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

ERMLetter

Letter to Secretary of State John Kerry and State Dept. Deputy Inspector General Harold Geisel

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 

ERMProposal

ERM’s Proposal to the State Department

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.

Harold Geisel, Deputy Inspector General, U.S. State Department

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.

#NYFrackingScandal Hits Cuomo Administration: Newly Disclosed Documents Show Conflicts of Interest

Photo from NYPost.com

With only two days before the expected release of New York’s Environmental Impact Assessment on fracking (also known by the industry term hydraulic fracturing), Governor Andrew Cuomo’s administration is at the center of a new conflict of interest scandal regarding two of his top aides.  Today, seven groups requested the Albany County District Attorney General David Soares investigate the Cuomo Administration’s conflicts of interest surrounding two staffers that hold “key positions in New York’s decision over whether to allow high-volume hydraulic fracturing.”

There are looming questions on the impartiality of Lawrence Schwartz and Robert Hallman, two top Cuomo Administration officials, who have significant influence on the Governor’s fracking decision. New documents obtained by DeSmogBlog through New York’s Freedom of Information Law (FOIL) show that Mr. Schwartz has significant stock holdings in companies that stand to benefit from fracking in New York state, and that Mr. Hallman failed to make specific financial disclosures, raising questions about his objectivity on the issue.

The two top aides, Lawrence Schwartz, Secretary to Governor Andrew M. Cuomo, and Robert Hallman, Deputy Secretary for Energy and Environment, have significant oversight within the Cuomo Administration on the issue of hydraulic fracturing. According to the groups’ letter, Mr. Schwartz supervises all state deputies and commissioners, including Mr. Hallman and the Commissioner of the New York State Department of Environmental Conservation – the agency that is tasked with studying high-volume hydraulic fracturing and developing the state’s policy regarding this extraction technique. Mr. Hallman is the state’s highest gubernatorial staff member who has oversight over the state Department of Environmental Conservation.

According to financial disclosure documents, Schwartz has substantial holdings in companies engaged in shale gas development, including ConocoPhillips, Occidental Petroleum and ExxonMobil. ExxonMobil alone holds 43,000 acres of leases for fracking in New York under its subsidiary XTO Energy Inc. Schwartz also identified “Williams Co.,” apparently a reference to “The Williams Companies Inc.,” a pipeline company that plans to build a $750 million pipeline through the southern portion of New York.

Mr. Hallman failed to specify his stock holdings in his financial disclosure forms, which seems to violate (at the very least) the spirit of N.Y. Pub. Off. § 73-a. The law states that “Public officials are required to list “EACH SOURCE” of income greater than $1,000 and “the type and market value of securities… from each issuing entity” greater than $1,000,” according to the letter from seven groups to District Attorney General Soares. Instead of disclosing each source, Mr. Hallman listed “various common stock” and “various corporate bonds.” His lack of disclosure should serve as a red flag and calls into question his impartiality on the state’s fracking decision.

Furthermore, records obtained via the FOIL request indicate that fracking companies have recently worked directly with Cuomo Administration officials.  XTO Energy Inc, a subsidiary of ExxonMobil, wrote to Mr. Schwartz and Mr. Hallman requesting changes to the state’s draft regulations on fracking in August 2012. And, The Williams Companies communicated with Mr. Hallman regarding natural gas pipelines twice in the summer of 2012.

New York state law states that public officials should avoid personal investments that could “create substantial conflict between his duty in the public interest and his private interest.” Both Mr. Schwartz and Mr. Hallman may have conflicts of interest that violate this standard.

Today during a press conference in Albany, Alex Beauchamp, Food & Water Watch Northeast Region Director, said, “We are outraged to discover that Governor Cuomo’s top aide is so heavily invested in oil and gas companies. And further, that he made these investments during the very timeframe this administration has been considering whether to allow fracking in New York. Clearly, this administration must not allow fracking to move forward under this cloud of scandal.”

Learn more at NYFrackingScandal.com.

Report: Fossil Fuel Front Groups on the Front Page

Update: The report was covered in E&E News (subscription), Mother Jones, Think Progress and DeSmogBlog. Click-through for more on our groundbreaking research on fossil fuel-funded groups in the media.

Fossil fuel-funded front groups, commonly referred to as “think tanks” or “institutes”, have been secretly influencing the media and the public on energy issues by moving pro-fossil fuel messaging.

These groups, and their proponents, have been quoted on average every other day for the past five years in 60 of the largest mainstream newspapers and publications. Despite having received millions of dollars from fossil fuel interests, such as ExxonMobil and Koch Industries, these groups’ financial ties to the fossil fuel industry are rarely mentioned.

The Checks and Balances Project’s report, “Fossil Fuel Front Groups on the Front Page,” uncovered the extent of this deception by focusing on the 10 most prominent fossil fuel front groups’ traction in 58 of the largest daily newspapers, the Associated Press and Politico. This analysis does not include mentions in broadcast, radio or online publications for these 10 advocacy groups.  As a result, this report only scratches the surface on these fossil fuel-funded groups’ influence on the energy debate.

Fossil fuel-funded advocacy groups’ failure to divulge their ties to the fossil fuel industry in one story is regrettable, but doing it in over 1,000 stories appears to be planned deception.

Here is a summary of the report findings (download a PDF of the report here):

1. Fossil fuel interests have provided at least $16.5 million to 10 organizations from 2006-2010.
Organizational Recipients of Funding

2. Fossil fuel-funded organizations used targeted, focused messaging to support fossil energy sources and attack clean energy.

Media Mentions by Topic

3. Within a five-year period, these groups and their personnel have been mentioned on energy issues at least 1,010 times in major daily newspapers, averaging four mentions a week – or more than once every other day.

Number of Energy Issue Placements for Each Organization 2007-2011
4. Media descriptions of these organizations (beyond their name) were not included in a majority of mentions. If described, descriptions typically focused on the organizations’ function (e.g., “think tank”) or location (e.g., “DC-based”), not their motivation. Almost all of the rare descriptions of motivation used self-identified ideology (i.e., “conservative,” “free market” or “libertarian”), not their financial ties to fossil fuel interests.

How Organizations Are Described

5. Media outlets routinely omitted any mention of the financial ties between the 10 organizations and the fossil fuel interests providing funding. The link between fossil fuel funders and organizations was described only 6% of the time.

Major Metropolitan Dailies with No Mention
6. These organizations received heavier coverage in influential newspapers that help shape the national agenda, including Politico, The Washington Post, USA Today and The New York Times.Appearances in National Newspapers

7. Despite being labeled as “free market” or “libertarian,” these organizations focus their criticism almost exclusively on clean energy policy investments. They make few – if any – references to government support for fossil fuels.

These findings will hopefully encourage more disclosure in our nation’s top media outlets. The Checks & Balances Project suggests a simple question to ask pundits and experts being quoted, cited or published in the media: “Do you get money, directly or indirectly, from interests that stand to benefit from what you are saying?”

With more transparency, members of the American public will know when an opinion may be biased and will be better informed on these critical questions about our energy future.

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