Keystone XL Pipeline Project: Key Issues
Paul W. Parfomak
Specialist in Energy and Infrastructure Policy
Robert Pirog
Specialist in Energy Economics
Linda Luther
Analyst in Environmental Policy
Adam Vann
Legislative Attorney
May 7, 2013
Congressional Research Service
7-5700
www.crs.gov
R41668
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Keystone XL Pipeline Project: Key Issues
Summary
TransCanada’s proposed Keystone XL Pipeline would transport oil sands crude from Canada and
shale oil produced in North Dakota and Montana to a market hub in Nebraska for further delivery
to Gulf Coast refineries. The pipeline would consist of 875 miles of 36-inch pipe with the
capacity to transport 830,000 barrels per day. Because it would cross the Canadian-U.S. border,
construction of Keystone XL requires a Presidential Permit from the State Department. A decision
to issue or deny a Presidential Permit is based on a determination that a project would serve the
national interest, considering potential impacts on the environment, the economy, energy security,
foreign policy, and other factors. Environmental impacts are evaluated and documented in an
Environmental Impact Statement (EIS) under the National Environmental Policy Act (NEPA).
TransCanada originally applied for a Presidential Permit for the Keystone XL Pipeline in 2008.
The initial proposal included a southern segment from Oklahoma to the Gulf Coast. After a final
EIS for the original project was released in August 2011, the State Department began a 90-day
public review period to make its national interest determination. A key issue that arose during this
review was concern over environmental impacts in the Sand Hills region of Nebraska. This
concern led the Nebraska legislature to enact new state pipeline siting requirements that would
alter the pipeline route through Nebraska. In January 2012, the State Department concluded that it
would not have sufficient information to evaluate an altered pipeline route before a deadline
imposed by Congress and denied the permit. The southern segment of the original Keystone XL
proposal, now called the Gulf Coast Project, was subsequently separated from the original
proposal because it did not require a Presidential Permit. It has been approved by the relevant
states and is currently under construction.
In May 2012, TransCanada reapplied to the State Department for a Presidential Permit to build
the northern, cross-border segment of Keystone XL. The new permit application initiated a new
NEPA process. The governor of Nebraska approved a new route through the state avoiding the
Sand Hills on January 22, 2013. On March 6, 2013, notice was published in the Federal Register
that the State Department draft EIS for the reconfigured Keystone XL Project was available for
public comment until April 22, 2013. Public comments must be addressed by the State
Department before a final EIS can be issued. After that, the 90-day public review period for the
national interest determination begins.
Development of the Keystone XL Pipeline has been controversial. Proponents base their
arguments supporting the pipeline primarily on increasing the diversity of the U.S. petroleum
supply and economic benefits, especially jobs. Pipeline opposition stems in part from concern
regarding the greenhouse gas emissions associated with the development of Canadian oil sands,
continued U.S. dependency on fossil fuels, and the risk of a potential release of heavy crude. The
Energy Production and Project Delivery Act of 2013 (S. 17), the Keystone for a Secure Tomorrow
Act (H.R. 334), a bill to approve the Keystone XL Pipeline (S. 582), and the Northern Route
Approval Act (H.R. 3) would all effectively approve the Keystone XL Pipeline. The Strategic
Petroleum Supplies Act (S. 167) would suspend sales of petroleum products from the Strategic
Petroleum Reserve until the pipeline is approved. On March 22, 2013, the Senate passed an
amendment to the Fiscal 2014 Senate Budget Resolution (S.Con.Res. 8) that would provide for
the approval and construction of the Keystone XL Pipeline (S.Amdt. 494).
