C&BP Calls for State Dept. Investigation into Keystone XL Consultant’s Conflicts of Interest

Originally posted on April 9, 2013. 

Yesterday, Checks & Balances Project and 11 environmental, faith-based and public interest organizations called on Secretary of State John Kerry and the State Department Deputy Inspector General Harold Geisel to investigate whether Environmental Resources Management (ERM) hid conflicts of interest which might have excluded it from performing the Keystone XL environmental assessment and how State Department officials failed to flag inconsistencies in ERM’s proposal. Tom Zeller, Senior Writer at The Huffington Post, wrote an article highlighting the letter callings for an investigation.

Early last month, the State Department released a 2,000 page environmental impact study for the Keystone XL pipeline claiming that the pipeline would not have major impact on the environment. But, Environmental Resources Management (ERM), the consulting firm hired to perform the “draft supplemental environmental impact statement (SEIS),” has ties to fossil fuel companies with major stakes in the Alberta Tar Sands. This conflict of interest was not accurately disclosed  in ERM’s answers on a State Department questionnaire. Checks & Balances Project considers ERM’s responses in its proposal to be intentionally misleading statements.

Unredacted Documents Uncover Conflicts of Interest
Last week, Mother Jones released unredacted versions of the ERM proposal, showing that three experts “had done consulting work for TransCanada and other oil companies with a stake in the Keystone’s approval.”

The unredacted biographies show that ERM’s employees have an existing relationship with ExxonMobil and worked for TransCanada within the last three years among other companies involved in the Canadian tar sands.

Here’s more from Mother Jones’ Andy Kroll:

“ERM’s second-in-command on the Keystone report, Andrew Bielakowski, had worked on three previous pipeline projects for TransCanada over seven years as an outside consultant. He also consulted on projects for ExxonMobil, BP, and ConocoPhillips, three of the Big Five oil companies that could benefit from the Keystone XL project and increased extraction of heavy crude oil taken from the Canadian tar sands.

Another ERM employee who contributed to State’s Keystone report — and whose prior work history was also redacted — previously worked for Shell Oil; a third worked as a consultant for Koch Gateway Pipeline Company, a subsidiary of Koch Industries. Shell and Koch have a significant financial interest in the construction of the Keystone XL pipeline. ERM itself has worked for Chevron, which has invested in Canadian tar-sands extraction, according to its website.”

When asked about who at the State Department decided to redact ERM’s biographies, a State Department spokesperson said “ERM proposed redactions of some information in the administrative documents that they considered business confidential.” Disclosing past clients may be business confidential information, but from what the biographies show, ERM may have recommended the redactions to hide conflicts of interest from public disclosure.

Problem with ERM Answers on Conflict of Interest Questionnaire 

The biographies on ERM’s proposal show that the company has had direct relationships with multiple business entities that could be affected by the proposed work in the past three years.

In the “Organizational Conflict of Interest Questionnaire,” the State Department asks (page 42), “Within the past three years, have you (or your organization) had a direct or indirect relationship (financial, organizational, contractual or otherwise) with any business entity that could be affected in any way by the proposed work?“ ERM’s Project Manager, Steve Koster, checked “No” but appears to have added to the Yes/No questionnaire that, “ERM has no existing contract or working relationship with TransCanada.”

Regardless of the addendum Koster added, he still submitted an incomplete statement when checking “No” to the specific question above. Simply put, the information provided by Mr. Koster was an incomplete statement if one simply reviews the biographies of ERM’s employees for the project.

The State Department Contracting Officer should have flagged this inconsistency when reviewing the staff biographies.  ERM’s answers did not properly reveal in the Yes/No questionnaire that ERM did have a current “direct relationship” with a business enetity that could be affected by the proposed work and a relationship in the past three years with TransCanada, the company building the pipeline.

Koster’s incomplete statement on direct business relationships is not the only odd statement in ERM’s proposal. ERM also answered “No” to the question, “Are you (or your organization) an ‘energy concern?’” which the State Department defines (in part) as: “Any person — (1) significantly engaged in the business of conducting research…related to an activity described in paragraphs (i) through (v).” Paragraph (i) states: “Any person significantly engaged in the business of developing, extracting, producing, refining, transporting by pipeline, converting into synthetic fuel, distributing, or selling minerals for use as an energy source…” ERM as a research firm working for fossil fuel companies is, unequivocally, an energy interest.

So the question must be asked: If ERM is unable to accurately fill out a simple questionnaire regarding conflicts of interest, how can we trust the company to perform an unbiased environmental assessment of a 1,179 mile-long pipeline cutting through the American heartland? And, why did the State Department’s Contracting Officer not flag the inconsistencies in ERM’s Conflict of Interest Questionnaire when reviewing the proposals?

