Keystone XL Contractor's Potential Conflicts Of Interest Not Mentioned In State Department Documents

WASHINGTON - State Department documents released to an environmental group are raising new questions about the hiring of a government contractor to evaluate environmental impacts of the proposed Keystone XL pipeline.

Environmental Resources Management has conflicts of interest that should have prevented it from winning the contract for the analysis of the controversial pipeline, which would carry oil from Canada's oil sands to the U.S. Gulf Coast, the Sierra Club has said. The group filed a Freedom of Information Act request with the State Department seeking documents that would show how Environmental Resources Management was chosen. Sierra Club provided some of the documents it received to The Huffington Post.

But the documents do not indicate that the State Department conducted its own investigation into the company's ties to pipeline operator TransCanada before approving it to produce the analysis. Environmental Resources Management's draft supplemental environmental analysis, released in March, recommended changes to the pipeline route, but declared the project would have "no significant impacts to most resources." The Obama administration's decision on the pipeline is expected sometime early next year.

Included in the documents Sierra Club obtained is a memo from a State Department staffer to Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs, that recommends Environmental Resources Management for the pipeline contract.

"ERM is the only candidate that has not worked for TransCanada or its subsidiaries of affiliates, nor has ERM been a third-party contractor on any reviews of TransCanada projects," the memo says. The documents include signed forms from ERM and TransCanada affirming that they had not previously worked together, as well as talking points for government staff to use answering press questions about potential conflicts of interest.

"The most alarming thing is the documents that aren't there," said Doug Hayes, a staff attorney at Sierra Club. "So far they've sent us a bunch of documents, and none of them demonstrate that State Department did any independent inquiry into ERM's conflict of interest."

If State Department officials had looked, they may have found reasons to reject ERM, Hayes said. After ERM's analysis was released , Mother Jones revealed that a key ERM staffer on the project had previously done work for TransCanada, and that two other contractors had done work for ANR Pipeline , a TransCanada subsidiary. Still other ERM employees had worked for companies that would benefit from the pipeline.

The biographies of those ERM staffers had been removed from materials the State Department released with the draft environmental impact statement. Mother Jones reported on the potential conflicts earlier this year after obtaining the version of the biographies before they were redacted by the State Department. Environmental groups seized on those connections, arguing that they should have prevented ERM from getting the contract. They also argued that ERM had not been transparent about this previous work for TransCanada in its disclosure form.

The State Department's Office of Inspector General is now looking into those allegations. The inspector general's report, delayed by the government shutdown, will not be ready until late-February 2014, spokesman Douglas Welty told The Huffington Post.

The department's first environmental analysis for the pipeline was conducted by Cardo Entrix, a company whose previous work for TransCanada prompted environmental groups to complain of conflicts of interest. That led to an investigation by the State Department's inspector general , which found no evidence that TransCanada had "improperly influenced" State's selection of the contractor and no actual conflict of interest in hiring Cardno Entrix. But the report dinged the department for failing to independently evaluate the contractor's claim that it had no conflicts and for "accepting them at face value."

Sierra Club's FOIA request sought records related to State's approval of ERM for the second study to see what, if anything, the department did differently in evaluating potential conflicts of interest for the new environmental study. "It looks like State Department did exactly what they did last time, which is take ERM and TransCanada's statements at face value and not do any independent evaluation," Hayes said.

In response to questions about the documents, a State Department official said the department doesn't believe there was a conflict of interest in selecting ERM.

"No Environmental Resources Management (ERM) employees working on the review have worked for TransCanada," said the official. "Our rigorous conflict of interest procedures are designed to ensure that no contractors or subcontractors have financial or other interests in the outcome of a project."

The Environmental Protection Agency and the Department of Interior both have submitted comments critical of ERM's study. The EPA said the study included "insufficient information" about several environmental concerns.

Another document released in response to the FOIA request is a State Department press guidance from of Aug. 3, 2012. It includes this paragraph as a suggested response to reporters' questions about whether ERM had worked with TransCanada before:

No, ERM has neither worked directly for TransCanada before, nor has it worked as a third-party contractor for a federal agency reviewing a TransCanada project. This is also true for subsidiaries of TransCanada.

The FOIA includes another version of the press guidance dated three days later. That document removes the line that says this "is also true for subsidiaries of TransCanada."

Ross Hammond, a senior campaigner at Friends of the Earth, said the removal of that line raises more questions about any potential relationships between ERM and TransCanada, and what the State Department knew about them. Hammond said the information that has come out about ties between the contractors and TransCanada should also raises questions about the Keystone report that ERM wrote.

"There's no reason that anyone should have any confidence -- particularly the president, who will be making the decision on this pipeline -- that what they put in this report is true," said Hammond.