Keystone contractor followed federal rules, report says

The Keystone XL oil pipeline got another boost Wednesday with the release of a State Department report that said a consulting firm that helped write an environmental review of the project complied with federal rules regarding possible conflicts of interest.

Backers of the project said it was another reason why the pipeline should be approved.

The report said the contractor, Environmental Resources Management, fully disclosed that some staff members who worked on the State Department report had previously done work with the pipeline operator, Calgary-based TransCanada. None of the work for TransCanada involved Keystone XL, and all of it occurred before the staff members began work at ERM, the report said.

"This is the second time groups opposed to the project have gone to the well with conflict of interest allegations and, once again, they have proven to be false, TransCanada spokesman Davis Sheremata said. "This is also the second time that an independent review of the State Department's process of our Keystone XL presidential permit application has been completed -- and that the highly respected Office of the Inspector General has confirmed the integrity and independence of the State Department's contractor hiring and review process."

An official with the American Petroleum Institute, the top lobbying group for the oil and gas industry, said the watchdog report removes another attempt by pipeline opponents to block the project.

"After more than five years, all the excuses not to build Keystone XL have been exhausted. The state of limbo needs to end," said Cindy Schild, API's senior manager of downstream operations.

The State Department followed federal guidelines regarding use of outside contractors, the report said, "and at times was more rigorous than that guidance."

Still, the report said the State Department's process for hiring outside contractors can be improved, adding that requirements for documenting how contractors are selected were "minimal."

London-based ERM largely wrote the State Department's Jan. 31 environmental report on the $5.3 billion pipeline, which would carry oil derived from tar sands in western Canada through the U.S. heartland to the Texas Gulf Coast. The report raised no major environmental objections to the pipeline and was seen as a major victory for pipeline supporters.

Environmental groups have criticized the State Department's hiring of ERM, saying the firm should be disqualified because of its previous work for TransCanada.

A spokesman for House Speaker John Boehner, a strong Keystone supporter, said the inspector general's report was the latest study to find no reason for the Obama administration to continue blocking the project. The pipeline was first proposed in 2008.

"It's long past time the president stop pandering to his extremist allies and just approve it so we can get people back to work," Boehner spokesman Brendan Buck said.

But Rep. Raul Grijalva, D-Ariz., a pipeline critic, said the inspector general's review was overly narrow.

The report focused on "whether the State Department followed its own flawed process for selecting a third-party contractor," Grijalva said. "The fact that the answer is 'yes' doesn't address any outstanding concerns about the integrity of ERM's work, the State Department's in-house ability to evaluate its quality or whether the process itself needs to be reformed."

Far from inspiring confidence in the project, the report "is evidence of the problem," Grijalva said.

The 1,179-mile pipeline has become a symbol of the political debate over climate change.

Pipeline supporters, including lawmakers from both parties and many business and labor groups, say the project would create thousands of jobs and reduce the need for oil imports from Venezuela and other politically turbulent countries.

Opponents say the pipeline would carry "dirty oil" that contributes to global warming. They also worry about possible spills.

Bill McKibben, an environmental activist who has led opposition to the pipeline, said the report revealed that "dirty dealings" are business as usual in Washington.

"The real scandal in Washington is how much is legal," said McKibben, co-founder of the group "This process has stunk start to finish."

McKibben said he was reassured that the process was now in the hands of Secretary of State John Kerry, saying Kerry has a long record as a climate champion. "There's at least an outside chance of a decision not based on cronyism," McKibben said.

The State Department has authority over the project because it crosses a U.S. border.

The Associated Press contributed to this report.