Obama Administration May Put Off Keystone Pipeline Decision With New Environmental Impact Study

A State Department decision on whether to reroute a TransCanadian pipeline could end up killing the $7 billion project altogether, an energy industry source warned Wednesday.

The source told Fox News that the Obama administration is considering much more than a simple reroute of the Keystone XL project. Instead, 11th hour deliberations are weighing whether to order the State Department to conduct an all-new Environmental Impact Study, which could delay a final decision by two years, well beyond the next presidential election, if not end it altogether.

Under pressure from environmental groups to nix the pipeline from crossing the U.S., the State Department said Wednesday it is weighing all factors before approving the project, which environmentalists say would destroy ecologically sensitive areas.

A spokesman with the State Department, which has authority for approving the program because it crosses national boundaries, said that the process is being driven by an effort to get the best information, and the collective impact on the environment, jobs and national security.

The pipeline, which is hated by environmentalists, but loved by labor groups would carry 700,000 barrels per day from the province of Alberta to refineries in Texas. To do so would require it crossing six states.

But Nebraska lawmakers opposed to the plan are weighing legislation to force a move away from the Sand Hills region and Ogallala aquifer, a major source of drinking water and irrigation.

The State Department's current Environmental Impact Study found the project would pose only limited adverse environmental impacts, but the energy industry source said the department's inspector general has ordered a separate probe of the review process, centering on two questions.

One is whether a lobbyist hired by TransCanada, Paul Elliott, who was a campaign adviser to Hillary Rodham Clinton in 2008, represents a conflict of interest for the program. The other is whether a firm that was hired to conduct the original study was an inappropriate choice because it was tied to TransCanada.