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Keystone Conflict: Nebraska Firm Reviewing Tar Sands Project Has Ties to Pipeline Builder

image of Ted Genoways
An activist rallying against the Keystone XL pipeline at a public hearing on Tuesday.

When Nebraska residents showed up for their final chance to speak out about the proposed Keystone XL pipeline on Tuesday night, they were greeted at every turn by smiling employees of HDR Engineering, Inc., uniformly decked out in khaki pants and blinding white Oxford shirts embroidered with the company’s corporate logo. HDR, an engineering and consulting firm based in Omaha, was hired by the state to conduct an environmental impact assessment of the $7 billion project, which, if approved, would transport toxic crude oil from the Alberta tar sands fields across Nebraska’s environmentally sensitive Sandhills and the largest freshwater aquifer in North America.

Conflict-of-interest concerns have plagued the Keystone project from the beginning. Now it turns out that HDR has a very cozy relationship with the company it was supposed to evaluate. For starters, HDR was hired by TransCanada in 2009 to help build a $1.2 billion natural gas-fired power plant in Ontario. In a press release, a company executive called landing the Ontario project “a significant win for HDR.” Then in 2011, HDR undertook a feasibility study for TransCanada’s renewable energy development group. These facts were far from hidden. As part of the selection process for the Keystone job, HDR let the Nebraska Department of Environmental Quality know about its links to TransCanada.

What’s more, HDR’s own website says one of its missions is to “help oil and gas clients overcome the challenges of increasing government regulation and oversight and harsh physical and political climates, and exploit those opportunities.” Among the services its provides to pipeline companies is “helping them through the environmental planning and permitting process.” HDR promises “one-stop shopping,” so these companies “can focus on what they do best -- delivering oil.”

Yet Nebraska’s environmental regulators went ahead and hired HDR anyway.

“Even a simple Google search shows the too-close-for-comfort relationship between HDR and TransCanada,” says Jane Kleeb, the executive director of anti-pipeline group Bold Nebaska. “You simply cannot have a fair and balanced environmental review when the contractor hired does work for the oil and gas industry. It would be like hiring Bold Nebraska to conduct the review and the hearing.”

HDR officials did not return calls for comment this week. But when the company applied for the Keystone job, it assured Nebraska officials that the company could be objective. Even though it had worked with TransCanada twice before, HDR wrote in its disclosure statements: “Both of these work efforts were of limited scope, have been completed, are the only recent work assignments with TransCanada, and were complete[ly] unrelated to the Keystone XL pipeline.”

Two other firms applied for the Keystone contract, which the Nebraska Legislature specifically said should go to a company with no conflict of interest. Olsson Associates of Lincoln disclosed that it had worked for a contractor on the Keystone XL pipeline -- possibly referring to a hydrology study for the Lewis & Clark Natural Resources District that was consulted as part of the rerouting process -- but not for TransCanada. EA Engineering Science and Technology Inc., also in Lincoln, did not reveal any conflicts, but didn’t get the job.

DEQ spokesman Jim Bunstock declined to comment on the process of selecting HDR or assessing its conflicts of interest, but he reiterated that everyone at the agency was satisfied that the company had conducted a fair assessment of the pipeline’s environmental risks for the department’s forthcoming report. He referred further questions to the agency official heading up the pipeline review, who did not return calls.

That’s little comfort to pipeline opponents who are already wary of inappropriate relationships between TransCanada and government regulators -- and the companies to which those regulators outsource their work. The U.S. State Department, which by executive order has federal authority over the pipeline project, was accused in 2011 of having a “cozy and complicitous relationship” with a lobbyist for TransCanada. The State Department also assigned its environmental impact review of Keystone XL to Cardno Entrix, a Houston-based environmental contractor with financial ties to TransCanada; as the New York Times reported, Cardno Entrix describes the Canadian pipeline company as a “major client” in its marketing materials.

