Pipeline Project Comes Under Further Scrutiny

WSJ.com 11/8/11

A federal auditor said Monday it would review the State Department's handling of a disputed Canada-U.S. oil pipeline, ratcheting up scrutiny of the project less than two months before the department is due to issue a verdict on it.

The battle over the pipeline has become increasingly contentious, with growing opposition from environmentalists, who say it could pollute water supplies. Protesters formed a human chain around the White House Sunday, calling on President Barack Obama to block construction.

If approved, the Keystone XL pipeline would stretch from Canada to Texas, transporting up to 500,000 barrels of oil a day. Proponents say the pipeline would create thousands of jobs and boost U.S. energy security.

Officials at the State Department, which has jurisdiction because the pipeline crosses national boundaries, have said they hope to decide on approval of the project by year's end, but are willing to let the decision slip into next year if necessary. A spokesman for the department's inspector general's office, which is conducting the review, said the review would be expedited.

The issue presents a dilemma for Mr. Obama, who wants to rally his base among environmentalists while rebutting Republican charges that his policies are blocking job creation.

In a Nov. 4 memo, released Monday, the State inspector general said it was looking in particular at the department's handling of an environmental analysis. The review was requested by 14 members of Congress, all Democrats except Sen. Bernie Sanders of Vermont, an independent who caucuses with Democrats. They cited concerns over State's choice of a company that had worked on other Trans-Canada projects to review the pipeline's environmental impact.

State declined to comment, but has denied claims of bias toward TransCanada's proposal. In an Oct. 31 letter to Mr. Sanders, it said that it was "committed to a thorough and transparent" process.

TransCanada's Terry Cunha said: "We conduct ourselves with integrity and in an open and transparent manner. We are certain that the conclusion of this review will reflect that."