Calgary-based TransCanada Corp. said Thursday it has received enough support from its customers to go ahead with an 80-kilometre extension to its delayed Keystone XL oil pipeline.

The firm said the Houston Lateral would increase the capacity of the pipeline — which has at least a year to go before U.S. regulators decide whether or not to approve the pipeline — to 830,000 barrels per day.

Instead of ending in Port Arthur, Texas, the pipeline will now reach into the Houston market as well. That will more than double the U.S. Gulf Coast refining market capacity the pipeline can access if it's approved.

"This significant demand and additional long-term customer commitments confirm the continued strong shipper support of TransCanada and the need for Keystone XL to move forward," said TransCanada CEO Russ Girling.

"Proceeding with the extension of the Keystone XL system to Houston and increasing capacity on the pipeline system will further enhance the connection of a secure, growing and reliable supply of Canadian crude oil and domestic U.S. crude oil with the largest refining market in North America, while providing additional flexibility to our shippers."

The Houston Lateral is within the original scope of the regulatory process that's currently underway, TransCanada said.

The U.S. State Department was originally set to announce its final decision by year-end, but in November decided more time was needed to weigh a new route for the pipeline to take through Nebraska, in order to avoid environmentally sensitive areas.

The department now expects to make its decision in early 2013. Based on that, TransCanada expects Keystone XL, including the Houston Lateral, to be in service by the end of 2014.

Study supports new pipelines

TransCanada's announcement came the same day as a study by the University of Calgary suggested building oil pipelines to new markets would boost Canadian economic growth by $131 billion between 2016 and 2030.

The analysis by the university’s School of Public Policy tried to calculate what prices companies would get if pipelines existed to maximize the output from the oilsands in northern Alberta.

The study came amid a fierce debate not only over Keystone XL but also a proposal by Enbridge, also of Calgary, to build the Northern Gateway line, to run from the oilsands to the B.C. coast.

Gateway would carry oil to tankers for export to the U.S. and Asia.

Environmental organizations and some First Nations groups oppose Gateway because of the potential for pipeline leaks and tanker spills.

The study suggested the new pipelines would provide over $27 billion in federal, provincial and municipal tax revenue, and create 649,000 person-years of employment.

It said Alberta would be the biggest beneficiary, but that "most every single province and territory will realize fiscal and economic gains."

"The rewards of additional pipelines for all of Canada are too great to ignore," said co-author Michal Moore in a release. "Pipelines must be a national priority."


The Northern Gateway pipeline would carry oil to tankers for export to the U.S. and Asia. (Enbridge)

With files from The Canadian Press