Keystone pipeline project has Montana approval, governor says

(Reuters) - Montana has given final approval to the controversial Canada-to-Texas Keystone XL oil pipeline, even though the project still faces obstacles with the federal government and Nebraska, the governor said on Thursday.

Governor Brian Schweitzer told Reuters that an important component of the project for Montana is an "on-ramp" to feed oil from his state into the proposed pipeline.

"This country needs conflict-free oil," he said in a phone interview. "Montana's National Guard is in Afghanistan and they've been in Iraq, and I promise you that we'll never send the National Guard to protect the pipeline in Alberta."

The proposed Keystone XL pipeline would stretch from the Canadian border through Montana, South Dakota, Nebraska and link up with an existing pipeline in Kansas. Another leg would extend from Cushing, Oklahoma, to the Gulf Coast in Texas.

The approval from Montana's Democratic governor comes as TransCanada Corp's $7 billion plan to carry Alberta oil sands crude to U.S. Gulf Coast refineries faces opposition from officials in Nebraska.

Republicans in the U.S. House of Representatives have sought to pressure President Barack Obama to fast-track an approval of the pipeline, which is seen as a jobs-generator, in exchange for supporting an extension of a payroll tax cut.

Schweitzer had expressed support for the project before he announced it was receiving final approval from his office.

The U.S. State Department, which has jurisdiction over the project since it crosses the border with Canada, last month pushed off its decision on the project into 2013.

That came after Obama faced boisterous protests from environmentalists opposed to the pipeline.

Schweitzer blamed delays for the project on Nebraska, where last month the governor approved a measure passed by lawmakers to reroute the pipeline away from the ecologically sensitive Sandhill region and Ogallala Aquifer.

Aside from Montana and Nebraska, the project had already won regulatory approval in the other U.S. states where it would run, said Shawn Howard, a spokesman for TransCanada. Those states are South Dakota, Kansas, Oklahoma and Texas.

TransCanada is working with Nebraska on a new route for the proposed pipeline, Howard said.

"We'll make sure this process is right. We've had enough surprises with this pipeline project, I don't think we want any more," he said.

(Reporting by Alex Dobuzinskis: Editing by Peter Bohan)

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