The State Department assigned an important environmental impact study of the proposed Keystone XL pipeline to a company with financial ties to the pipeline operator, flouting the intent of a federal law meant to ensure an impartial environmental analysis of major projects.
Russ Girling, TransCanada’s chief executive, in Washington on Friday. The pipeline would run from northern Alberta to Texas.
The department allowed TransCanada, the company seeking permission to build the 1,700-mile pipeline from the oil sands of northern Alberta to the Gulf Coast in Texas, to solicit and screen bids for the environmental study. At TransCanada’s recommendation, the department hired Cardno Entrix, an environmental contractor based in Houston, even though it had previously worked on projects with TransCanada and describes the pipeline company as a “major client” in its marketing materials.
While it is common for federal agencies to farm out environmental impact studies, legal experts said they were surprised the State Department was not more circumspect about the potential for real and perceived conflicts of interest on such a large and controversial project.
John D. Echeverria, an expert on environmental law, referred to the process as “outsourcing government responsibility.”
The subsequent study, released at the end of August, found that the massive pipeline would have “limited adverse environmental impacts” if operated according to regulations. That positive assessment removed one of the last hurdles for approval of the proposed pipeline.
Cardno Entrix also played a substantial role in organizing the public hearings on the project for the State Department, the last of which was held Friday in Washington. The proposal is open for public comment until midnight Sunday, and the department’s Web site directs comment to a Cardno Entrix e-mail address.
Environmental groups, as well as some citizens and public officials along the route, have opposed the project, citing the relatively high emissions created by extracting crude from oil sands and the spill threat posed to important aquifers by a pipeline filled with a potentially corrosive crude, among other concerns. The E.P.A. has criticized two prior draft environmental impact statements prepared by Cardno Entrix on Keystone XL as “inadequate” and providing “insufficient information,” but has not yet rendered an appraisal of the final study. The E.P.A.’s role is purely advisory.
Advocates for the project say that Keystone XL, which would carry 700,000 barrels of crude a day, would create thousands of jobs and help ensure a stable fuel supply from a friendly neighbor.
The State Department is the agency that approves transboundary pipelines by determining whether they are in the national interest. Its decision is expected by the end of the year.
The National Environmental Policy Act, which took effect in 1970, allows for agencies to hire outside contractors to perform its required environmental impact studies, but advises that contractors be chosen “solely by the lead agency” and should “execute a disclosure statement” specifying that they “have no financial or other interest in the outcome of the project.”
And yet legal experts said it had become common for companies applying to build government projects to be involved in assigning and paying for the impact analysis. Some say such arrangements are nearly inevitable because federal agencies typically lack the in-house resources or money to conduct these complex studies. “What’s normal is deplorable, and it’s NEPA’s dirty little secret,” said Mr. Echeverria, acting director of the Environmental Law Center at Vermont Law School, referring to the law. He said federal agencies are supposed to review the findings, but often lack the expertise to do so.
Oliver A. Houck, a law professor at Tulane University and an expert on NEPA, said Cardno Entrix should never have been selected to perform the environmental study on Keystone XL because of its relationship with TransCanada and the potential to garner more work involving the pipeline. The company provides a wide ranges of services, including assisting in oil spill response.
Cardno Entrix had a “financial interest in the outcome of the project,” Mr. Houck said, adding, “Their primary loyalty is getting this project through, in the way the client wants.”
Kerri-Ann Jones, the assistant secretary of state for oceans and international environmental and scientific affairs, in an interview, said the State Department followed all federal regulations and had closely managed and supervised the company’s work, adding, “We have final say.”
She said that TransCanada had managed the bidding process and recommended three candidates with Cardno Entrix topping the list. The department vetted Cardno Entrix by consulting with other agencies like the Bureau of Land Management. TransCanada pays the consultant directly, but would not reveal the amount.