The Obama administration faces a test of its environmental credentials in deciding whether to approve a pipeline carrying greenhouse gas-intensive oil sands fuel from Canada into the US.

Hillary Clinton, secretary of state, is expected to decide as early as this month whether to approve the Alberta Clipper, a 1,000-mile pipeline designed to carry up to 800,000 barrels a day of fuel from Canada’s vast oil sands.

Environmentalists say doing so would be at odds with the green economy pledged by the administration.

“Approving new mega-projects like the Alberta Clipper pipeline would lock North America into the old, high-carbon energy economy,” said Keith Stewart, director of climate change at WWF-Canada. “We need to invest in the green economy of the future, not pour billions into the Betamax of the energy world.”

But Enbridge Energy, the Canadian pipeline builder, said the project would im­prove US energy security. The pipeline and associated facilities “will serve the national interest …enhancing the ability to deliver a secure and growing supply of Canadian crude oil, thereby supplementing the diminishing supplies of domestically produced crude oil,” the company said in its May application.

It is hard for the US to resist the 175bn barrels of oil sand reserves, given rising concerns over energy security. But the extraction of a barrel of crude from oil sands is estimated to generate as much as five times more greenhouse gas emissions as from a barrel of conventional crude.

Environmentalists have seized on a delay in granting the permit, which could have come in early July, as a sign it might be rejected. But the state department told the Financial Times it had not finished the review process.

Enbridge is confident it will obtain the permit this month, enabling it to build.

“We’re going to start construction at the end of this month,” the company said. “We believe we will have a successful outcome and look forward to completion by mid-2010. We’re not worried at all.”

Canadian environmentalists sent the state department a letter last week urging it to delay a decision until after a climate treaty emerges from the Copenhagen summit. “This decision carries significant implications regarding greenhouse gas pollution and global warming that cannot be duly considered in the absence of clear US climate change policy and an understanding of an international climate treaty,” it read.

The Dirty Oil Sands Network said: “Climate security and energy security must go hand in hand. The best way to achieve this is for the Obama administration to keep building a clean energy economy.”

Amy Myers Jaffee, energy expert at the James A. Baker III Institute for public policy, said the place to take a stand on oil sands would not be in permit issuance but in bilateral talks with Canada ahead of the Copenhagen summit.

“The Obama people have to think about the overall Canadian relationship,” she said.

The countries are already embroiled in a lumber dispute, one of the longest-running trade disputes in history, which is centred on Canadian subsidies.

“You have to make a choice here,” said Steven Kallick, director of the boreal conservation project for the Pew Charitable Trust, a prominent US advocacy group. “[Extracting from] oil sands is clearly inconsistent with limiting climate change.”

TransCanada received permission from the Bush administration in 2008 to build a similar pipeline to carry oil sands fuel from Alberta to Illinois and Oklahoma.

Before the economic downturn, analysts estimated that pipeline companies and refiners planned to invest more than $31bn (€22bn, £19bn) by 2015 to export, process and distribute oil sands products. Some of that investment has been delayed or suspended.

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