State Department IG won’t release Keystone XL report on a contractor Friday

The State Department's Inspector General will not release the findings of its inquiry into a contractor working on the Keystone XL pipeline Friday even as the agency will release its Final Environmental Impact Statement on the project shortly, according to the IG office.

The State IG announced in August that it would not release its report on whether it posed a conflict of interest that ERM Group Inc., which is the primary contractor for the supplemental impact statement, has financial ties to TransCanada Corp., the company seeking to build the pipeline. The environmental group Friends of the Earth had charged this relationship throws into question whether the agency can provide an impartial assessment of the project.

State Department IG spokesman Doug Welty said Friday his office's report is “absolutely is not coming out today.”

Some individuals familiar with both the IG investigation and the environmental impact statement asked not to be identified because neither have been made public yet. The impact statement, which will examine issues such as whether the project will contribute to the globe's overall greenhouse gas emissions, is a critical step in the administration's decision-making process for the pipeline. But it does not represent the final decision, which will come some months later and will include other factors, including the project's impact on the U.S. economy, foreign policy and energy security.

The State Department will release the environmental impact statement as soon as Friday, individuals said, and reaches largely similar conclusions as the draft assessment. That report concluded that approval of the project would not dramatically alter the course of oil extraction in Canada's oil sands.

"The EIS is in the final stages of preparation, and we anticipate a release of the document soon," said a State Department official Thursday night who asked not to be identified because the assessment was not yet public. "As a reminder when it is released, EIS is not a decision, but another step in the process prescribed by the Executive Order."

Environmentalists are already criticizing the agency's environmental assessment, although groups outside the administration have not yet been briefed on the report.

“The question going into the State Department’s final environmental impact statement is this: Who will State listen to? Will State reverse course after listening to the Environmental Protection Agency experts who criticized the first draft as 'inadequate' and the second draft as ‘insufficient’ on climate impacts, oil spill risks, and threats to water resources?" said Jim Murphy, the National Wildlife Federation's senior counsel, in a statement Friday. "What about Canada's own government or the oil industry, which has repeatedly said Keystone XL is needed to realize tar sands growth plans that Canada projects will cause its own carbon emissions to soar 38% by 2030? Or will State stand by the oil industry consultants it hired to write that first draft currently being investigated for conflicts of interest?”

TransCanada, the company behind Keystone XL, just began transporting heavy crude through the southern leg of the Keystone XL pipeline. But it is still waiting for the State Department to decide whether to issue a permit for the 1,179-mile northern leg that would carry predominantly heavy oil from Canada’s oil sands, cross the border in Montana and run to the small town of Steele City, Neb.

 Steven Mufson contributed to this report.