Canada's Minister of Natural Resources Oliver poses for a portrait in Toronto
Canada's Minister of Natural Resources Joe Oliver poses for a portrait in Toronto December 2, 2011. Canada believes the United States will ultimately approve TransCanada's proposed Keystone XL TRP.TO pipeline, which Washington last month put on hold for more than a year, Oliver said on Friday. REUTERS

Buoyed by renewed pledges of customer support, TransCanada Corp said on Thursday it not only wants to proceed with its stalled Canada-to-Texas Keystone XL oil pipeline but to undertake a $600 million expansion and extension.

The company is betting its proposed expansion of the original $7 billion plan to carry Alberta oil sands crude to the Gulf Coast will hammer home Keystone's economic benefits to politicians and trump the environmental worries that have prompted a lengthy delay in its U.S. approval process.

TransCanada said shippers for Keystone XL, target of vocal protests by green groups and Hollywood celebrities for much of 2011, have backed a 19 percent increase in capacity as well as plans to build an extension to Houston-area refineries.

The move, which is subject to the delayed regulatory approval, would boost capacity for the oil sands crude to 830,000 barrels a day from 700,000.

It would also double the refining capacity on the Gulf Coast accessible by Keystone XL, the Calgary-based company said. It expanded the proposal after an open season in which customers made conditional shipping commitments.

The beefed-up proposal has no bearing on the U.S. State Department's deliberations on approving the project, TransCanada spokesman Terry Cunha said.

Last month, the State Department, after studying the project for more than three years, pushed off its decision well into 2013, past the U.S. presidential election next November.

There's still a process to be followed with the Department of State and getting approval, Cunha said. But what it does outline is we continue to get strong support from the shippers to build this project and deliver crude oil into the U.S. Gulf Coast.

The pipeline controversy is politically troublesome for President Barack Obama as it pits his supporters with strong green views against those seeking the energy security and jobs that the project's backers have touted.

Critics say Keystone XL would bring risks of oil spills to much of the central United States and foster more development of carbon-intensive tar sands production.

Republicans in the U.S. House of Representatives have tried to push Obama to fast-track an approval of the pipeline in exchange for supporting the extension of a payroll tax cut. Obama has said he would veto such a bill.

One reason for delaying the ruling was to study rerouting part of the line away from a massive underground water source in Nebraska, which was a big concern among lawmakers in the state. But TransCanada and the state hammered out an agreement on that just days after Washington slammed the brakes on the process.

At stake for the oil market is the promise of an end to a costly glut of oil supply at the Cushing, Oklahoma, storage hub, where surging supplies from Canada and the Bakken region of North Dakota have led to deep price discounts.

With Keystone XL delayed, other proposals have emerged to drain away supplies from Cushing, chief among them Enbridge Inc and Enterprise Products Partners' plan to reverse the flow direction of the Seaway pipeline between the Gulf Coast and Cushing with eventual throughput reaching 400,000 bpd.

TransCanada executives have discussed the possibility of moving forward with Keystone XL's Cushing-to-Gulf portion before the overall project wins a green light, but it is not known if that is possible with the State Department review going on.

I think those discussions are still ongoing, so nothing has been confirmed at this time, Cunha said.

Under its expansion proposal, TransCanada would build a 48-mile lateral line to Houston from the pipeline's terminus at Nederland, Texas. It could be in service by 2014, pending regulatory approval.