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Protesters against the construction of the Keystone XL pipeline demonstrate in San Francisco before the arrival of U.S. President Barack Obama. Justin Sullivan/Getty Images

Justin Sullivan/Getty Images

TransCanada Corp. faces new hurdles in its marathon race for approval of the $7-billion Keystone XL pipeline, including a congressional demand for an investigation into the U.S. state department's permitting process.

The Calgary-based pipeline giant is hoping to get the final nod from the Obama administration by the end of next month, but opponents continue to throw up obstacles both in Washington and in Nebraska, where the pipeline would cross environmentally sensitive terrain.

In a letter to U.S. President Barack Obama released Wednesday, Senator Bernard Sanders urged that no decision on the pipeline be made until an independent investigation into conflict of interest allegations can be completed by the state department's Office of the Inspector General.

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Saying there are "many serious concerns" about the process, the Vermont Democrat wrote that it is "critical that the American people have confidence that all the facts have been represented in an objective and unbiased manner," and that the state department fully "complied with the letter and spirit" of the law.

TransCanada dismissed the concerns, saying the senator – and his 12 congressional co-signers – was merely recycling old and false allegations.

"This letter, along with many others, is part of a co-ordinated effort to stall a decision on whether or not the Keystone XL pipeline should receive a presidential permit to begin construction of this vital piece of North American energy infrastructure," company spokesman Shawn Howard said in a statement.

"The real issue is does this proposed pipeline meet U.S. regulatory standards to be constructed and operated to deliver oil."

The Keystone XL pipeline is crucial for TransCanada and the Canadian energy industry, providing an export conduit for Alberta's oil sands. The pipeline is slated to transport some 700,000 barrels a day of oil sands bitumen to refineries on the U.S. Gulf Coast.

In Nebraska, meanwhile, a new legal brief suggests the legislature has the legal authority to redirect the route Keystone XL would take through the state.

Such "siting legislation" is the subject of a special session called by Governor Dave Heineman for Nov. 1. If enacted, the law would pose a significant obstacle to TransCanada's ambitions to rapidly construct the pipeline. One prominent Nebraska politician has suggested that siting rules could not be legally enacted.

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But on Wednesday, David Domina, a prominent Nebraska trial attorney, released a legal opinion, suggesting the state has the legal authority to create such rules and could influence Keystone XL provided it can pass a bill by year's end.

"Nebraska has the legal power to regulate its land use and thereby control the routes for oil pipelines across the state," concluded Mr. Domina, who did the work for Bold Nebraska, a group that has become one of the leading state critics of Keystone XL.

He suggests the state force TransCanada to re-route the pipe to prevent it from crossing the ecologically sensitive Sand Hills area, but the company has rejected that option because it would require seeking new environmental approvals that could delay the project by two to three years.

In Washington, Mr. Sanders complained to the state department's Office of the Inspector General, noting that the department allowed TransCanada to screen consultants who would conduct an environmental impact assessment into the project.

Environmental groups released documents obtained under the Freedom of Information Act that revealed TransCanada played a role in selecting Houston-based Cardno Entrix to do the screening, and that the consultant has done work for TransCanada.

The members of Congress also asked the inspector general to investigate allegations of inappropriate communications between TransCanada lobbyist Paul Elliott and state department officials, based on e-mails released under freedom of information laws.

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A spokesman for the Office of Inspector General confirmed receipt of the request for an investigation. "It is currently under review and appropriate action will be taken," Doug Welty said in an e-mail. A state department official has denied that there was any conflict of interest or breaking of the rules when it hired Cardno Entrix to managing the environmental assessment.

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About the Authors
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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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