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<DIV class=timestamp>October 7, 2011</DIV>
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<H1><NYT_HEADLINE version="1.0" type=" ">Pipeline Review Is Faced With Question
of Conflict</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per
title="http://topics.nytimes.com/top/reference/timestopics/people/r/elisabeth_rosenthal/index.html?inline=nyt-per
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href="http://topics.nytimes.com/top/reference/timestopics/people/r/elisabeth_rosenthal/index.html?inline=nyt-per"
rel=author>ELISABETH ROSENTHAL</A> and <A class=meta-per
title="http://topics.nytimes.com/top/reference/timestopics/people/f/dan_frosch/index.html?inline=nyt-per
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rel=author>DAN FROSCH</A></H6></NYT_BYLINE><NYT_TEXT>
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<P>The State Department assigned an important environmental impact study of the
proposed <A class=meta-classifier
title="More articles about the Keystone XL pipeline."
href="http://topics.nytimes.com/top/reference/timestopics/subjects/k/keystone_pipeline/index.html?inline=nyt-classifier">Keystone
XL</A> pipeline to a company with financial ties to the pipeline operator,
flouting the intent of a federal law meant to ensure an impartial environmental
analysis of major projects. </P>
<P>The department allowed <A title="The company’s Web site"
href="http://www.transcanada.com/">TransCanada</A>, the company seeking
permission to build the 1,700-mile pipeline from the <A class=meta-classifier
title="More articles about oil sands."
href="http://topics.nytimes.com/top/reference/timestopics/subjects/o/oil_petroleum_and_gasoline/oil_sands/index.html?inline=nyt-classifier">oil
sands</A> of northern Alberta to the Gulf Coast in Texas, to solicit and screen
bids for the environmental study. At TransCanada’s recommendation, the
department hired <A title="company Web site"
href="http://www.entrix.com/">Cardno Entrix</A>, 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. </P>
<P>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. </P>
<P>John D. Echeverria, an expert on environmental law, referred to the process
as “outsourcing government responsibility.” </P>
<P>The <A title="Web site for the enviromental impact study"
href="http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf?Open">subsequent
study</A>, 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. </P>
<P>Cardno Entrix also played a substantial role in organizing the <A
title="Times article"
href="http://www.nytimes.com/2011/09/29/us/rancor-grows-over-planned-oil-pipeline-from-canada.html">public
hearings</A> on the project for the State Department, the last of which was held
Friday in Washington. The proposal is open for <A
title="Form for comment on State Dept. Web site"
href="http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf/CommentFset?OpenFrameSet">public
comment</A> until midnight Sunday, and the department’s Web site <A
title="State Dept. Web site"
href="http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf?Open">directs
comment</A> to a Cardno Entrix e-mail address. </P>
<P>Environmental groups, as well as some citizens and public officials along the
route, have opposed the project, citing the relatively high emissions created by
extracting crude from oil sands and the spill threat posed to important aquifers
by a pipeline filled with a potentially corrosive crude, among other concerns.
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. </P>
<P>Advocates for the project say that 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. </P>
<P>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. </P>
<P>The <A href="http://www.epa.gov/compliance/nepa/">National Environmental
Policy Act</A>, 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.” </P>
<P>And yet legal experts said it had become 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. “What’s normal is deplorable, and it’s NEPA’s dirty little secret,”
said Mr. Echeverria, acting director of the Environmental Law Center at Vermont
Law School, referring to the law. He said federal agencies are supposed to
review the findings, but often lack the expertise to do so. </P>
<P>Oliver A. Houck, a law professor at Tulane University and an expert on NEPA,
said Cardno Entrix should never have been selected to perform the environmental
study on Keystone XL because of its relationship with TransCanada and the
potential to garner more work involving the pipeline. The company provides a
wide ranges of services, including assisting in <A class=meta-classifier
title="More articles about oil spills."
href="http://topics.nytimes.com/top/reference/timestopics/subjects/o/oil_spills/index.html?inline=nyt-classifier">oil
spill</A> response. </P>
<P>Cardno Entrix had a “financial interest in the outcome of the project,” Mr.
