Developers of a proposed oil pipeline may have overlooked the possibility that it could pollute Lake Ashtabula and the Sheyenne River, which the city of Fargo uses for drinking water, an engineer says.

Instead, TransCanada Corp. planners decided to route part of the Keystone pipeline near the lake and river to avoid going through wetlands, said Barton Schultz, a project manager for Houston Engineering Inc.

"I don't want to minimize what TransCanada has done. They spent over two years and collected a lot of information … to pick this route," Schultz said. "My only point here is that it appears that the value that Lake Ashtabula has to the city of Fargo as a drinking water source was not fully understood."

Schultz spoke Tuesday at a state Public Service Commission hearing about the proposed location of the Keystone pipeline, which its developers want to build through eight eastern North Dakota counties. It would carry more than 400,000 barrels of crude oil daily from Alberta to locations in Illinois and Oklahoma.

The commission had set a Dec. 12 deadline for deciding the pipeline's route, but commissioners said Tuesday they would not be able to meet it.

Mark Deutschman, a Houston Engineering vice president, said a 91-mile stretch of pipeline near the lake and river was at risk of failing once every 43 years.

The specter of lake pollution could be lessened if the pipeline were moved, or if more cutoff valves were installed along the stretch, Deutschman said. Deutschman and Schultz work in Houston Engineering's offices in Maple Grove, Minn.

An expert hired by Keystone, Heidi Tillquist, has testified that an oil leak from that section of pipeline would need to occur within a specific length to cause a spill into Lake Ashtabula. The section is less than three miles long.

Witnesses for Keystone are scheduled to speak Wednesday as the hearing wraps up. Jeff Rauh, a project spokesman, said Tuesday's testimony only affirmed the minuscule likelihood of environmental harm.

"We've heard Fargo's case, and we understand that no matter how you slice it, the risk of a problem with this pipeline is very, very low," Rauh said.

Bruce Grubb, the city of Fargo's enterprise director, said in separate testimony Tuesday that despite the city's worries about the location of a proposed oil pipeline, officials have not complained about other pipelines that could pollute Fargo's water.

Under questioning from Thomas Kelsch, a TransCanada attorney, Grubb said the city has not objected to a fuel pipeline that already runs beneath Lake Ashtabula, or to another pipeline near the Red River that supplies gasoline to Fargo and Grand Forks.

Grubb said he was not aware of the Cenex pipeline beneath the lake until recently, and said he did not know of any pollution problems it may have caused.

"Certainly from Fargo's perspective, from a water utility perspective, our preference would be to not increase the level of risk any more than we have today," Grubb said.

At points along its proposed route, the Keystone pipeline approaches the Sheyenne River and Lake Ashtabula, which Fargo uses as a backup water supply. The route goes beneath the Sheyenne near Fort Ransom, in North Dakota's southeastern corner.

Fargo officials worry a leak could cause crude oil to spill into the lake or the Sheyenne. The Red River is Fargo's principal source of water, but the city occasionally draws water directly from the Sheyenne.

Fargo did not make its reservations known until after the PSC held public hearings on the project in Park River, Valley City and Bismarck in July and September. The commission then decided to reopen the proceedings to allow Fargo time to hire experts to examine the project.

Houston Engineering consultants have since looked at the pipeline's plans. The city also hired a Denver law firm to help it challenge the route.

The Public Service Commission already has decided the pipeline is in the public interest, but the commissioners are still mulling exactly where it should be located.

As the two-day hearing began Tuesday, the commission rejected a request from the Dakota Resource Council, a Dickinson-based environmental group, to delay its start.

The PSC also refused a request from Richard Starke, who lives in Burlington but has property along the pipeline's route, to formally intervene in the case.

Starke has peppered the commission with vituperative e-mail messages about the Keystone pipeline, and once suggested it could be blown up with the proper mix of fertilizer and diesel fuel. The threat prompted an investigation by the state Highway Patrol and the FBI.