UPDATE 2-State Department acted properly on Keystone -U.S. report

Wed Feb 26, 2014 7:56pm EST
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By Timothy Gardner

WASHINGTON Feb 26 (Reuters) - The State Department acted properly in its choice of an outside contractor to review the Keystone XL oil pipeline, a U.S. report said on Wednesday, raising calls by the project's supporters for President Barack Obama to approve it.

The State Department inspector general's report cleared the State Department of accusations by environmentalists there was undue influence by the pipeline's developer on a draft federal environmental review of the contentious project.

TransCanada Corp had recommended four companies to the State Department to do an environmental review, including Environmental Resources Management, Inc, or ERM, but did not tell the department it had previously worked with the company.

Under U.S. law, major industrial projects like Keystone, which would carry 800,000 barrels a day of crude oil from Canada to the U.S. Gulf, must undergo an environmental review.

The process the State Department used to select ERM to help prepare the report on Keystone "substantially followed" guidance, the inspector general said in a long-awaited report.

At times, the State Department was more rigorous than it needed to be, the report added.

Republican lawmakers said the report should clear the way for approval, which they have been urging for five years.   Continued...