensive oil sands fuel from Canada to refineries on the Gulf Coast.

But an analysis released today by oil research firm IHS CERA noted that even that project could face pricing pressures caused by lower per-barrel costs for conventional oil, sapping demand for Canadian crude.

"By 2015, without new pipeline solutions to bring oil sands barrels to markets outside the Midwest (such as the US Gulf Coast), oil sands production growth could stall for lack of new demand," IHS analyst Jackie Forrest wrote, adding that even if Enbridge can start its Wrangler line by 2014, "oil sands producers would face steeper price discounts for their crudes, a full year longer than a scenario where the decision on Keystone XL is not being postponed."

Click here to read Johanns' letter to Clinton.