Inspector General: Keystone Contractors in Conflict of Interest

The State Department's Office of the Inspector General (OIG) has finally weighed in – with caveats – on potential conflicts of interest in the environmental assessments of the proposed Keystone XL pipeline. 

The office just released its long-anticipated report, capping off an investigation on whether Environmental Resources Management, the contractor hired by TransCanada to conduct the environmental impact study, had too close a relationship with TransCanada, and whether it deliberately hid those ties in filings with the State Department. 

On first look, the inspector general report takes an extremely narrow view of the potential conflicts, but does declare that the department's procedures for dealing with conflicts of interest are weak and need to be improved. 

Specifically, from the OIG's findings:

  • OIG did find that the process for documenting the contractor selection process, including the conflict of interest review, can be improved.
  • OIG also found that the Department’s public disclosures concerning its conflict of interest review could be improved.

Finally, the Office of the Inspector General makes these specific recommendations:

  • OIG recommends that the Department’s Bureau of Oceans and International Environmental and Scientific Affairs, in coordination with the Office of the Legal Adviser, enhance its guidance to more fully articulate its selection and conflict of interest review processes.
  • OIG recommends that the Department explain in greater detail the definition of “organizational conflict of interest” relied upon by the Department.
  • OIG recommends that the Department specify in its guidance the documentation required in the contractor selection and conflict of interest processes and establish standard operating procedures to capture and retain this information.
  • OIG recommends that the Department enhance its guidance to integrate a process for public disclosure of appropriate information.


The State Department is charged with conducting an environmental impact assessment for any permitting decision, like the Keystone XL pipeline. This assessment is presented to the American public as an Environmental Impact Statement. TransCanada nominated a contractor, ERM Group, with a long history of rubber-stamping fossil fuel projectsRelated, ERM is a dues-paying member of the American Petroleum Institute (API)

In conflict of interest disclosure forms that ERM submitted to the State Department, the contractor claimed to have no ties to TransCanada – which was not, in fact, true. Public records revealed that ERM has worked recently with TransCanada on the Alaska Pipeline Project, and has contracts or recently worked with dozens of other oil companies with major stakes in the mining, transport, and refining of tar sands crude. 

According to the Checks and Balances Project, ERM lied at least twice in its filings with the State Department, which should have cast enough doubt on their competency and impartiality to conduct a thorough and unbiased review of the Keystone XL pipeline. 

Then, in May of 2013, the State Departments' Inspector General started an investigation into the seemingly clear conflicts of interest. 

In a Friday afternoon "trash dump" before the Super Bowl weekend, the State Department released the Final Supplemental Environmental Impact Statement, which was immediately criticized for being flawed and incomplete. The final environmental assessment was released before this inspector general's report, despite the pleas of two dozen lawmakers who called for a halt of the State Department's review until the conflict of interest issues were investigated.  

It was hoped by many in the environmental community that the report released today, which was repeatedly delayed, would expose the flawed State Department contracting process, call for a new study that could be free of bias, and call for an overhaul for the procedures that allowed this to take place in the first place. Instead, the narrowly-focused report merely calls out State for weak procedures  that "need to be improved."

Immediate reactions

From 350.org founder Bill McKibben: “The real scandal in Washington is how much is legal. This process has stunk start to finish. It’s good that its now in the hands of the Secretary Kerry and President Obama so there’s at least an outside chance of a decision not based on cronyism.” 

From 350.org Policy Director Jason Kowalski: “Far from exonerating the State Department of wrongdoing, the Inspector General report simply concludes that such dirty dealings are business as usual. 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 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.” 

350.org has announced an "XL Dissent" weekend of action in Washington DC this Saturday and Sunday, capped off by a rally at Secretary of State John Kerry's Washington residence and a march to the White House. Find more details about the actions at 350.org.

From Elijah Zarlin, CREDO's senior campaign manager and formerly a senior national email writer on President Obama's 2008 campaign: "Secretary of State John Kerry inherited this mess, and now it's time for him to bring it to a close by stating what is obvious -- that this pipeline is not in our national interest. If he doesn't, more than 78,000 Americas stand ready to risk arrest to stop the White House and the State Department from putting the oil industry’s interest before our national interest, and recommending approval of Keystone XL.”

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