An internal audit cleared the State Department of major missteps and conflicts of interest in its environmental review of the Keystone XL pipeline, but faulted the agency for its lack of scientific expertise and for not adequately considering alternative routes.

The report by the State Department’s Office of Inspector General “determined that the department did not violate its role as an unbiased oversight agency.” But it found that the State Department was hampered by its lack of expertise in handling an environmental review on the scale of Keystone XL, a $7-billion, multiyear oil transport project that would wind 1,700 miles from Alberta, Canada, to the Gulf Coast of Texas. The report said most key staff members handling the review had no relevant experience and had to learn “on the job.”

The inspector general said the State Department also failed to fully consider alternative routes for the pipeline that would avoid the crucial Ogallala aquifer in Nebraska. The state is now surveying possible new routes.

The Keystone permitting process has dragged on since 2008 in part because of criticisms of the State Department’s environmental impact statement.


Last month, the State Department denied the Canadian company TransCanada’s application to build the pipeline after determining that a 60-day deadline imposed recently by Congress would not let it complete a thorough review. TransCanada has said it will apply again.

The new report on the environmental review process was conducted at the request of several members of Congress, including Sen. Bernie Sanders (I-Vt.) and Rep. Steve Cohen (D-Tenn.). The inspector general’s report punctured arguments by longtime critics that the State Department’s review was tilted in favor of TransCanada and that its staff built cozy relationships with TransCanada lobbyists.

TransCanada said it welcomed the findings. “We are pleased that the latest claims put forward by activists who are opposed to Keystone XL are unfounded, as we knew they would be,” said James Millar, a company spokesman.

But the report made several observations and recommendations that support critics’ claims that aspects of the review were problematic. The inspector general looked into the relationship between TransCanada and Cardno Entrix, the outside contractor hired by the State Department to conduct the environmental impact statement. In July, it emerged that Cardno Entrix considered TransCanada a significant client.


In its report, the inspector general determined that there was no conflict of interest between Cardno Entrix and TransCanada. But it criticized the State Department for not performing “any independent inquiry to verify Cardno Entrix’s organizational conflict of interest statements.”

If the State Department had had better-equipped staff, discussions about Keystone XL with environmental scientists at other agencies could have been held by State Department staffers rather than Cardno Entrix employees, as occurred during the review, the report said. The State Department might have sidestepped some public embarrassment, the inspector general also concluded. “The department may have been able to avoid the Environmental Protection Agency’s poor rating of the draft [environmental impact statement] and the need for a supplemental EIS,” the report said.

“The more we learn about Keystone and the State Department’s review process, the clearer it is that we were right to mount spirited protests last summer and fall,” said Bill McKibben, founder of 350.org, an environmental group opposed to the pipeline. “As this report reveals, the environmental review wasn’t carried out at arm’s length, nor with the technical know-how that was clearly required.”

neela.banerjee@latimes.com