The State Department Inspector General is reviewing the department's handling of a proposed oil pipeline stretching from Canada to Texas that has spawned protests in two countries.

The move further signals that the State Department may be considering a delay about a final decision on a cross-border permit for the 1,700-mile pipeline, analysts said. The State Department must provide a permit for TransCanada's Keystone XL in order for it to get built, since the pipeline would cross international borders.

In a document dated Nov. 4 and circulated yesterday, Inspector General Harold Geisel said the investigation would help determine "to what extent the Department and all other parties involved complied with federal laws and regulations relating to the Keystone XL pipeline permit process."

The announcement came in response to a request from three senators and 11 House members questioning conflicts of interest in the Keystone XL review process, including the department's use of a former TransCanada client, Carndo Entrix, to help conduct an environmental review of the $7 billion project. There also have been allegations from environmental groups of close ties between former TransCanada lobbyists and the State Department.

"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," said Sen. Bernie Sanders (I-Vt.), one of the congressional lawmakers originally calling for a State Department review.

Prospects for delays

The announcement is the latest blow to TransCanada, a day after thousands of environmental activists formed a circle around the White House to protest Keystone's XL potential to raise greenhouse gas emissions and prompt oil spills in delicate areas, such as Nebraska's Sandhills region.

Supporters of the pipeline -- which would carry a form of crude that is more carbon-intensive to produce than traditional forms -- say it is a critical piece of weaning the United States off of Middle Eastern oil and creating thousands of jobs. They say the criticism has been overblown, considering State's conclusion in its final environmental impact statement that the project would have minimal impact on climate change and other environmental factors.

The State Department hinted last week it could delay a decision about the project until after January, and with the commencement of an investigation, many green groups said it would be premature for State to issue a final verdict on the project.

"This is significant because it possibly could lead to a revelation that the entire process needs to be thrown out," said Danielle Droitsch, a senior attorney at the Natural Resources Defense Council. "It would be laughable if State were to move forward now."

At the same time, one congressional official familiar with the process said there was nothing in the law forcing State to delay a decision on a permit while the inspector general conducts a review. Originally, State said it would make a decision by the end of the year, but Department spokeswoman Victoria Nuland called that schedule into doubt last week when she said "if thoroughness demands a little bit more time, nobody's slammed the door on that."

Nebraskans wait for governor's move

The timing of a decision on Keystone XL is critical, because there are shipping agreements in place that could be nullified if there is too long of a delay in the permitting process. That raises the prospect that oil developers in Canada would have to look to alternatives to move oil-sands crude out of Alberta, either by rail or through other proposed pipelines.

Yesterday, TransCanada spokesman Terry Cunha said his company welcomed an independent review, so that the latest claims by activists could be addressed.

"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," he said.

With the death of major climate legislation on Capitol Hill, Keystone XL has become the biggest environmental thorn in Obama's presidency. Kenneth Green, an analyst at the American Enterprise Institute, predicted the president would "kick the can" on the issue until after the election to avoid political push-back from both sides.

Meanwhile, state legislators in Nebraska continue to consider several bills in a special session to address concerns there about the pipeline's proposed path over the Ogallala Aquifer, a drinking-water reservoir. Gov. Dave Heineman (R) has not introduced his own bill in the special sessions, spurring some green groups to say that the Legislature is unlikely to call for a rerouting of the pipeline.

"I'm not going to take this seriously until the governor does something," said Jane Kleeb, executive director of Bold Nebraska and an opponent of the pipeline.