U.S. review on Keystone pipeline permitting out soon

WASHINGTON Thu Jan 12, 2012 7:11pm EST

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WASHINGTON (Reuters) - A U.S. "special review" of the State Department's handling of permitting for the Canada-to-Texas Keystone XL oil pipeline is nearly complete and will likely be released in coming weeks, a federal government source said on Thursday.

The timing could mean the results of the review by the State Department's internal watchdog are made public before President Barack Obama is slated to decide whether to allow a permit for the $7 billion project, or rule it not in the national interest.

"They've completed their initial work and hope to have a final report out soon," the source said, indicating the goal is for the review to be out in weeks, rather than months.

When Harold Geisel, the State Department's deputy inspector general, launched the review in November, he refused to put a timing on the release of it. The review was requested by members of Congress.

Senator Bernie Sanders, an independent and one of the Senate's most liberal members, and 13 Democratic lawmakers had asked President Barack Obama to delay a decision on the pipeline until the inspector general investigated alleged conflicts of interest over TransCanada Corp's project.

Sanders and other opponents of the line, which would carry 700,000 barrels per day or more of petroleum from Canada's oil sands, had expressed concern that Cardno Entrix, a company the State Department hired to conduct environmental impact statements on the pipeline, had financial ties to TransCanada.

Environmentalists also complained that Paul Elliott, a lobbyist for TransCanada, was too close to the State Department, a charge the agency has rejected.

TransCanada has said it has never had a direct relationship with Cardno and that Elliott never did anything illegal.

Cardno Entrix has said the State Department had forbidden anyone on the company from commenting on the issue.

The source said the special review should not take much longer because it was "very specific in scope" and not open-ended unlike other reports the office undertakes.

After the lawmakers asked for the review, Obama delayed a decision on the line until after the election in November.

Since then, Congressional supporters of the line included language in the payroll tax extension law that forces Obama by February 21 to allow the pipeline to be built, or to determine the project is not in the country's interest.

The source said the inspector general's special review would first be sent to the State Department. A day later it would go the lawmakers who asked for it, and a day after that to the public.

(Reporting By Timothy Gardner; Editing by Bob Burgdorfer)

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