Intentions of State Department and ERM in Question

The Federal Government has strict ethics rules to prevent Organizational Conflicts of Interest (OCIs) from impacting the impartiality of government contracts and to prevent hiring contractors who cannot provide independent and unbiased services to the government.

According to a white paper from the Congressional Research Service, before the State Department could choose ERM as the contractor, the “Contracting Officer” had to make an “affirmative determination of responsibility.” All government contractors (including ERM) must be deemed responsible, in part by meeting strict ethics guidelines, known as “collateral requirements.”

According to current collateral requirements, contractors must be found “nonresponsible” when there are unavoidable and unmitigated OCIs. Checks & Balances Project believes that the Contracting Officer should have deemed ERM “nonresponsible” because the company serves as a contractor for major fossil fuel companies that have a stake in the Keystone XL pipeline. If ERM were “nonresponsible”, the company would have been ineligible to perform the environmental impact review of the Keystone XL pipeline.

These potential material incomplete statements on a Federal Government proposal calls into question the integrity of ERM and threatens millions in government contracts.

If ERM were determined to be “nonresponsible” or “excluded” because of these incomplete statements, it could jeopardize ERM’s ability to perform any work for the Federal Government. Again, according to the Congressional Research Service:

“Decisions to exclude are made by agency heads or their designees (above the contracting officer’s level) based upon evidence that contractors have committed certain integrity offenses, including any “offenses indicating a lack of business integrity or honesty that seriously affect the present responsibility of a contractor.””

Certainly these incomplete statements call into question both the independence of ERM and the judgement of the Contracting Officer in making the “affirmative determination of responsibility.” This proposal process should be investigated by the State Department Inspector General to determine if ERM’s statements are cause for exclusion.

Groups Calling for Inspector General Investigation

We believe ERM used multiple material incomplete statements and had clear conflicts of interest as shown in the unredacted documents. So, why was ERM hired by the State Department?

Checks & Balances Project asked a State Department spokesperson about the conflicts of interest and the spokesperson said: “Based on a thorough consideration of all of the information presented, including the work histories of team members, the Department concluded that ERM has no financial or other interest in the outcome of the project that would constitute a conflict of interest.” Perhaps the State Department’s Contracting Offier made the decision to hire ERM because of the company’s incomplete statements on the conflict of interest questionnaire.

Checks & Balances Project along with 11 other groups (Better Future Project, Center for Biological Diversity, Chesapeake Climate Action Network, DeSmogBlog, Forecast the Facts, Friends of the Earth, Greenpeace, NC WARN, Oil Change International, Public Citizen’s Energy Program and Unitarian Universalist Ministry for Earth) sent a letter to Secretary of State John Kerry and the State Department Deputy Inspector General Harold Geisel calling for an investigation into the matter. These incomplete statements and the determination by the Contracting Officer that ERM did not have any conflicts of interest, despite clear evidence to the contrary, are grounds for further investigation.

In other frackademia news, Congressional Western Caucus starts a “university”

The Congressional Western Caucus announced last week it will launch an online, Western Caucus University. The caucus claims the point of the new website is to educate the public on “what it means to live and work in the West.” Since the western caucus is comprised of oil- and gas-funded members of Congress who commonly advocate for the oil and gas industry, it’s likely this university’s “curriculum” will include whitewashed information about drilling and fracking.

Indications are already present that the website will be used to promote government handouts of public lands – national parks, monuments, forests, and wildlife areas – to the oil and gas industry, at the expense of agricultural, outdoor recreation, and tourism industries that are economic drivers in the West. Here’s some information we’re willing to bet won’t make it onto the site:

• U.S. oil production has surged to a 20 year high.

• The combination of profit, geology and technology are driving oil and gas drilling to private land. 93% of all onshore shale oil and mixed oil and gas plays – the source of the recent oil boom – are found under nonfederal lands. Even in the Rocky Mountain West, where more federal land is located, 89% of the shale oil and mixed oil and gas plays are under nonfederal lands.

• The Obama Administration has leased 2.5 times more public lands to oil and gas companies than it has protected.
  • In the West, where most federal lands are located, the areas with more than 30% protected federal lands increased jobs by 345%, from 1970 to 2010, compared to 83% job growth in counties with no protected lands.

• The outdoor recreation industry, which relies heavily on protected lands like national parks, generates $646 billion in spending  each year and 6.1 million American jobs.

• The Government Accounting Office and industry experts have said oil shale could use up to 140 percent of what Denver Water provides its customers, today.

