IG: State Department did not break rules when hiring consultant for Keystone report

The State Department’s inspector general cleared the department on Wednesday of allegations that it improperly hired an outside consultant with industry ties to evaluate the proposed Keystone XL oil pipeline.

The inspector general’s report said that the department’s process for selecting the contractor, a global firm called ERM, “substantially followed its prescribed guidance and at times was more rigorous than that guidance.”

The report said that the inspector general found two instances of “reasonable deviations from prescribed guidance,” but added that these “did not adversely affect the selection process.” It concluded that the department’s conflict-of-interest procedures were “effective,” though it faulted the department’s “partial disclosures” for contributing to “misperceptions” about the choice of ERM.

The State Department hired ERM to write the final environmental impact statement for the Keystone XL pipeline. That report, a key factor in the ultimate permit decision by President Obama and Secretary of State John F. Kerry, said that blocking the pipeline would not stop or slow down the development of Canadian oil sands. Environmental groups say the oil sands, whose exploitation emits more greenhouse gases than conventional oil development, undermine efforts to prevent or slow climate change.

Environmental groups have argued that ERM’s past work for a variety of oil and pipeline companies, including TransCanada, meant that the firm had conflicts of interest that discredited its environmental assessment of TransCanada’s Keystone XL project. But the State Department and many energy experts say that any environmental consulting firm able to undertake a report of the magnitude of the State Department environmental assessment would have worked for the industry at some point or another.

Map of the Keystone XL pipeline.

The inspector general’s report also said that the IG’s own office of investigations conducted a preliminary inquiry into allegations by environmental groups that ERM and the department concealed past work by the consulting firm and decided that “the matter did not warrant opening a criminal investigation.”

State Department spokesman Jen Psaki said “we welcome the findings” and added that the department will “continue to work to improve and strengthen the procedures for selecting third-party contractors and assessing potential conflicts of interest.”

Environmental groups criticized the report. The inspector general “was looking at a very narrow question of whether the process was followed,” said Erich Pica, president of Friends of the Earth. “It wasn’t looking at the overall question. The American people need to know whether there was a real or perceived conflict of interest.” He asserted that there was a “real conflict and no amount of process can disguise that from the American people.”

Michael Brune, executive director of the Sierra Club, said that “the Keystone XL tar sands pipeline fails President Obama’s climate test, and today’s inspector general report does nothing to change that.”

However, House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said the Obama administration is “guilty of foot-dragging” and called on Obama to make a decision.

An earlier State Department contractor for the Keystone environmental study also came under criticism for its previous work for oil and gas companies.

TransCanada spokesman Davis Sheremata said in an e-mail Wednesday that “this is the second time groups opposed to the project have gone to the well with conflict of interest allegations and, once again, they have proven to be false.”

Earlier on Wednesday, Kerry cut off questions about Keystone during an interview with The Washington Post and other news organizations.

“I have no comments at all on any aspects of Keystone,” Kerry said. “Really right now I’m doing my due diligence. And I want to do it in a complete tabula rasa approach.”

He added, “I just want to look at the arguments, I want to read all that’s been done. I haven’t done it yet, purposefully. I’ve stayed away from it, which is what I was supposed to do. And now I’m entering a very intensive evaluation.”

Also on Wednesday, before the inspector general report was released, the Natural Resources Defense Council issued a report complaining that the State Department had not given enough consideration to the effect the Keystone XL would have on local communities as well as the global climate. The NRDC said that State should have given greater emphasis to air and water pollution at the oil sands sites, cancer rates among indigenous First Nation groups in Canada, and pipeline spills.

Anne Gearan contributed to this report.

Steven Mufson covers the White House. Since joining The Post, he has covered economics, China, foreign policy and energy.
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