After initially indicating it would likely approve TransCanada’s application, the State Department in late 2011 ordered a review of alternate routes to avoid putting critical water sources in Nebraska at risk. Officials said the move would push the approval process back to the first three months of 2013, removing a politically risky decision for the Obama administration in the midst of the reelection fight.

The delay also gave Nebraska state officials time to order their own review of the pipeline project. Although it would stretch 1,700 miles from northern Alberta to the Texas Gulf Coast, much of the concern about the Keystone project has involved the risk of leakages or spills in the environmentally sensitive Nebraska Sandhills and the Ogallala aquifer, which underlies portions of eight states, is critical to U.S. agriculture, and provides drinking water to millions of Midwesterners.

TransCanada has agreed to reroute the project in order to protect the Sandhills and aquifer, but its new proposed route has still caused concern among Nebraska farmers and landowners. In December 2011, the Nebraska legislature voted to spend up to $5 million from state coffers on an independent environmental assessment, to avoid precisely the sorts of charges of conflict of interest that arose after the Cardno Entrix controversy. Nebraska’s senators agreed that the evaluation should be performed within the state and by the state-run DEQ, with no financial contributions from TransCanada that might sway the investigation’s outcome. But as soon as the agency announced that it had awarded a contract to HDR Engineering to help with the report, allegations arose among pipeline opponents and local media that HDR had previous ties to TransCanada.

Even at Tuesday night’s public hearing at the Boone County Fairgrounds, the final chance for Nebraska residents to speak about the Keystone project, HDR ran the show. The company was responsible for taking the names of people who wished to speak -- and was in charge of seeing that those speakers came up on a first-come-first-served basis. But when bussed-in labor unions were allowed to hang pro-pipeline banners, and then TransCanada’s head of the Keystone XL project was the first to testify, soon followed by other supporters of the project -- all from out of state and many with a financial interest in seeing it approved -- ranchers and farmers from surrounding communities began to complain that, once again, the fix was in.

Rancher Laura Meusch, one of the first pipeline opponents to speak, did not get a chance to make her statement until about 10 p.m., four hours after testimony began and long after most of the press had left to file their stories. (A handful of anti-Keystone voices spoke earlier, but they were greatly outnumbered during the early hours of the hearing by pro-pipeline speakers. The hearing eventually went to 2 a.m., and 105 people voiced their opinions.) Meusch says it appears clear that HDR and DEQ were making things easier for the company and its supporters. “I was very disappointed in the way the DEQ and HDR bent over backwards for TransCanada,” she wrote via e-mail.

Nebraska state senator Ken Haar echoed Meusch’s concerns and added that he thought the release of the report and the subsequent hearing were ill-timed. He noted that the 30-day public comment period included the final run-up to Election Day and the Thanksgiving holiday, when both citizens and politicians were focused on other things. HDR and DEQ also held only a single hearing, the one Tuesday night in Albion. “I think NDEQ should have another hearing in perhaps 60 days,” he said.

Kleeb urged for the next hearing to be run by state officials. “The folks who are fighting for their land and water are demanding the DEQ fire HDR immediately,” she said.

But it might be too late for Nebraska officials to hold a second hearing if they want their environmental review to have any impact on the U.S. State Department’s decision about the pipeline. According to an Omaha World-Herald report today, the department appears close to releasing its own final environmental impact assessment of TransCanada’s new route proposal, perhaps as soon as next week. That would set the stage for the Secretary of State to either issue a permit or reject the pipeline in early 2013, as expected.

image of Ted Genoways
Ted Genoways, OnEarth's editor-at-large, is the author of The Chain: Farm, Factory, and the Fate of Our Food (HarperCollins, online at www.tedgenoways.com), an examination of Hormel Foods and the great recession. The recipient of a 2010 Guggenheim fe... READ MORE >
Thanks to Nebraska Wesleyan University student and Bold Nebraska intern Chelsea Johnson for her analysis of HDR's conflict of interest!