Friday, February 10, 2012

State Department IG Report On Keystone XL Permit Process

The U.S. Department of State (DOS), Office of Inspect General (OIG) has issued a report entitled, Special Review of the Keystone XL Pipeline Permit Process (Report Number AUD/SI-12-28, February 2012). The report indicates as part of the background, that on September 19, 2008, TransCanada submitted a Presidential permit application to the Department of State (Department) for the Keystone XL oil pipeline. Keystone XL is a proposed 1,700-mile pipeline connecting Alberta, Canada, to the U.S. Gulf Coast. The Department is responsible for reviewing such applications for cross-border oil pipelines by virtue of the Presidential delegation of authority contained in Executive Order 13337 and deciding whether issuance of a requested permit "would serve the national interest."
    As part of the review process for Keystone XL, the Department prepared an environmental impact statement (EIS) to inform the overall "national interest determination." The Department used third-party contractors to assist in the preparation of the EIS. In 2006, the Department consulted with the Council on Environmental Quality and agreed that the Federal Energy Regulatory Commission's process for using third-party contractors to prepare environmental documents was the best model for the Department to follow.
    The EIS process included evaluation of the proposed Federal action and reasonable alternatives to the proposed action; solicitation of input from organizations and individuals who could potentially be affected; and the presentation of direct, indirect, and cumulative environmental impacts for public review and comment. On August 26, 2011, the Department issued a final EIS and subsequently entered into the broader national interest determination period for Keystone XL [See WIMS 9/7/11]. The national interest determination involves consideration of many factors, such as energy security; environmental, cultural, and economic impacts; and foreign policy.
    The Department of State, Office of Inspector General (OIG), conducted the special review at the request of several members of Congress in an October 26, 2011, letter (included in Appendix B of the report). The Members asked that OIG "launch an investigation into the State Department's handling of the Environmental Impact Statement (EIS) and National Interest Determination (NID) for TransCanada Corporation's proposed Keystone XL pipeline." OIG's objective was to determine to what extent the Department complied with Federal laws and regulations relating to the Keystone XL oil pipeline Presidential permit process. In conducting this review OIG asked seven researchable questions.
    Among other things, the Members of Congress requesting the report indicated, "We are disturbed by reports, such as those in The New York Times on October 7, 2011, that the State Department allowed TransCanada, the pipeline developer, to screen applicants to conduct the EIS mandated by federal law. The reports also allege that TransCanada successfully recommended the State Department select Cardno Entrix to conduct the EIS, despite Cardno Entrix listing TransCanada as a "major client" and Cardno Entrix having a pre-existing financial relationship with TransCanada. On its face alone, this creates an appearance of a conflict of interest and raises several questions. . ." In the report, the OIG responds to a seven major questions raised by the Members including:
  • To what extent and in what manner did TransCanada improperly influence the Department in the selection of a contractor for the EIS?
  • To what extent did the Department's final EIS fully incorporate the views and concerns of Federal agencies with expertise, such as the Environmental Protection Agency, in relation to alternatives and mitigation, pipeline safety, and environmental risks?
  • To what extent is there a contractual or financial relationship between Cardno Entrix and TransCanada beyond Keystone XL, and does Cardno Entrix have a contract or agreement with TransCanada wherein Cardno Entrix would provide services, such as spill response, for Keystone XL? Furthermore, did the Department employees who selected Cardno Entrix have personal financial conflicts of interest?
  • To what extent did the Department violate its role as an unbiased oversight agency by advising TransCanada to withdraw their permit request to operate the pipeline at higher pressures with the reassurance that TransCanada could apply for the permit at a later date through a less scrutinized and less transparent process?
  • To what extent did communication between Department officials, TransCanada, the Canadian Government, or proponents of Keystone XL deviate from the Department's obligations under Federal law to provide an objective analysis of the project and its potential risks?
  • To what extent did the Department and all parties fully comply with the letter and spirit of all Federal disclosure laws and regulations in regard to Keystone XL?
  • To what extent were Freedom of Information Act (FOIA) requests for materials related to Keystone XL timely fulfilled by the Department?
    On the major question of a conflict regarding the selection of Cardno Entrix, "OIG found no evidence that TransCanada (the applicant) had improperly influenced the Department's selection of Cardno Entrix as the Keystone XL EIS third-party contractor. The Department followed the Federal Energy Regulatory Commission's third-party contracting process, from reviewing, editing, and approving the draft request for proposal to independently reviewing proposals and selecting a contractor. This process allows the applicant to influence the selection of the EIS contractor by (1) deciding which contractors will receive the request for proposal, (2) reviewing all proposals received in response to the request for proposal, and (3) forwarding to the Department the three ranked proposals to review. However, TransCanada's influence was minimal, given the Department's (1) control of the language in the request for  proposal, (2) general familiarity with the environmental contractor community, and (3) independent review of proposals and selection of the contractor. A prime factor in the Department's selection of Cardno Entrix was the Department's previous experiences using the company as a third-party contractor for other EISs."
    On the questions of incorporating agencies' input such as from EPA, the OIG indicated, "The Department's final EIS for Keystone XL generally addressed and incorporated the views and concerns of Federal agencies with expertise in relation to alternatives and mitigation, pipeline safety, and environmental risks from this project. However, some concerns, such as the manner in which alternative routes were considered in the Department's EIS, were not completely incorporated. OIG also determined that the Department's limited technical resources, expertise, and experience impacted the implementation of the NEPA process. . . As a result, OIG believes the EIS and related processes were less effective, thereby delaying the decision for approval or denial of the Keystone application."
    The OIG audit resulted in three major recommendations including: that the DOS redesign its process for selecting third-party contractors by maximizing the Department's control of each step and minimizing the applicants' role in the process; that DOS fill at least one full-time position with staff who have experience and expertise in handling National Environmental Policy Act issues and the environmental impact statement process; and that DOS redesign the Department of State process for selecting and using third-party contractors in order to improve the Department's organizational conflict of interest screening process.
    API President and CEO Jack Gerard issued a statement saying, "The IG report gives the Keystone XL environmental review process a clean bill of health and concludes that the review was correct and done well. It's clear that another excuse not to build the pipeline has been removed, so we can only ask ourselves what's the excuse now for not approving Keystone? It's also ironic that on the same day the IG report is released, Canadian Prime Minister Harper is in China securing his country's economic and energy future by sending more Canadian oil to Asia. We're calling on our president to lead. In 2009, President Obama showed leadership when approving the Alberta Clipper pipeline. Back then his administration said that approval of the Clipper pipeline sent a positive economic signal, in a difficult economic period. The same applies to Keystone XL, and we are asking the president to reconsider his decision to reject this shovel-ready project that will put 20,000 American[s] back to work."
    Senator Bernie Sanders (I-VT) one of the Members that requested the OIG investigation issued a release saying the report "finds flaws in pipeline review." Senator Sanders said, "The findings confirm once again why the project should not be rubber stamped for approval, despite efforts by Republicans in Congress to do just that. The more we learn, the less merit there is to this project. For those of us who are concerned about the consequences of global warming and the need to cut greenhouse gas emissions, the idea of producing oil that emits 82 percent more carbon pollution than conventional oil is indefensible. We have better options for the American people that do not jeopardize the future of our country and our planet. These include increasing fuel efficiency standards for our cars and trucks, a step which would cut pollution and save up to three times as much oil as Keystone XL could ever deliver."
    Access the complete 58-page OIG report (click here). Access complete details and background from the DOS Keystone XL Pipeline Project website (click here). Access the API release (click here). Access a release from Senator Sanders (click here). [#Energy/OilSands, #Energy/Pipeline]
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