Bloomberg News

State Department’s Keystone Review Was Proper, Watchdog Says

February 13, 2012

(Updates with comment from Representative Cohen in fourth paragraph, State Department spokeswoman in fifth paragraph.)

Feb. 9 (Bloomberg) -- The U.S. State Department followed legal guidelines and standard procedures in its review of the bid by TransCanada Corp. to build the Keystone XL pipeline, the agency’s Inspector General said in a report.

The department “did not violate its role as an unbiased oversight agency” in choosing contractors or communicating with TransCanada, according to the report, which was posted today on a congressional website.

The report was requested by Representative steve Cohen, a Tennessee Democrat, and Senator Bernie Sanders, a Vermont independent, who oppose the project. The watchdog office advised the State Department to revamp its procedures in picking contractors to compile environmental-impact statements, which the lawmakers had questioned.

“This report undermines the integrity of the project’s review and underscores the point that the pipeline should not be approved based on a shoddy, unscientific review,” Cohen said in a statement.

Victoria Nuland, a State Department spokeswoman, said the agency will consider the recommendations in the report. “There was no improper influence,” Nuland said at a press briefing.

Independent Review

Cohen and Sanders sought the independent review of the State Department’s study of the $7 billion pipeline from Canada to U.S. Gulf Coast refineries before President Barack Obama delayed consideration of it in November. Last year, lawmakers unhappy with Obama’s decision set Feb. 21 as a deadline to issue a permit. Obama denied TransCanada’s application, citing a lack of time for a review.

Cohen and Sanders questioned the ties between TransCanada and Cardno Entrix, the consulting firm hired by the government to prepare an the environmental impact statement for the pipeline. They also questioned the degree to which other agencies’ views were incorporated in the environmental assessment, and whether the State Department overstepped its impartial role by advising TransCanada to withdraw its request to operate the pipeline at higher pressures.

On each of those points, the Inspector General’s report said that the State Department did not violate accepted standards or laws.

“OIG found no evidence that communications between department officials, TransCanada, the Canadian government, proponents, and opponents of Keystone XL deviated from the department’s obligations under federal law,” Deputy Inspector General Harold Geisel said in the report.

--With assistance from David Lerman in Washington. Editors: Daniel Enoch, Steve Geimann

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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