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Demonstrators march with a replica of a pipeline during a protest against the Keystone XL pipeline Sunday outside the White House in Washington.

Evan Vucci/AP/Evan Vucci/AP

The U.S. government has opened a review of Keystone XL's approval process, adding to the series of obstacles facing the controversial pipeline project barely a month before TransCanada Corp. hopes to gain clearance.

The $7-billion Keystone XL project is planned to carry vast volumes of oil sands crude from Alberta to the U.S. Gulf Coast.

The project's U.S. government approval was once seen as a near-certainty by industry and political leaders alike, but is beginning to come into question amid a multipronged attack on the pipeline. At the very least, the timeline for an approval decision is now increasingly in doubt, amid a barrage of legal and legislative roadblocks, and signals from the State Department that it might miss its December deadline.

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The U.S. State Department's Inspector-General on Monday launched a conflict-of-interest review of the pipeline's permitting process to examine "the Department of State's handling of the Environmental Impact Statement and National Interest Determination for TransCanada Corp.'s proposed Keystone XL permit process."

The Inspector-General review comes after a request by several powerful U.S. senators, who questioned the impartiality of Cardno Entrix, the consultant hired to conduct the Keystone XL permitting process. Cardno Entrix has listed TransCanada as one of its major clients, raising conflict-of-interest concerns.

Proponents of the project say the review is largely a formality, and unlikely to delay the State Department's decision.

But in a statement, Senator Bernie Sanders urged President Barack Obama "to defer any decision on the pipeline" until the investigation has completed. It's not clear how long that will take.

The announcement of the review came after a weekend of protests that saw several thousand Keystone XL opponents, including several Hollywood actors, form a human chain around the White House. Much of the national opposition is rooted in a desire to "draw a line in the sand" on expansion of new oil production – especially in the oil sands, which critics see as dangerous to the climate.

In a statement, TransCanada spokesman James Millar welcomed the Inspector-General's review "so that these latest claims by professional activists and lawmakers who are adamantly opposed to our pipeline project can be addressed."

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

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But local concerns are also emerging as a potential threat. On Monday, legislators in Nebraska began committee deliberation of a new bill, one of five proposed to give the state authority over the location of major crude oil pipelines.

That legislation is being heard after Dave Heineman, the state's Governor, sought a special session to see whether Nebraska can legally and practically redirect Keystone XL. The state has become a hotbed of opposition to a project that, in its current form, will cross the Sand Hills, an iconic and ecologically sensitive region.

For TransCanada, moving the route would mean needing to restart much of the environmental permitting work that has already dragged on for 39 months.

Legislation proposed by State Senator Annette Dubas would provide the Nebraska Public Service Commission the authority to examine "aesthetics" and other considerations in determining whether a pipe should be allowed to travel over certain ground.

Such a bill would provide Nebraska a chance to protect "the uniqueness of our state," she said Monday.

She was, however, questioned on how such a bill would function, since it would not be allowed to deal with issues of safety that fall under federal jurisdiction.

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"You can't do siting based on a potential leak – so that means we have to forget about what's in this pipeline ... whether it's water, gas, peanut butter and jelly, or oil," said State Senator Chris Langemeier, who chairs the natural resources committee that is examining the bill.

So, he added, "what would be a justification to say a blank pipe with nothing in it cannot be within 1,000 feet of a house – because we don't want to look at it or it might disrupt your comfort in putting a pipeline in the ground?"

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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