Why Did ICF Int’l Withdraw From Tar Sands Pipeline Contract with the State Department?

The scrutinized Keystone XL contractor says the decision to withdraw from the State Department's Alberta Clipper review was 'strictly a business decision.'

Keystone XL protest in Washington D.C. Credit: John Duffy

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A State Department contractor for the Keystone XL that has been under attack for alleged conflicts of interest has withdrawn from contract negotiations to review a lesser-known but still controversial tar sands pipeline: Enbridge’s Alberta Clipper.

The unusual move has led some legal and industry experts to question whether public and political pressure against the company might have played a role in the decision. “There’s no doubt it is in the back of our minds,” said David McColl, an energy analyst for Morningstar, an investment research company, who focuses on Enbridge. Federal contracts for major projects can be lucrative—potentially worth into the millions, depending on the scope and scale of the work and the agency involved—and are often the bread-and-butter of consulting firms’ business.

On March 15, 2013, the State Department announced it had chosen ICF International, a technology and policy consulting group based in Fairfax, Va., to carry out the environmental review of Enbridge’s proposed expansion of the Alberta Clipper oil pipeline to transport 880,000 barrels a day from Canada to Wisconsin.

The announcement came days after the department released its draft environmental analysis of the Keystone XL, which was partly prepared by ICF. The report concluded that the pipeline wouldn’t have much effect on the environment or climate, and touched off a flurry of controversy and a campaign by environmentalists to expose alleged bias of the contractors. Groups criticized several of the firms—including ICF, but mainly the ERM Group Inc.—over their business ties to Keystone builder TransCanada and to other oil companies that would benefit if the pipeline is built.

In December, 25 House Democrats urged the Obama administration to hold off making a decision on the Keystone until the claims could be investigated. It was around that time that ICF withdrew from the Alberta Clipper project, according to an official at the State Department. 

“It could be something where [ICF] just doesn’t want the heat,” said Nick Schroeck, an expert in transnational environmental law at Wayne State University in Detroit and the executive director of the Great Lakes Environmental Law Center. “They would rather go do something without the public scrutiny.” It could also be that ICF International, Enbridge and the State Department couldn’t agree on fees and costs, he said.

Steve Anderson, a spokesman for ICF International, said that pressure from environmentalists didn’t play a role in its decision to pull out of the Alberta Clipper review. He said it was “strictly a business decision,” and that it is “well known that ICF takes on controversial issues.” He would not provide any additional details, including information about how much the contract was worth. Enbridge said it “would not publicly discuss costs” and directed all further questions to the State Department.

ICF receives nearly 60 percent of its total annual revenue—equal to $549.6 million—from U.S. federal government contracts for jobs ranging from evaluating how climate change will affect transportation infrastructure and tracking natural gas industry trends for the EPA to doing research on solider selection and training for the Department of Defense.

It is “not unheard of” for a firm to abandon a government contract, “but rare,” Schroeck said.

“I haven’t run into that situation before,” said Anthony Swift, an attorney with the Natural Resources Defense Council’s International Program on tar sands development.

No matter what led ICF International to back out of analyzing the environmental risks of expanding the Alberta Clipper line, the procedural set back has significantly delayed the project.

Depending on the scope and scale, environmental impact statements can take months, if not years, to complete.

When Enbridge filed its application to amend the line’s presidential permit in November 2012, analysts predicted the pipeline would be pumping more oil by mid-2014.

“Now it likely won’t happen until at least after the mid-term elections,” said McColl of Morningstar.

Scrutiny Expected on Enbridge Review

ICF International has been involved with the State Department’s review of the Keystone XL since its intitial environmental impact statement in 2011. When President Obama rejected TransCanada’s first permit application, it prompted another application and a supplemental environmental review.

ICF was one of a handful or so companies to contribute to the March 2013 supplemental draft analysis for TransCanada’s new application and to the final assessment, released on Jan. 31. It undertook the section that compared the carbon footprint of transporting tar sands to conventional oil. ICF concluded in the January report that the 830,000 barrels of oil the Keystone XL could carry each day would contribute as much as 168 million metric tons of greenhouse gases to the atmosphere annually.

It also concluded that even with the increase in emissions, the project would have no significant impact on global warming because expansion of the tar sands would continue unabated regardless of the pipeline’s fate. Many environmentalists and industry experts dispute that assumption. 

ICF’s section is particularly crucial because Obama, who will make the final decision, has said that “the national interest will be served only if this project doesn’t significantly exacerbate the problem of carbon pollution.”

The climate change impacts of the Alberta Clipper—alternatively known as Line 67—will also be studied, according to the State Department official.

This means that whichever firm is selected to carry out the review will likely face scrutiny from environmentalists who are bent on demonstrating that tar sands development is bad for earth’s climate, and that without cross-border pipelines Alberta’s landlocked oil patch would struggle to expand. “By expanding the Clipper, you are enabling increased volume of tar sands to make it to market in a manner that sends a financial signal to the industry to continue expansion,” Swift of NRDC said. “It could be disastrous in terms of climate change.”

While Keystone XL is their no. 1 priority, environmentalists are keeping a close eye on the Alberta Clipper review, Swift said. In a legal tactic designed to force a redo of the Keystone XL review, several groups filed a petition asking the State Department to study the cumulative climate impacts of the Keystone XL and the Clipper expansion.

The Alberta Clipper has been transporting crude 1,000 miles from Canada’s tar sands mines to a terminal in Superior, Wisconsin for three-and-a-half years. Enbridge has applied to nearly double capacity on the line, from approximately 450,000 barrels per day to 880,000 barrels per day, “to meet the rising demand of U.S. and Canada refineries, which require access to additional secure and reliable supplies of crude oil from western Canada.” It is seeking an amendment to its already approved presidential permit. An additional environmental review is needed to assess the risks of the proposed expansion, which will include updating and installing new technology at pumping stations.

The State Department has already issued a request for new contractor proposals and is currently reviewing the bids. It “expects to make a new provisional contractor selection soon,” the official said.

How Contractors Are Chosen

How government agencies choose third-party contractors to work on projects such as environmental impact statements is a long, drawn-out procedure with “no hard and fast rules,” said Stephanie Karisny, a staff attorney for the Great Lakes Environmental Law Center.

For the State Department, generally, the company applying for the presidential permit—or an amendment to its permit, in the case of Enbridge’s Alberta Clipper expansion—prepares a written request for third-party contractors to submit bids for a particular project. The State Department will then issue this request through the federal register, send it to an existing list of contractors put together by the permit applicant, or publicize it using “other means,” according to Karisny.

The State Department analyzes the contractor bids based on whether the firms have the “technical adequacy” and “managerial capacity” to conduct the project, as well as if there are any conflicts of interests, according to an agency document titled, “Interim Guidance for the Use of Third-Party Contractors in Preparation of Environmental Documents by the Department of State.” It is up to the permit applicant, in this case Enbridge, to confirm that there is no conflict of interest.

Based on these three factors, the State Department will choose a contractor—”at which point the deal is usually done,” said Karisny. It is then up to the permit applicant, who pays for the work, and chosen contractor to finalize the details.

InsideClimate News reporter Zahra Hirji contributed to this report.