WASHINGTON -- A consulting firm that helped write an environmental review of the proposed Keystone XL oil pipeline complied with federal rules regarding possible conflict of interest, the State Department's inspector general said Wednesday in a report that buoyed supporters of the controversial pipeline and disappointed critics.
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.
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 350.org. "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 report marks the second time the inspector general has cleared the State Department of wrongdoing in its oversight of the pipeline project. In February 2012, the IG found no evidence that State Department employees were improperly influenced by a previous contractor, Cardno Entrix, that had conducted an earlier review.
The State Department has authority over the project because it crosses a U.S. border.
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.