Keystone XL Pipeline: Alleged Conflict of Interest Much Ado about Nothing?

by Marlo Lewis on November 2, 2011

in Blog, Features

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Blocking the Keystone XL Pipeline — the $7 billion, 1,700-mile project that could create 20,000 construction jobs and eventually transport 830,000 barrels of tar sands oil from friendly, stable, democratic Canada to hubs in Oklahoma and Texas — has become the environmental movement’s top agenda item.

This is not surprising, because Canada’s booming oil sands industry demolishes two popular narratives of green ideology — the claim that oil is a dwindling resource from which we must rapidly decouple our economy before supplies run out, and the notion that most of the money we spend on gasoline ends up in the coffers of unsavory regimes like Saudi Arabia. In reality, more than half of all the oil we consume is produced in the USA, and we get more than twice as much oil from Canada as from Saudi Arabia.

Much of the anti-Keystone agitation is vintage ’60s stuff. In late August, during a weeks-long protest rally outside the White House, 800 demonstrators (including celebrities Margot Kidder and Daryl Hannah) were handcuffed and bused to local police stations. In late September, more than 100 demonstrators were arrested trying to enter Canada’s House of Commons. In October, 1,000 protesters showed up outside President Obama’s $5,000-a-head fundraiser in San Francisco, and organizers claim 6,000 demonstrators will encircle the White House on Sunday, Nov. 6.

Meanwhile, oil bashers on Capitol Hill are engaging in some political theater of their own. Last week, Sen. Bernie Sanders (I-Vt.), two other senators, and 11 congressmen requested that the State Department’s inspector general (IG) investigate an apparent conflict of interest in the preparation of State’s Environmental Impact Statement (EIS) for the Keystone XL Pipeline.

Sanders et al. point out that Cardno/Entrix, the firm State commissioned to conduct the EIS, listed TransCanada, the corportion proposing to build the pipeline, as a “major client.” This “financial relationship,” they suggest, could lead Cardno/Entrix to low-ball the project’s environmental risks. They even insinuate that Cardno/Entrix may have understated oil spill risk just so it could later get paid by TransCanada to clean up the mess.

Earlier this week, State responded to Sanders et al. As far as I can see, there’s no there, there.

First, though, some background on the procedural issues.

Because the proposed pipeline is “international” (crossing the U.S.-Canada border), State is the agency tasked with granting or denying approval, known as a “Presidential Permit,” based on a “National Interest Determination.” That is, Secretary Clinton must determine whether or not the pipeline is in the national interest.

State’s EIS is a key step in the overall review process. Such analyses are mandatory under the National Environmental Policy Act (NEPA), which obligates agencies to consider all significant environmental impacts of a major action before undertaking it. However, notes the Congressional Research Service, NEPA “does not require federal agencies to elevate environmental concerns above others.” An agency may decide that “other benefits outweigh the environmental costs of moving forward with the action.” That is widely expected to happen with Keystone, and it is driving the warmists bonkers. Keystone foes’ last desparate hope is that a scandal over the EIS will turn things around and doom the pipeline.

As State explains in its letter to Sanders, the EIS — over 1,000-pages long and three years in the making — was quite thorough. State conducted two rounds of public meetings, more than 40 in total, along the proposed route, the first after publication of the draft EIS and then again after release of the final EIS, “to inform the national interest determination.” This was the first time State ever convened a second set of public meetings in connection with an EIS. In addition, State worked closely with the Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) “to identify a set of 57 conditions, with which the applicant agreed to comply should the permit be granted, that go above and beyond the safety requirements of other pipelines.”

Of course, many protesters — and even some congressmen — may feel that any oil spill risk is intolerable and disqualifying. But by that standard, no pipeline should ever be built, all existing pipelines should be dismantled, and all commerce in petroleum should stop. And then we could all live in Medieval squalor — planet saved!

As to alleged conflicts of interest, when Cardno acquired Entrix, the new firm, Cardno/Entrix, did issue a press release listing TransCanada as a “major client.” However, TransCanada was a client only in the sense that “the federal government had selected Entrix to do third-party contract work for four TransCanada permit applications — two with the Federal Regulatory Commission (FERC) and two with the Department of State” (emphasis in original).

