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* Lawmakers say contractor tied to TransCanada
* TransCanada: conflict of interest claims are baseless
By Timothy Gardner and Jeffrey Jones
WASHINGTON/CALGARY, Oct 13 (Reuters) - U.S. lawmakers will urge Secretary of State Hillary Clinton on Friday to reject the proposed route of the Keystone XL oil sands pipeline, saying they are concerned the approval process has been tainted by alleged conflicts of interest.
Representative Earl Blumenauer, a Democrat, will send a letter to Clinton, signed by more than 20 other lawmakers in the House, criticizing how her department has handled the review of TransCanada Corp's $7 billion pipeline proposal to move crude to Texas from Alberta, Canada.
Among other things, the lawmakers are concerned about a report in The New York Times that the contractor the department used to evaluate the environmental impacts of the line, Cardno Entrix, has worked on other projects with TransCanada. They said that raises questions about the impartiality of the environmental assessment.
"These relationships alarmingly suggest that the process may not have been objective, and this decision is too important to be clouded by even the appearance of impropriety," the letter says.
The law allows U.S. agencies to hire contractors to do environmental assessments, but says the companies should sign a disclosure statement outlining they have no financial interest in the outcome of the project.
In this case TransCanada recommended Cardno among two other contractors to the department, and paid the contractor, although Cardno answered to the State Department.
Cardno, which also conducted public hearings on Keystone XL for the State Department over the last few weeks, did not disclose it was already working with TransCanada on another project, the Bison natural gas line, according to documents seen by Reuters and obtained from the State Department by Friends of the Earth, an environmental group and staunch opponent of Keystone XL.
"Why would a company which is basically an oil industry company be hired in the first place to conduct an environmental impact statement on industry? That's a classic fox in charge of the henhouse scenario," said Damon Moglen, climate and energy director for FOE.
"There are plenty of environmental contractors who don't have ties to the oil industry who could subcontract for oil pipeline expertise but are completely neutral on this matter."
Environmental groups and some politicians oppose the pipeline, which would carry up to 700,000 barrels a day of oil. They say a spill could jeopardize a major aquifer in the central United States and that the pipeline would foster more development of the carbon-intensive oil sands.
Supporters say it will provide thousands of jobs and decrease dependence on oil from countries that are unfriendly to the United States.
The State Department issued a final assessment in August that said the pipeline would have only minor impacts on the environment.
Now it hopes to decide by the end of the year whether the pipeline is in the country's national interest and grant TransCanada a presidential permit, the final go-ahead the company needs before construction.
But the lawmakers said the State Department is moving too fast and the assessment did not adequately study the risks to the aquifer. "Any manipulation of the EIS process taints its outcome, and makes the final product unacceptable as the basis for a finding of national interest," the lawmakers said in the letter. "We request that you find the proposed route not in the national interest."
A Cardno Entrix official at the company's Seattle office referred questions on the issue of relationships with TransCanada to the State Department, which did not immediately respond to a query.
A TransCanada spokesman said claims of conflict of interest are baseless. Cardno Entrix has evaluated other TransCanada projects, but always as a contractor to regulators such as the State Department and Federal Energy Regulatory Commission, not the company, TransCanada's Terry Cunha said.
"As a result, we don't have a direct relationship with Entrix -- we never had," Cunha said.