November 7, 2011 / 6:51 PM / 8 years ago

UPDATE 4-Inspector review may delay Canada-U.S. oil pipeline

* Opponents: green review had conflicts of interest
    * Lawmakers had asked Obama to delay decision on Keystone
    * Congress aide says review could lead to major delay

    By Timothy Gardner and Ayesha Rascoe
    WASHINGTON, Nov 7 (Reuters) - The U.S. State Department's
inspector general has opened a "special review" of the
department's handling of permitting for the Canada-to-Texas
Keystone XL oil sands pipeline, which could delay the final
decision on the line into 2012 or later.
    Howard Geisel, the State Department's inspector general,
said in a memo sent to Senator Bernie Sanders that the review
will determine to what extent the department and all other
parties involved complied with federal laws and regulations
relating to the permitting process on TransCanada Corp's proposed $7 billion Keystone XL pipeline.
    "The review will include interviews of appropriate
officials and an assessment of pertinent documents," said the
    Sanders, one of the Senate's most liberal members, and 13
Democratic lawmakers late last month asked President Barack
Obama in a letter to delay a decision on the pipeline until
State's inspector general investigated alleged conflicts of
interest over the project.
    The State Department has the power to issue the permit for
the line because it crosses the national border, but Obama said
last week he would have heavy influence on the final decision.
    The pipeline has been a headache for Obama ahead of next
year's election, and the inspector general's announcement came
a day after thousands of the pipeline's opponents formed a ring
around the White House in a protest.
    Environmentalists, who are part of Obama's voter base, say
oil sands petroleum releases large amounts of carbon dioxide
and the line could leak into a crucial central U.S. aquifer.
    On the other hand, the pipeline could create thousands of
temporary jobs, and a decision to approve the line could
support Obama's goal of boosting employment and diversifying
energy sources.
    The inspector general's office refused to estimate how long
the review would take. "We do appreciate the urgency of the
matter," said Doug Welty, public affairs officer for the
department's inspector general officer, who added that the
review is not an investigation.
    While the review does not halt the permitting process, the
department could decide to hold off on making a decision until
the inspector general's office is finished.
    The review, to be conducted at three or more State
Department offices, will look at the agency's environmental
review of the project issued in August and its ongoing
examination of whether the pipeline is in the national
    The State Department has said it hopes to decide by the end
of the year whether the project can go forward. But late last
month it opened the door to missing that target citing the need
for a thorough review.DECISION SEEN IN 2012 OR LATER
    Sanders and other opponents of the pipeline have 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 have also complained that Paul Elliott, a
lobbyist for TransCanada, is too close to the State Department,
a charge the agency has rejected. Elliott served as the
national deputy campaign manager for Secretary of State Hillary
Clinton during her 2008 run for president.
    Bill McKibben, an environmental writer who organizes
Keystone protests, said the special review will encourage
people across America to step up their fight against the oil
sands. "Since the State Department didn't even bother to study
the global warming question, the only real answer is to send
this back for a whole new review," he said.
    A Congressional aide familiar with the Keystone project
said the inspector's review could lead to major delays.
    "The chances of them making a decision before the end of
the year are pretty much impossible at this point," the aide
told Reuters. "The decision is definitely going to come in 2012
if not later."
    TransCanada's chief executive Russ Girling said this month
an extended delay would threaten the project because it could
lead oil shippers and refiners to abandon support for the line.
    On Monday, a TransCanada spokesman said the company would
develop a response once it gets a sense of what it is dealing
with. He also said the company was confident the review will
reflect TransCanada acted in a fair, open, and transparent
manner, and welcomed the chance for the latest claims against
the project to be refuted.
    The State Department's environmental assessments of the
Keystone are also being challenged by another lawmaker, whose
committee has oversight of such reviews. Barbara Boxer, the
chairman of the Senate Environment Committee, asked Secretary
of State Hillary Clinton on Friday to answer a series of
questions about the environmental assessment by Nov. 14,
probing whether the firm had a conflict of interest.
    Boxer asked whether the Keystone decision will be delayed
until the State Department knows the results of an independent
engineering evaluation of spill detection measures and valves.
    The State Department did not immediately respond to a
request for comments on that letter.
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