State Department Watchdog: No Conflict of Interest in Keystone Review

The finding is a blow to environmentalists battling the Keystone pipeline.

Pipe is stacked at the southern site of the Keystone XL pipeline on March 22, 2012 in Cushing, Oklahoma. U.S. President Barack Obama is pressing federal agencies to expedite the section of the Keystone XL pipeline between Oklahoma and the Gulf Coast.
National Journal
Ben Geman
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Ben Geman
Feb. 26, 2014, 1:18 p.m.

The State Department’s inspector general said Wednesday that the department followed internal guidelines in selecting the contractor that studied the proposed Keystone XL pipeline and that the process to gauge potential conflicts of interest was “effective.”

However, the report also finds that the “process for documenting the contractor-selection process, including the conflict-of-interest review, can be improved.”

The report follows allegations by environmentalists and anti-Keystone Democrats that the contractor who studied the pipeline, Environmental Resources Management, suffered from conflicts of interest in weighing the environmental footprint of TransCanada Corp.’s proposed pipeline.

However, the Office of the Inspector General report states: “In the case of concerns raised about ERM’s alleged lack of objectivity because current ERM staff had previously worked for TransCanada and other oil and pipeline companies, OIG found that the department’s conflict of interest review was effective and that the review’s conclusions were reasonable.”

It states that “a reasonable review was undertaken to independently evaluate ERM’s certification that it had no conflict of interest.”

The report follows a recent State Department analysis, conducted by ERM, finding that building Keystone would be unlikely to cause a surge in greenhouse-gas emissions, although alternative scenarios modeled showed a bigger climate footprint.

The OIG finding, combined with the environmental analysis released in late January, quickly buoyed pipeline supporters.

“With this development, the path should be clear for the State Department to issue an affirmative national interest determination based on the merit and importance of this much-needed energy infrastructure project for the nation,” said Sen. John Hoeven, a North Dakota Republican who is pressing the Obama administration to approve the controversial pipeline.

Environmental groups battling the proposed pipeline reacted critically to the findings, including one centered on ERM’s membership in the American Petroleum Institute, a powerful industry lobbying group that supports the pipeline.

The OIG says a State Department lawyer’s conclusion that this was not a “disqualifying” conflict of interest was a “reasonable conclusion.” That drew harsh words from the environmental group

“While allowing a member of the American Petroleum Institute to review a tar sands oil pipeline may technically be legal, it’s by no means responsible. Secretary [of State] Kerry and President Obama can let their climate legacies be tarred by this dirty process or they can do the right thing and reject the Keystone XL pipeline once and for all,” said Jason Kowalski,’s policy director.

While the report is a blow to anti-Keystone activists, it won’t end the intense political and lobbying battle over the pipeline that would bring oil from Alberta’s oil sands to Gulf Coast refineries.

The project remains under State Department review, and the department is taking comment from the public and other federal agencies on its final environmental review released in late January.

The State Department’s inspector general said Wednesday that the department followed internal guidelines in selecting the contractor that studied the proposed Keystone XL pipeline and that the process to gauge potential conflicts of interest was “effective.”

Keystone opponents on Wednesday launched fresh efforts to persuade the Obama administration to reject the project.

Democratic Sens. Barbara Boxer and Sheldon Whitehouse sent Kerry a letter Wednesday calling for an “immediate and comprehensive study on the human health impacts of tar sands and the proposed pipeline” before any final decision.

But an array of pipeline advocates said the inspector general report on the contracting process knocks aside any reason for the Obama administration to avoid approval.

“After more than five years, all the excuses not to build Keystone XL have been exhausted. The state of limbo needs to end,” said Cindy Schild of the American Petroleum Institute.

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