State’s letter continues:

Under NEPA regulations, this does not constitute a conflict of interest; the federal government is the client — the federal government is selecting and directing the work of Entrix (now Cardno/Entrix) — not TransCanada (whose projects were being assessed). While the pipeline applicant pays the contractor — in this case Entrix (now Cardno/Entrix) – the contractor (Entrix) takes direction from, and reports solely to the Department in accord with NEPA’s regulations, which prioritize the taxpayer over the applicant company by ensuring the taxpayer does not bear the financial burden of the assessment.

So yes, Sanders is correct, Cardno/Entrix had a “financial relationship” with TransCanada. But only because Entrix had conducted environmental reviews of other TransCanada projects for State and FERC. If Sanders considers that to be an ethically compromising conflict of interest, then logically he should oppose all other NEPA-mandated environmental reviews as similarly tainted!

To avoid such alleged conflicts of interest, will the Sanders gang advocate that taxpayers fund environmental reviews when corporations seek federal agency approval to drill oil wells, dig mines, inject fracking fluids, construct pipelines, build dams, harvest timber, etc.? But wouldn’t that (according to their worldview) be giving corporate welfare to “polluters”?

State’s letter does not say whether Cardno/Entrix has a contract to provide oil spill response for the Keystone pipeline. Until the IG investigates this, I will assume that Cardno/Entrix’s expertise in spill response is one of the reasons the company was well qualified to conduct the EIS.


BobRGeologist November 3, 2011 at 2:04 am

I believe heavy oil will require a much larger and more expensive pipeline than the refined product and heat application to keep it flowing in cold weather. It seems logical to me to build an atomic power plant near the mine site to supply heat for a nearby refinery which will also provide SW Canada with more electric power as well. 50 belo zero F is not unusual in that part of Canada. I have experienced -40F weather in Wyoming in mid-November!.

Kojiro Vance November 4, 2011 at 4:33 pm

I have represented my company on several NEPA reviews. The way it works is that the applicant submits the names of 3 reputable environmental consultants who are capable of preparing an EIS. The government picks one of them and then directs the work, billing the costs back to the applicant. Companies like TransCanada do lots of environmental work. It would be nearly impossible for them not to have had some business with Cardno/Entrix somewhere. It would not be in Entrix’s best interests to falsify or fudge the analysis. Besides, the agency in the Gov’t who is overseeing this work wouldn’t let that happen. Sanders, et. al. are idiots who are either ignorant of the provisions of NEPA or are misrepresenting the process because they know the pipeline is in the public interest and they can’t fight fair.

NEPA was supposed to be the be all and end all of environmental reviews. Decisions were supposed to be made based on sound science and public policy However, in my experience, the enviros only like the process when it says “no”. I had a project that clearly had minimal environmental impact, however a certain agency had a political axe to grind and managed to kill it by disregarding its own data and science.

Jim Guirard November 12, 2011 at 11:11 am

Once again, Obama is promising CREATION of jobs, while his Gestapo-green EPA and other regulators insist on the wholesale CREMATION and AMPUTATION of jobs, instead.

On the XL Pipeline, we have the biggest “shovel ready” project ever, but for purely political reasons of alleged “climate change,” he decides not to provide shovels and good pay for American workers but opts for hovels (shabby housing) and more food stamps, instead.

From shovels to hovels. From Camelot to Scamalot. From Democracy to Barackracy. From hope to hype. From change to yellow-dog mange. Is this year-long anti-jobs delay certifiable PROGRESS, or is it just making things “Progressively” WORSE?

Finally, one wonders whether the normally level-headed Canadians consider this man to be completely mindless or completely insane — and, oh yes, there is a difference.


A DC-area attorney, writer and national security strategist, Jim Guirard was longtime Chief of Staff to former US Senators Allen Ellender and Russell Long of Louisiana. His web site is devoted to truth-in-language and truth-in-history in public discourse.

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