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Keystone Environmental Review Didn’t Breach Rules: Report

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Keystone Environmental Review Didn’t Breach Rules, Report Says
A tractor trailer passes the Hardisty tank farm, which includes the TransCanada Corp. Hardisty Terminal 1, in Alberta, Canada. Photographer: Brett Gundlock/Bloomberg

Feb. 27 (Bloomberg) -- The U.S. State Department’s inspector general said the agency’s selection of a contractor to write an environmental review of the Keystone XL pipeline didn’t violate federal conflict of interest rules, a finding that removes another hurdle for the long-delayed project.

Environmental groups including Friends of the Earth had alleged that the contractor, Environmental Resources Management, didn’t disclose financial ties to TransCanada Corp., the Calgary-based pipeline company that is proposing to build Keystone.

A months-long review didn’t back-up the claims. The process used to select ERM “substantially followed its prescribed guidance and at times was more rigorous” than required, assistant inspector general for audits Norman Brown said in a letter yesterday to State Department officials overseeing the Keystone review.

Critics wanted the State Department to throw out the environmental assessment released last month over the conflict question. The environmental report found Keystone wouldn’t be a major contributor to greenhouse gas emissions.

Keystone opponents decried the inspector general findings.

“The real scandal in Washington is how much is legal,” said Bill McKibben, co-founder of, an environmental group working against Keystone. “This process has stunk, start to finish.”

Spokeswoman Jen Psaki said in a statement that the State Department is “pleased” with the report from the inspector general.

Obama’s Position

The results of the environmental assessment, released Jan. 31, are important because President Barack Obama has said he wouldn’t approve Keystone if it would significantly contribute to global carbon dioxide emissions. Obama told U.S. governors during a Feb. 24 meeting at the White House that he expects to make a decision on the project in the next couple of months.

The pipeline would connect Alberta oil sands with U.S. Gulf Coast refineries. The $5.4 billion project has become a symbol of the divide over energy and economic development and addressing the risks associated with climate change.

Environmentalists say Keystone would encourage mining of the type of heavy crude found in the oil sands, which releases more greenhouse gases than the production of other forms of oil. Supporters say the project will create thousands of construction jobs and improve U.S. energy security.

ERM’s Application

ERM said in its application in June 2012 to work on the Keystone environmental assessment that it hadn’t had an existing contract or working relationship with TransCanada for the previous three years. After winning the job, ERM disclosed a subsidiary had done work on a project that was jointly owned by TransCanada and Exxon Mobil Corp. called the Alaska Pipeline Project.

Brown said ERM “did not provide a complete response” on its application about its financial ties to TransCanada through the Alaska Pipeline Project.

“However, ERM included in other parts of its proposal and supplemental submissions all of the information, including identification of its other clients and work, sought by the department for its conflict of interest analysis,” the inspector general review said.

While the State Department met the requirements for documenting its contractor-selection process, the agency’s review could be improved with additional documentation and public disclosure, according yesterday’s report.

The inspector general’s recommendations include updates to describe the conflict-of-interest guidelines in greater detail and establishing steps for the public release of information.

Department Review

The State Department is reviewing whether Keystone, first proposed by TransCanada in 2008, is in the U.S. national interest. The department is responsible for reviewing the application because the project would cross an international border.

Secretary of State John Kerry will make a recommendation to Obama after weighing factors including Keystone’s environmental, diplomatic and economic impacts.

Kerry said yesterday that he is “now entering a very intensive evaluation” of the pipeline.

“Really right now, I’m doing my due diligence,” Kerry said during a roundtable discussion with reporters at the State Department in Washington. “I just want to look at the arguments, and all that’s been done. I haven’t done it yet -- purposeful, stayed away from it, which is what I was supposed to do. And now I’m entering a very intensive evaluation.”

Critics Optimistic

Critics of Keystone said they remain optimistic the project would be blocked by the administration.

“The hundreds of thousands of people across the country who oppose Keystone XL will continue to mobilize in opposition to the pipeline tomorrow and the next day; their concerns go far beyond anything the IG report will address,” Rachel Wolf, a spokeswoman for the All Risk, No Reward Coalition, which includes landowners and environmental groups opposed to the pipeline, said in an e-mailed statement yesterday.

A spokesman for House Speaker John Boehner, an Ohio Republican, said the inspector general report provides further support for the approval of Keystone.

“Another day and another government report that finds no reason to continue blocking this common-sense, job-creating project,” Brendan Buck, the spokesman, said in a statement.

To contact the reporters on this story: Jim Snyder in Washington at; Brian Wingfield in Washington at

To contact the editor responsible for this story: Jon Morgan at

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