The U.S. State Department allowed TransCanada Corp., the company hoping to build the 1,700-mile Keystone XL pipeline from Canada to the Gulf of Mexico, to solicit and evaluate bids from consultants for the project's federal environmental review.

The department chose Houston-based environmental contractor Cardno Entrix on TransCanada's recommendation, despite the fact that the contractor previously worked with the Canadian company and describes it as a "major client." The environmental review, released at the end of August, found that the project would have "limited adverse environmental impacts."

Cardno Entrix also helped organize public hearings on the pipeline.

Legal experts say it is common for federal departments to have outside contractors complete environmental reviews. The National Environmental Policy Act recommends that departments choose their own contractors and that those contractors disclose that they "have no financial or other interest in the outcome of the project."

Despite NEPA's guidance, legal experts say that companies applying for projects are typically involved in choosing contractors for reviews. But given the controversial nature of the Keystone project, they say that they would have expected the State Department to be more appreciative of potential conflicts of interest.

Cardno Entrix had a "financial interest in the outcome of the project," said Oliver Houck, a law professor at Tulane University and a NEPA expert. "Their primary loyalty is getting this project through, in the way the client wants."

U.S. EPA criticized two of Cardno Entrix's draft environmental impact statements, calling them "inadequate." The agency has yet to review the review released in August.

A spokesman for TransCanada said that State oversaw the environmental review process. State Department officials also said that they have "final say" over the environmental impact statement and that they followed all federal rules.

"We have done an objective environmental impact statement," said Kerri-Ann Jones, the assistant secretary of State for oceans and international environmental and scientific affairs (Rosenthal/Frosch, New York Times, Oct. 7). -- AP