Canada's energy regulator said on Wednesday it is looking into a complaint that TransCanada Corp's permit to build the Keystone XL oil pipeline within its own borders has expired, adding the prospect of more delays to a project environmentalists hope to block.

The Communications, Energy and Paperworkers Union of Canada, which opposes the $7 billion oil pipeline to Texas from Alberta, contends TransCanada had not begun construction of the project by March 11, 2011, as spelled out in the permit the National Energy Board granted in March 2010.

Start-up of Keystone XL has been delayed by about a year by an extended review by the U.S. State Department amid a growing political debate in the United States on the pipeline's merits. The State Department is not expected to release its decision until the end of 2011.

The NEB has requested that TransCanada respond by October 14. The union - the largest for Canadian energy workers - will then have until October 21 to react.

Essentially the board is looking at it, asking for comments from TransCanada and CEP. Once they have that in front of them they will look at it and decide the next steps, board spokeswoman Tara O'Donovan said.

The CEP contends the pipeline, which would ship up to 700,000 barrels of oil sands-derived crude to Texas from Alberta, will prevent the creation of jobs that would come with building oil sands processing facilities within Canada.

It is also critical of the impact of tar sands development on the environment and aboriginal communities, its president, Dave Coles, said.

Coles questioned what it said is an assertion by TransCanada that it started construction by moving earth near the massive oil storage hub at Hardisty, Alberta.

It's tongue-in-cheek a bit, but they may have got a pickup truck and a shovel from a farmer and thrown a bit of dirt in the back, he said.

We've had our crew all over that right-of-way. We've got satellite photos. Just taking a backhoe and loading up a dump truck is not construction. It doesn't meet the test. Nobody will accept that.

TransCanada disagreed with the CEP's claims, arguing that it began constructing foundations for three oil storage tanks at Hardisty in September 2010, and is burrowing under two Alberta rivers in preparation for the pipe.

We have kept the NEB apprised of the construction schedule for the Keystone XL project on an ongoing basis since construction began last year, spokesman Terry Cunha said in an email. At no point has the NEB expressed any concern about the failure of TransCanada to start construction of the Keystone XL project.

Environmental groups and an broad assortment of celebrities have lined up against Keystone XL, which TransCanada says would improve U.S. energy security and create jobs during a time of economic malaise.

Opponents argue that the pipeline would put a major central U.S. aquifer at risk of oil spills and foster more production of carbon-intensive oil sands-derived crude. TransCanada says it would be one of the safest and most advanced pipelines on the continent.

More than 1,200 people were arrested in protests against the project at the White House in August and September and another 100 were taken into custody in Ottawa on Monday.

Coles was the first to be arrested in that protest.

In the United States, a series of public meetings at locations along the proposed route started this week.

They have violated the terms of their permit, Coles said. This stuff is all up in the air and needs to be re-looked at. A lot of things have changed since that permit was issued.

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