Standard Practice, not Conflict, in the Keystone XL Environmental Review

The latest Keystone XL protest coverage has focused on some possible “conflicts of interest” in the environmental review process.  The New York Times reported “that the State Department allowed the pipeline developer, TransCanada, to choose the company that prepared an assessment of the project’s environmental impact.”  Moreover, “Cardno Entrix, listed TransCanada as a “major client” on other projects and has a financial relationship with the pipeline developer.”  Friends of the Earth called the NYT report an “exposé” of a “shocking conflict of interest.”  And just this afternoon, the NYT reported that U.S. State Department’s inspector general was investigating the the possible conflicts of interest.  I have to say, I’m not shocked, and I haven’t seen anything that wasn’t common knowledge or practice for people in the field.

Despite the high visibility coverage, the reality is that the Keystone XL review looks like pretty much any other environmental review done for large projects in the U.S.  When an entity undertakes a project that requires Federal permits, several laws can trigger a mandatory review of the possible environmental impacts of the project. The lead government agency is charged with conducting the analysis and issuing a determination.  Since Keystone XL crosses an international border, the U.S. State Department is the lead agency,

What happened with Keystone XL is what normally happens.  The lead agency (State Department) required the developer (TransCanada) to hire a contractor (Cardno Entrix) to conduct the environmental review.  In such cases, the lead agency has the right to approve or disapprove the contractor.  The lead agency could in theory chose the contractor and tell the developer to pay the bill, but this almost never happens.  The agencies often lack the expertise and contacts, and companies are understandably not anxious to pay millions of dollars to contractors they did not choose.  [The NYT covers this arrangement in a separate article, and references the National Environmental Policy Act (NEPA) which is driving most of this review.  Read the Keystone XL Environmental Impact Statement (EIS) yourself; the U.S. Department of State has posted it online.]

Opponents of the pipeline project point out that Cardno Entrix has worked for TransCanada before, they are simultaneously working for TransCanada on other projects, and they listed TransCanada as a major client.  They point to this as evidence of an overly-friendly review (may or may not be true-I haven’t read it), and a “conflict of interest” (which I think is a bit off the mark).  

The recent stories have also pointed out a technical error on the part of CardnoEntrix. In such projects, companies fill out conflict of interest disclosures. On these you are supposed to indicate any other ways you are profiting from the developer whose projects you are evaluating. CardnoEntrix apparently forgot to disclose some projects they were doing and have done for TransCanada. I can’t imagine, however, any court finding the omissions substantive. One of the projects they forgot to report was reviewed by the State Department, and anyone who works in the field knows that TransCanada and CardnoEntrix have a long standing client-contractor relationship.

A feeling of conflict of interest is intrinsic to the environmental consultant-developer relationship.  When I am hired as an archaeologist by a developer, they really don’t want me to find anything.  They also pay me, and when I am lucky hire me again and again.  That is a conflict, but not an impropriety.  I’m not going to do surveys for free, but I also am not going to lie about what I do (or do not) find.  In the existing system, this level of conflict is intrinsic and unavoidable. No consulting firm is going to conduct the environmental review for free, and no developer is going to hire a consultant they have not used before for their biggest job ever.   That’s why there is a lead agency to review the work.

My point, simply put, is this is the way NEPA works.  While the scale is huge, the EIS was done the way things are normally done.   The main issue is whether the EIS was adequate or inadequate, and the lead agency has to make that determination.

Oh, and my disclosure:  I have not directly contracted with TransCanada, Cardno Entrix, or the State Department.  I have however, been a subcontractor for a subcontractor who was a subcontractor for a contractor for one or more of these entities on more than one occasion.   I  have existing clients who have involvement in such projects.  I have good friends who work in the oil industry.   I  have clients and friends who have actively opposed TransCanada projects.  These pipelines are massive projects and you would be hard pressed to find a professional in the region who has not been touched by them.  It’s a complicated chain.

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