• Big Oil was the top campaign contributor to the Congressional Western Caucus co-chairs Rep. Cynthia Lummis ($108,050 – more than double the next biggest contributing industry) and Rep. Steve Pearce ($206,100 – also more than double).

Two questions for Congressional Western Caucus members:

1. Is this online advocacy paid for with taxpayer dollars?

1. How much input will oil and gas lobbyists have into what is included in the website?

Doc Hastings defends fantasy jobs, leaves western water in the dust

House Natural Resource Committee Chairman Doc Hastings proved again last week that he’s more interested in protecting Big Oil subsidies than taking a smart approach to energy that protects western water.

On Friday, the Department of Interior finalized a smart, balanced approach for oil shale on public lands that helps to ensure drought-stricken communities aren’t put in further jeopardy. Since that approach means fewer handouts for oil companies, Chairman Hastings was quick to respond with a ridiculously inaccurate statement about oil shale. Hastings said that the decision “sends oil shale jobs overseas.”

First off: What jobs? There is no oil shale industry. Despite 100 years of trying, and billions risked in taxpayer-funded subsidies, oil shale has never been successfully commercialized in the U.S.

Second: How can the U.S. ship jobs – that don’t even exist in the first place – overseas? Will they go to imaginary foreign workers?

Oil shale isn’t a job creator or a viable energy source. In 2012, only days after Speaker Boehner (R-OH) and Rep. Doug Lamborn (R-Colo.) finished pushing a new oil shale boondoggle through the U.S. House, oil giant Chevron closed down what was supposed to be a lucrative oil shale experiment on Colorado’s West Slope. Chevron then reassigned all three full-time workers it had on the project.

Until Rep. Hastings gets his facts straight on oil shale, he should be careful what he says. It might save him some embarrassment, and being more informed might help him protect more American communities.

Colorado BLM using stalling tactic at Mesa Verde, new drilling proposals could come back this summer

Is Colorado BLM Director Helen Hankins backpedaling on decisions to halt controversial drilling plans next to Mesa Verde National Park, Dinosaur National Monument, and in North Fork Valley?

Barely a month after deferring oil and gas leasing decisions, Dir. Hankins’ staff are showing signs she is planning to welch on her office’s commitment to protect national parks and the heart of North Fork’s economic and agricultural center.

Earlier this week, the Durango Herald reported that:

[Connie] Clementson [Field Manager of the BLM Tres Rios office] made clear that the decision to defer the leases in Southwest Colorado does not take that land off the table for future development. After the BLM answers all the protests received about the lease sale, the land could be renominated for leasing as soon as August or November, Clementson said.

The Tres Rios field office manages lands near Mesa Verde National Park. The National Park Service criticized Dir. Hankins plans to offer leases for drilling on these lands and cited the lack of coordination by her staff.

When BLM announced the oil and gas deferrals near North Fork’s agricultural community, the Montrose Daily Press reported the following comments by Colorado BLM Communications Director Stephen Hall:

The deferral is not permanent, but the parcels won’t be offered for lease any time soon, said Steve Hall, communications director for the BLM in Colorado. “We didn’t put a timeframe on it. It’s safe to say we aren’t going to have them up (for bid) in the near future,” he said. “But we didn’t do what some had asked, which is defer them until the new resource management plan.”

Dir. Hankins already deferred those North Fork leases earlier in 2012, then reinstated most of them after the public scrutiny died down. Is that what she’s doing now? And does Dir. Hankins plan to reoffer these same, heavily protested leases based on 30-year-old data?  Instead of being a real estate agent for Big Oil and driving-up speculation on public lands, Hankins should do the right thing and put our national parks, water and local economies on equal ground with oil and gas development.

Denver Post Looks at Public vs. Private Lands Drilling

In a post on his “Balance Sheet” blog, Mark Jaffe at the Denver Post wades in to the debate about drilling on public lands. He writes:

When Willie Sutton was asked why he robbed banks, he replied, or at least is said to have replied: “Because that’s where the money is.”

And so it is with oil and gas, operators are drilling where the money is and that the Center for Western Priorities says just happens to be on land not overseen by federal agencies.

In the piece, he quotes industry representatives who claim that bureaucracy is holding back drilling on federal lands. In fact, as a report by the Congressional Research Service found that industry, not the government is taking longer to approve permits:

“After a lease has been obtained, either competitively or non-competitively, an application for a permit to drill (APD) must be approved for each oil and gas well…in 2006 it took the BLM an average of 127 days to process an APD, while in 2011 it took BLM 71 days. In 2006, the industry took an average of 91 days to complete an APD, but in 2011, industry took 236 days.”  – pg. 8

You can read Jaffe’s full blog post here.