Keystone XL: Two conflicting truths -

Keystone XL: Two conflicting truths

Short version: It’s complicated


Joshua Roberts/Reuters

The review process for Keystone XL might have hit—you guessed it—yet another bump. This time the snag is allegations that Environmental Resources Management, an environmental consultancy that helped the U.S. State Department write its latest draft environmental assessment of the pipeline, has inappropriate ties with TransCanada. The conflict of interest accusations, which come from environmentalist groups that oppose Keystone XL, have triggered an internal inquiry at the U.S. State Department that, we learned late last week, will likely take until January 2014 to conclude, potentially delaying a final decision on the project.

The charge levied against ERM is that some of its employees who worked on the Keystone report had previously worked for TransCanada or for industry players that would benefit from the construction of the pipeline. That, green groups such as Sierra Club seem to believe, is proof that ERM’s loyalty lies with the oil and gas industry. The issue, though, seems to be more complicated than that. On the one hand, you would want a contractor evaluating the environmental impact of a pipeline to have worked with the majors in the industry: How else would they develop the necessary expertise? On the other hand, ERM was being asked to judge the hand that feeds it.

“It’s a bit of an intractable problem,” says Patrick Parenteau a professor at Vermont Law School and former director of the school’s Environmental Law Center. Legally speaking, he says, a conflict of interest in this case is defined as having a direct financial stake in the project under review. Put in those terms, ERM will probably pass the test, he says, but that doesn’t mean a conflict doesn’t exist. It is conceivable that ERM employees might have had, in the back of their minds, concerns about how the consultant’s take on Keystone would affect its ability to win future contracts with the industry.

And back-of-the-mind concerns become particularly important when contractors are assessing relatively new scenarios where there is no broad consensus. “What you’re buying,” notes Parenteau, “is a very nuanced kind of judgement.” A spill of diluted bitumen (dilbit) from Keystone would probably fit the scenario Parenteau described. Although there is no reason to believe that dilbit is more likely than conventional crude to cause a pipeline leak, as some environmental groups have alleged, the evidence on whether a dilbit spill requires a different cleanup response is much less clear cut.

None of this, of course, tells us anything about ERM’s actual conduct, but it does highlight just what a conundrum the State Department faces. No wonder the agency, which has been chastised once before over its vetting process for contractors advising on Keystone, is treading carefully.

Complicating things further is the fact that environmental assessments aren’t exactly State’s bread and butter, notes Parenteau. The agency is in charge of reviewing the northern leg of Keystone because it crosses national borders, but its expertise on all things environmental is, to use a euphemism, limited, which is why it has to rely on external contractors.

The risk for Keystone is that a nervous, out-of-its element State Department might opt to retrace its steps—not because of the existence of an actual conflict of interest—but because of the appearance of one.

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Keystone XL: Two conflicting truths

  1. I think the critical line in the report is that the employees “previously worked for TransCanada”. Since when does “previously” working for someone make you pre-disposed or loyal to the former employer? More absurdly is saying the because some of its employees formerly worked for TransCanada that ERM would be beholden to it?
    There are a limited number of experts available with the knowledge and training to prepare such a report. If ERM hired one or two away from TransCanada, in my opinion those employees would be expected to have more loyalty to ERM than TransCanada. To explain, as someone who works in the consulting industry I can assure you that when an employee is hired away from a firm it tends to make that person a “persona non grata” at their old firm. It thus, makes the employee more loyal to their new firm as they know that their options have been reduced by one (their old firm). In a small industry reducing your options that way (where perhaps only a couple few firms will be vying to employ you) makes you substantially less hirable in the future and you will want to stick around with your new employers.

  2. The issue that ERM lied on their application form is of course serious, and questions why oil companies are allowed to choose their own contractors to review their own project.

    But the bigger problem is that the resulting report by ERM (with the name of the State Department on it) is simply seriously flawed on multiple subjects.

    For starters, here are the issues with the way in which ERM (The State Department report) reports carbon emissions caused by the Keystone XL :

    (1) the State Department IGNORED the carbon emissions from burning the bitumen that will flow through this pipeline.
    (2) the State Department IGNORED the carbon emissions from the upgrading of the bitumen to something that can be refined.
    (3) the State Department IGNORED the carbon emissions from burning the by-product (petroleum coke) of refining these bitumen
    (4) On top of (1), (2) and (3), rather than simply stating the actual carbon emissions from extracting bitumen to refinable ‘oil’, the State Department counted only the EXCESS of carbon emissions over other oil extraction methods, and failed to mention that these carbon emissions are mostly from burning natural gas.
    (5) The emissions in point (4) are then further divided by a factor of 3, because the State Department assumes that Canadian tar sand development will triple in the next 15 years, no matter if the Keystone XL is built or not.
    (6) The emissions from point (5) are then again divided by a factor of 4, because the State Department assumes that “perhaps” 3/4 of the pipeline’s capacity will be transported by rail.

    In 6 easy points, the State Department’s draft SEIS (which is written by TansCanada contractors) brushes 181 million metric tons of CO2 every year under the rug, and instead focuses on the pumping stations along the pipeline. It then concludes that carbon emissions from these pumping stations are “not a significant contribution” to climate change.

    Do the TransCanada contractors (ERM) really think that the American people are so easily deceived ?

  3. Old money controls where oil will be shipped as well as the Politics of a nation. Individuals have no say and are left to wonder why. Anything to maintain the money rolling in with no concern to national interests.
    New money on the other hand looks to the future. That is why China is currently exploring the use of Arctic waterways to ship products to Europe and why a smaller organization is planning to ship OIL out of Churchill to Europe.

  4. Seriously can Obama make a decision on anything?