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The State Department assigned an environmental impact statement (EIS) for the proposed Keystone XL pipeline to Cardno Entrix, a company with financial ties to the pipeline operator, TransCanada. The State 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 State 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.

The major criticism is that Cardno Entrix had a financial interest in the outcome of the project. Their primary loyalty is getting this project through, in the way the client wants. TransCanada pays the consultant directly, but would not reveal the amount. Cardno Entrix did submit a disclosure statement acknowledging that it was paid $2.9 million to handle the environmental review of an earlier pipeline in the Keystone network.

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. 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 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.

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.

The 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 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.”

It is 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.

The American company, Entrix, merged with the Australian company Cardno Limited in 2010. (NYT, 10/7/2011)

U.S. Department of State Final EIS
 
EPA Response to State Department Supplemental Draft EIS Keystone XL Project
 
EIS, Wiki