TransCanada has been cleared of any undue influence in the U.S. State Department's decision to hire Cardno Entrix, a client of TransCanada, to conduct an environmental impact review of the $7-billion Keystone XL pipeline project, an audit by the U.S. Inspector General has found.

In a 58-page special review of the Alberta-to-Texas Keystone XL pipeline permit process tabled in Congress Thursday, Inspector General Harold W. Geisel found "no evidence that TransCanada had improperly influenced" the department's decision to hire Cardno Entrix to perform the environmental impact analysis of the proposed Keystone XL pipeline project.

TransCanada's "influence was minimal," and the main factor behind the State Department's decision to hire Cardno Entrix was the department's "previous experiences using the company as a third-party contractor for other environmental impact statements," found Geisel.

Furthermore, Geisel found no evidence to suggest that "communications between U.S. State Department officials, TransCanada, the Canadian government, proponents and opponents of Keystone XL deviated from the department's obligation under federal law" to provide an objective analysis of the project and its potential risks.

Russ Girling, TransCanada president and CEO, welcomed the findings of the review.

"The independent investigation confirms we followed all of the procedures and practices established by the Department of State and other federal agencies," said Girling in a statement on Thursday.

Process for hiring contractor criticized

The Inspector General did find fault with the handling of some aspects of the pipeline permit process by the U.S. State Department itself.

For instance, Geisel acknowledged that the State Department's process to hire a third-party contractor to perform an environmental impact statement "inherently gives the applicant some influence in the process."

The process allows the applicant to decide which contractors receive the requests for proposal, review the proposals, and identify its preferred contractor, Geisel explained in the audit.

To that end, Geisel recommended that the State Department modify its third-party contracting process to "reduce the appearance of improper influence."

Although Geisel did not find "an organizational conflict of interest" between Transcanada and Cardno Entrix, his audit found that the State Department did not request that information from the contractor but rather accepted it "at face value."

Geisel said that omission could call a contractor's "objectivity into question" and recommended the State Department's screening process be "redesigned" and "improved."

Finally, Geisel also had "some concerns' with the way in which alternative routes for the proposed pipeline were considered and "not completely incorporated" in the department's final environmental impact statement.

Geisel determined that the department's "limited technical resources, expertise, and experience impacted the process," and recommended that the department hire extra staff, something the department told Geisel it is currently in the process of doing.

'Shoddy, unscientific review,' says congressman

The Office of the Inspector General was asked to review the pipeline permit process following a complaint by Representative Steve Cohen (a Tennessee Democrat) and Senator Bernie Sanders (a Vermont Independent) on behalf of 11 legislators alleging the environmental review was biased in favour of TransCanada.

After the review was tabled on Thursday, Cohen said the report "undermines the integrity of the project's review and underscores the point that the pipeline should not be approved based on a shoddy, unscientific review."

Sanders said the findings confirmed "why the project should not be rubber-stamped for approval, despite efforts by Republicans in Congress to do just that."

The inspector general interviewed officials and examined documents within at least half a dozen bureaus that were involved in evaluation of TransCanada's Keystone XL pipeline permit.

The Obama administration delayed approval for the Keystone XL pipeline until after the 2012 election. But in December, the Republicans included a Feb. 21, 2012, deadline for the decision in a bill to extend payroll tax cuts.

But last month, U.S. President Barack Obama rejected the proposal for Keystone XL, saying the Republican deadline did not provide enough time to conduct a proper review, and invited TransCanada to reapply for a permit.

On Thursday, Girling maintained that TransCanada is fully committed to the project and will reapply for a permit to build the pipeline, a process TransCanada hopes will be handled in an "expedited fashion" due to the work already completed during the review process.

Girling added that "plans are already underway on a number of fronts to do our part to maintain the project’s construction schedule," and that "shippers continue to tell us that this critical North American energy infrastructure project is needed."

Meanwhile, Republicans in Congress appear undeterred in their resolve to see the proposed Keystone XL pipeline project built, as they continue to push new bills that would require approval of the project.