Keystone Consultant Disclosed Alleged Conflict After Winning Job

Feb 07, 2014 2:52 pm ET

Feb. 7 (Bloomberg) -- The consulting firm that wrote a largely favorable environmental review of the proposed Keystone XL pipeline disclosed to the State Department work it did that led to allegations of a conflict of interest after it won the contract, according to newly released documents.

The firm, Environmental Resources Management, part of London-based ERM Group Inc., has come under fire from environmental groups led by Friends of the Earth for not disclosing the work that one of its subsidiaries did on a project jointly owned by TransCanada Corp., the company that is seeking permission to build Keystone.

In its August 2012 “organizational conflict of interest addendum” to an application filed to the State Department that June, ERM said that its affiliate Oasis Environmental Inc. worked on the Alaska Pipeline Project, a company jointly owned by Exxon Mobil Corp. and TransCanada. ERM had won the contract to write the environmental analysis of the Keystone XL project before it wrote the addendum.

Friends of the Earth and other groups want the State Department to throw out the environmental assessment, which found Keystone wouldn’t be a major contributor to greenhouse gas emissions, and start the process over. The State Department inspector general is reviewing the complaints.

Alberta Link

TransCanada of Calgary is seeking permission from the U.S. to build Keystone to link Alberta’s oil sands with U.S. Gulf Coast refineries.

ERM also said in a letter to the State Department in July, in response to growing conflict-of-interest complaints, that a second affiliate, ERM-West Inc., worked on the Alaska Pipeline Project until at least May 2012.

The August 2012 addendum doesn’t mention ERM-West’s work and it isn’t clear ERM disclosed the relationship to the State Department before the conflict complaints became the subject of media reports.

ERM didn’t respond today to a request for comment about the filing. In the past, it hasn’t responded publicly to the conflict complaints, referring questions to the State Department. The State Department says the work was done under its supervision and that third-party contractors don’t stand to gain financially from the project.

‘Grossly Misinterpreted’

Friends of the Earth and the Checks & Balances Project called for an investigation into the potential conflicts on July 10, noting that ERM’s application to work on the environmental assessment for Keystone said that it had had no existing contract or working relationship with TransCanada for the past three years.

Ross Hammond, a senior campaigner for Friends of the Earth, said ERM should have answered yes to the question as to whether it had an direct or indirect relationship with TransCanada.

“Their claims that because they weren’t being directly paid by TransCanada and thus have no conflicts of interest strains credulity, especially when you read how broadly the question is phrased,” Hammond said in an e-mail.

ERM wrote in the July 17 letter to the department that said media reports “grossly misinterpreted” its relationship with TransCanada.

That letter and the August 2012 addendum were posted publicly by the State Department alongside the Jan. 31 Environmental Impact Statement.

The environmental impact review found that Keystone isn’t as significant threat to the climate as opponents assert because the oil sands would be developed with or without the pipeline. President Barack Obama has said he wouldn’t approve Keystone if it would significantly contribute to global carbon dioxide emissions.

Fund Manager

Tom Steyer, the billionaire former hedge fund manager and Democratic Party donor, questioned the “integrity” of the environmental analysis in a Feb. 2 letter Secretary of State John Kerry. Steyer said the department should conduct an“independent and transparent review” of the environmental review, noting ERM’s alleged relationship with TransCanada.

“ERM had no contractual relationship with TransCanada related to this work, and no payments were received from them in relation to this activity,” the firm said in its July letter to the department about its work on the Alaska pipeline project.

“We continually hire employees, some of whom (as stated in our original OCI disclosure) have, or may have previously done work for TransCanada, which the Department of State determined does not itself constitute a conflict for ERM,” the letter adds.

--Editors: Jon Morgan, Steve Geimann