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Another delay for U.S. decision on Keystone

A decision on the controversial and much-delayed Keystone pipeline to the U.S. Gulf Coast could be pushed into 2014 as a U.S. watchdog examines whether contracts tied to the Keystone XL review process were wrongfully awarded and regulatory safeguards fully adopted.

Nathan VanderKlippe/The Globe and Mail

A decision on the controversial and much-delayed oil sands pipeline to the U.S. Gulf Coast could be pushed into 2014 as a U.S. watchdog examines whether contracts tied to the Keystone XL review process were wrongfully awarded and regulatory safeguards fully adopted.

The U.S. State Department's Office of Inspector General (OIG) is holding an inquiry into whether it was appropriate for the government to hire Environmental Resources Management, a private contractor selected to conduct an environmental review of TransCanada Corp.'s proposed pipeline.

Environmental groups have alleged ERM did not disclose its ties to TransCanada to the State Department. The OIG is investigating the allegations, as well as questioning whether the State Department adopted the watchdog's 2012 recommendations on how to avoid such conflicts of interest.

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"We hope to conclude our work and issue a report in January," said Douglas Welty, a spokesman for the internal watchdog.

TransCanada spokesman Grady Semmens said Friday the Calgary-based company did not know how the investigation might affect the timing of the State Department's Keystone review.

Environmentalists have become effective at stalling – although not necessarily blocking – Keystone XL, as they try to slow rapid development in the oil sands.

They joined forces with Nebraska in 2011, arguing the pipeline should be rerouted around the sensitive Sandhills region, prompting President Barack Obama to delay his decision on the multibillion-dollar project.

This delay bought more time for the opponents and forced oil sands producers to turn to other options, including rail, to move their products. New pipeline proposals, such as moving crude to Canada's East Coast in order to ship to markets such as Asia, have sprung up as Keystone XL's future remains unclear.

The State Department does not have to wait for the OIG's report in order to issue its decision on Keystone XL. Mr. Obama has previously said he will make a call in 2013.

The State Department, in an e-mail response to questions, did not address whether the timing of the OIG report will affect the timing of its decision.

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The OIG's review "will provide independent and impartial assessment of the Department's actions," said a State Department official, who asked not to be named.

"We continue to co-operate fully with OIG. The department is committed to a rigorous, transparent, and efficient federal review of the Keystone XL application."

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Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

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Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More

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