Houck said, adding, “Their primary loyalty is getting this project through, in
the way the client wants.” </P>
<P>Kerri-Ann Jones, the assistant secretary of state for oceans and
international environmental and scientific affairs, in an interview, said the
State Department followed all federal regulations and had closely managed and
supervised the company’s work, adding, “We have final say.” </P>
<P>She said that TransCanada had managed the bidding process and recommended
three candidates with Cardno Entrix topping the list. The department vetted
Cardno Entrix by consulting with other agencies like the Bureau of Land
Management. TransCanada pays the consultant directly, but would not reveal the
amount. </P>
<P>Ms. Jones said that Cardno Entrix provided a solid and impartial study, which
became more robust through the draft process, with advice from agencies like the
E.P.A. “I think it required a lot a lot of work to get it where it is now,” she
said. “We have done an objective environmental impact statement.” </P>
<P>The State Department has also <A title="Times article"
href="http://www.nytimes.com/2011/10/04/science/earth/04pipeline.html">faced
charges of political conflict of interest</A> over its handling of the Keystone
XL application because TransCanada’s chief Washington lobbyist, Paul Elliott,
was a top official in Hillary Rodham Clinton’s 2008 presidential campaign. </P>
<P>Cardno Entrix officials referred all questions about its participation to the
State Department. 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. It did not mention another project it had done
for TransCanada, consulting on a natural gas pipeline that runs through Wyoming,
Montana and North Dakota. </P>
<P>A spokesman for TransCanada, Terry Cunha, said that his company had
recommended contractors to the State Department based on “technical ability,
experience, and appropriate personnel.” But he said the final contract for the
environmental assessment “provides that Department of State directs Entrix. As a
result, we don’t have a direct relationship with Entrix.” The American company,
Entrix, merged with the Australian company Cardno Limited in 2010. </P>
<P>Environmental groups say the study underplays both the emissions impact of
the new pipeline and the danger posed by a spill of crude from oil sands, called
diluted bitumen, a hard-to-remediate mixture. An <A title="Times article"
href="http://www.nytimes.com/2010/07/29/us/29michigan.html">accident at a
pipeline</A> owned by Enbridge Energy in July 2010 dumped 843,000 gallons of
such <A class=meta-classifier title="More articles about oil."
href="http://topics.nytimes.com/top/news/business/energy-environment/oil-petroleum-and-gasoline/index.html?inline=nyt-classifier">oil</A>
near Marshall, Mich. </P>
<P>A 35-mile stretch of the Kalamazoo River remains closed and cleanup has <A
title="Times article"
href="http://www.nytimes.com/2011/09/10/business/energy-environment/agency-struggles-to-safeguard-pipeline-system.html">proved
extremely difficult</A>, running over budget and past deadlines set by the
E.P.A. Estimates of cleanup costs have run well over $500 million. The E.P.A.’s
regional administrator said her office had never seen a river system affected by
so much submerged oil. </P>
<P>But the impact report for the Keystone XL project says that “response to a
spill from the proposed pipeline would not require unique clean up procedures.”
</P>
<P>The Enbridge spill is only mentioned briefly in addendums. And Cardno Entrix
would have been aware of the challenges in Michigan: it was hired by Enbridge to
assess the damage to natural resources caused by the spill. </P>
<P>Steven Da Silva, a retired science teacher who attended public hearings in
Austin and Port Arthur, Tex., last week to oppose the pipeline, said he was
surprised to see officials wearing Cardno Entrix nametags and was not sure
whether State Department employees were present. </P>
<P>The department said its personnel moderated all hearings. </P>
<P>Legal experts said it is not unusual for subcontractors to conduct hearings
and prepare responses to complaints. But they also said the State Department
should closely monitor the work to make sure that any concerns raised are taken
seriously. James W. Spensley, a Colorado-based environmental lawyer with broad
experience in government pointed out that the courts provided an import check on
abuse, since shoddy or biased studies are vulnerable to legal challenges. </P>
<P>“Generally,” he said, “lead agencies are very cautious about finding someone
who is going to give them good, reliable, information because they are the ones
that are going to get sued.” </P><NYT_CORRECTION_BOTTOM>
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<DIV><FONT size=2 face=Verdana>_______________________________</FONT></DIV>
<DIV><FONT size=2 face=Verdana>Wayne A. Fox<BR><A
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