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

Mon Nov 7, 2011 5:50pm EST
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By Timothy Gardner and Ayesha Rascoe

WASHINGTON (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 memo.

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.   Continued...