‘Inappropriately Cozy’ U.S. Ties on Keystone, Group Says

The State Department withheld information on internal discussions about TransCanada Corp. (TRP)’s proposed Keystone XL pipeline across six U.S. states, according to an environmental group.

The department “heavily redacted” or withheld internal e- mails on discussions over the $7 billion project that were requested under the Freedom of Information Act, according to Friends of the Earth in Washington. Documents that have been released demonstrate “inappropriately cozy” relationships between department officials and TransCanada, the group said.

The State Department’s inspector general said on Nov. 4 it will examine the agency’s handling of the project. The watchdog said it was “initiating a special review” of the department’s environmental study and a pending determination of whether the project is in the national interest.

“We are not satisfied with the responses State has provided so far,” Nick Berning, a spokesman for the group, said yesterday in an interview. “Our attorneys are going to continue to work to obtain the missing documents.”

The State Department, which had intended to reach a decision on the project by the end of the year, said Nov. 10 it was delaying action until early 2013 to consider alternative routes. The department has jurisdiction over the project because the pipeline crosses an international border.

Sanders Seeks Review

TransCanada’s proposed pipeline would cover 1,661 miles (2,673 kilometers) across Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. Critics say the project, carrying as many as 700,000 barrels a day of heavy crude from Alberta to Gulf Coast refineries, threatens water supplies in Nebraska and will worsen global warming.

Senator Bernie Sanders, a Vermont independent, and 13 other lawmakers sought an investigation in an Oct. 26 letter questioning whether the project review was “free of actual or apparent conflicts of interest.”

Lawmakers asked the inspector general to examine whether the State Department and Calgary-based TransCanada had communications “which were in any way improper.” A TransCanada lobbyist, Paul Elliott, was deputy campaign manager for the 2008 Democratic presidential campaign of Hillary Clinton, now the secretary of State.

“Paul’s job is to set up meetings,” Russ Girling, chief executive officer of TransCanada, said today in an interview at Bloomberg’s world headquarters in New York. “Anybody that believes that one individual that works for TransCanada pipelines can have undue influence on the political process and the regulatory process here is ridiculous.”

‘Complied Fully’

“The department has complied fully” with the public- documents request, spokesman Mark Toner said today in an e-mail. “Its highest priority is working with other agencies to determine whether the proposed project is in the national interest.”

E-mails obtained by Friends of the Earth in September and October show a State Department employee, Marja Verloop, saying “Go Paul!” after Elliott announced TransCanada won new support for the pipeline, according to the group.

A batch of e-mails released today by Friends of the Earth provide more evidence of inappropriate collaboration between department officials and TransCanada, Berning said. The e-mails show that the department should be disqualified from vetting the project, he said.

The Environmental Protection Agency “would appear to be an agency with more environmental expertise,” Berning said. “State should have no role in the environmental review.”

The lawmakers and Friends of the Earth also questioned the department’s hiring of the consulting firm Cardno Entrix, a subsidiary of Cardno Limited of Brisbane, Australia, to conduct the environmental study. Cardno Entrix had described TransCanada as a “major client.”

“If they produce an environmental review TransCanada is happy with, they could very well be positioned for future pipeline business,” Berning said. “Cardno Entrix should never have been hired.”

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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