State Dept. IG to review oil pipeline from Canada

AP News
Posted: Nov 07, 2011 8:05 PM
State Dept. IG to review oil pipeline from Canada

The State Department's inspector general will review the Obama administration's handling of a Canadian company's request to pipe oil from western Canada to Texas, following complaints from Democratic lawmakers about possible conflicts of interest in the review process.

Deputy Inspector General Harold W. Geisel said the special review will center on whether the State Department "and all other parties involved" in the project followed federal laws and regulations related to the $7 billion Keystone XL project. The 1,700-mile pipeline proposed by Calgary-based TransCanada would carry oil derived from tar sands in Alberta, Canada, to refineries in Houston and Port Arthur, Texas.

The pipeline would travel through Montana, South Dakota, Kansas, Nebraska and Oklahoma before reaching Texas. It would double the capacity of an existing pipeline that opened last year, carrying oil through North Dakota, South Dakota, Nebraska, Kansas, Missouri, Oklahoma and Illinois.

The review could delay the heavily-contested project, which has become a political trap for Obama, who risks angering environmental supporters if he approves the pipeline and could face criticism from labor and business for thwarting jobs if he rejects it. Some liberal donors also have threatened to cut off funds to Obama if he approves the pipeline.

Announcement of the review comes one day after thousands of protesters gathered in Lafayette Square across from the White House to oppose the Keystone XL plan. During Sunday's rally, the crowd linked hands to surround the White House, keeping up pressure on President Barack Obama as his administration decides whether to approve the pipeline project. The State Department has authority over the project because it crosses a U.S. border.

Sen. Bernie Sanders, I-Vt., said Monday that Obama should delay a decision on the pipeline request until the inspector general's investigation is finished. The administration has said for months that it expects to decide by the end of this year, although in recent days officials have hinted that timeline could slip.

"This is a critically important issue for our environment and the energy future of our country," Sanders said. "At a time when all credible scientific evidence and opinion indicate that we are losing the battle against global warming, it is imperative that we have objective environmental assessments of major carbon-dependent energy projects."

It was not known how long the inspector general's review would take, although a spokesman for the inspector general's office said Monday that a team has been assembled and has already begun work.

A spokesman for TransCanada said the company welcomes the review.

"At TransCanada, we conduct ourselves with integrity and in an open and transparent manner. We are certain that the conclusion of this review will reflect that," spokesman James Millar said.

Sanders and Rep. Steve Cohen, D-Tenn., requested the review, saying they were disturbed by media reports that a company that performed an environmental review on behalf of the State Department had listed pipeline developer TransCanada as a "major client." Two other senators and 10 other House members _ all Democrats _ also asked for the IG review.

In a letter last month, the lawmakers asked the inspector general to look at all contractual or financial relationships between the consultant, Houston-based Cardno Entrix, and TransCanada.

They also asked for a review of State Department emails involving a TransCanada lobbyist who had worked in Secretary of State Hillary Rodham Clinton's 2008 presidential campaign.

Houston-based Cardno Entrix worked on the environmental impact study for the pipeline and helped conduct a series of public hearings this month. The State Department has said the company was one of three consultants TransCanada recommended for the pipeline project, although U.S. officials made the final decision. The company was hired in December 2008 under the administration of President George W. Bush. The firm also worked on the original Keystone pipeline starting in 2006.

Jim Teitt, director of client services for Cardno Entrix, said Monday that the firm listed TransCanada as a client because of its work on the original Keystone project.

Clinton told The Associated Press last month that that she had no reason to believe there was a conflict of interest involving the TransCanada lobbyist, Paul Elliott.

Supporters say the Keystone XL pipeline could significantly reduce U.S. dependence on Middle Eastern oil, while opponents say it would bring "dirty oil" that requires huge amounts of energy to extract and could cause an ecological disaster in case of a spill.

Obama said last week that his administration will be guided by what's best for the American people and the economy as it reviews the pipeline project.

"We need to encourage domestic oil and natural gas production," Obama told a Nebraska TV station. "We need to make sure that we have energy security and aren't just relying on Middle East sources. But there's a way of doing that and still making sure that the health and safety of the American people and folks in Nebraska are protected, and that's how I'll be measuring these recommendations when they come to me."

Many pipeline opponents took Obama's comments as a sign that he will personally decide on the pipeline, rather than leave it to the State Department.

White House spokesman Jay Carney said Monday that the State Department is leading the Keystone review and will continue to do so, adding that the decision "is absolutely going to take into account the criteria that the president laid out" in the Nebraska interview, including the project's effect on jobs, public health and the environment.

"In the end, we fully expect that the decision or the resolution of this issue, the determination, will reflect the president's views," Carney said. "It is the Obama administration."

Cohen, who led the House effort for the IG review, called the allegations regarding Cardno Entrix and the TransCanada lobbyist "disconcerting," adding that the claims are serious enough to warrant a delay in the State Department's decision whether to approve or reject the pipeline. "Given the significant economic, environmental, and public health implications of the proposed Keystone XL pipeline, the American people deserve an accurate, unbiased review," he said.

Matthew Daly can be followed at