State Department Watchdog Finds No Problem With Oil Industry Contractor Writing Keystone XL Report

President Barack Obama arriving at the TransCanada Stillwater Pipe Yard in Cushing, Okla. TransCanada is the company vying for approval of its Keystone XL tar sands pipeline. CREDIT: AP PHOTO/PABLO MARTINEZ
President Barack Obama arriving at the TransCanada Stillwater Pipe Yard in Cushing, Okla. TransCanada is the company vying for approval of its Keystone XL tar sands pipeline. CREDIT: AP PHOTO/PABLO MARTINEZ

The State Department’s Inspector General on Wednesday released its long-awaited report on the Keystone XL pipeline and whether the contractor hired to write the Supplemental Draft Environmental Impact Statement had a conflict of interest.

This report is narrowly targeted at the internal process used to select contractor Environmental Resources Management (ERM) to write the report State will use to base its decision on the Keystone XL pipeline. ERM has worked for Chevron and Shell, two oil companies working to develop the tar sands in Alberta, Canada. Another contractor, EnSys Energy, has worked for ExxonMobil, BP, and Koch Industries. These large corporations are invested in the continued development of the Canadian tar sands oil deposits.

The Inspector General’s report was a chance to shed more light on how these companies were chosen to write Environmental Impact Statements about the pipeline and whether it would substantially increase carbon emissions. When that report came out last month finding essentially that the pipeline would not, opponents turned their eyes to the Inspector General’s report.

Now that it’s out, what does it say? The Inspector General (OIG) found that the State Department “substantially followed its prescribed guidance and at times was more rigorous than that guidance” during the selection process that resulted in ERM being picked. “Although in two instances the Department made reasonable deviations from its prescribed guidance, OIG found that these deviations did not adversely affect the selection process,” the report read.

The report goes on to explain how State reviewed all “conflict of interest materials” that ERM submitted.

The OIG found that even though ERM had done work for TransCanada in the past, none of the relevant staff had worked there while this work was done, and none of them had personal work histories working for TransCanada or on Keystone XL.


“For example, 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.”

The report did say that State could document its own internal processes better: “the Department did not document its internal substantive analyses of the specific organizational conflict of interest issues it reviewed prior to May 2013.” Because of this lack of documentation, the OIG had to rely primarily on employee interviews.

“Lack of such documentation also could lead to inconsistency in future applications of the process,” the report warned, and recommended four ways to improve information-sharing and documentation.

The OIG said that a redaction of some of ERM’s conflict of interest paperwork before that paperwork was made public is a reason for the “misperceptions that ERM had not provided all required information to the Department and that ERM and the Department were attempting to conceal conflicts of interest.”

“The inspector general was only asked to examine whether the State Department followed its own flawed process for selecting a third party contractor,” Rep. Raúl Grijalva (D-AZ) said.


“The fact that the answer is ‘yes’ doesn’t address any outstanding concerns about the integrity of ERM’s work, the State Department’s in-house ability to evaluate its quality, or whether the process itself needs to be reformed. This isn’t evidence that there’s no problem here — this is evidence of the problem.”

Earlier on Wednesday, Grijalva announced he was asking the General Accountability Office to look into the process State uses to select contractors free of conflict-of-interest.

Last year, Representative Henry Waxman (D-CA) and Senator Sheldon Whitehouse (D-RI) sent a letter to the State Department urging the agency to review the contribution the proposed Keystone XL pipeline would have on U.S. carbon emissions.

Regardless of the State Department’s conclusions about how it decided on a contractor to write the Environmental Impact Statement, approval or disapproval of the pipeline remains in the hands of President Obama.

He gets to decide if a pipeline that the oil industry wants built in order to ship some of the dirtiest oil on the planet to other countries while creating just 35 permanent jobs is in the nation’s best interest. Oh, and it will ship enough oil to emit 51 coal plants’ worth of carbon dioxide every year while creating piles of petcoke — which is even dirtier than coal.