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Contents
Introduction ...................................................................................................................................... 1
Presidential Permits ................................................................................................................... 2
2008 and 2012 Permit Applications ........................................................................................... 2
Past Congressional Actions ....................................................................................................... 3
Congressional Actions in the 113th Congress ............................................................................ 4
Description of the Keystone Pipeline System .................................................................................. 5
The Keystone and Keystone XL Pipeline Systems ................................................................... 5
Marketlink for Bakken Oil Production ...................................................................................... 7
Presidential Permit Applications ...................................................................................................... 8
Consideration of Environmental Impacts Under NEPA .......................................................... 10
EPA Rating of the Environmental Impact Statement ........................................................ 11
The National Interest Determination ....................................................................................... 14
State Siting and Additional Environmental Requirements ...................................................... 17
Legislative Efforts to Change Permitting Authority ................................................................ 18
Arguments For and Against the Pipeline ....................................................................................... 20
Impact on U.S. Energy Security .............................................................................................. 20
Canadian Oil Imports in the Overall U.S. Supply Context ............................................... 21
Oil Sands, Keystone XL, and the U.S. Oil Market ........................................................... 22
Economic Impact of the Pipeline............................................................................................. 29
Lifecycle Greenhouse Gas Emissions ..................................................................................... 29
Private Land Use and Oil Spill Impacts .................................................................................. 31
Issues with the Original Pipeline Route Across the Sand Hills ............................................... 33
Figures
Figure 1. Existing Keystone Pipeline and Proposed Keystone Expansions .................................... 6
Figure 2. The Keystone XL Project and Gulf Coast Pipeline .......................................................... 7
Figure 3. Gross U.S. Oil Imports by Major Sources ...................................................................... 22
Figure 5. Proposed Enbridge Flanagan South Pipeline Route ....................................................... 26
Figure 6. Keystone XL Project—Pipeline Route in Nebraska ....................................................... 34
Tables
Table 1. Milestones in the NEPA process for the Keystone XL Project ........................................ 13
Table 2. Milestones in National Interest Determination Process for the 2008 Keystone XL
Pipeline ....................................................................................................................................... 16
Appendixes
Appendix A. Presidential Permitting Authority ............................................................................. 35
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Appendix B. Details of the Initial NEPA Review .......................................................................... 37
Contacts
Author Contact Information........................................................................................................... 40
Acknowledgments ......................................................................................................................... 40
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Introduction1
In 2008, TransCanada (a Canadian company) submitted to the U.S. Department of State an
application for a Presidential Permit authorizing construction and operation of pipeline facilities
for the importation of crude oil at the United States-Canada border. The Keystone XL Pipeline
system would transport Canadian oil sands crude extracted in Alberta, Canada, and crude
produced from the Bakken region in North Dakota and Montana to a market hub in Nebraska for
further delivery to Gulf Coast refineries. A decision to issue or deny the Presidential Permit would
be based on the State Department’s determination of whether the pipeline system would serve the
national interest.
By August 2011, the State Department had compiled data necessary to begin the required 90-day
public review period for making its national interest determination. During that period, one key
issue that arose pertained to potential impacts associated with the construction and operation of
the proposed pipeline segment across the Sand Hills region of Nebraska. This concern led the
Nebraska legislature to enact new state pipeline siting requirements that would alter the pipeline
route through Nebraska. As a result, in November 2011, the State Department announced that it
would need additional time to gather information needed to assess a new pipeline route avoiding
the Sand Hills.
The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78), enacted on December
23, 2011, included provisions requiring the Secretary of State (hereinafter the Secretary) to issue a
permit for the project within 60 days, unless the President determined the project not to be in the
national interest. Citing insufficient time to meet the deadline established by Congress, the State
Department, with the President’s consent, denied the permit for the Keystone XL Project.
TransCanada and Nebraska have since agreed upon an alternative pipeline route avoiding the
Sand Hills. In May 2012, TransCanada submitted an application to the State Department for a
Presidential Permit to build a newly configured cross-border segment of Keystone XL pipeline
system.2 This report describes the Keystone XL Project as it is proposed in the 2012 Presidential
Permit application and the process that the State Department is obligated to complete to issue or
deny that application. To the extent that they may affect the State Department’s decision to issue
or deny the current permit application, this report discusses selected issues related to the project
proposed in 2008 and issues that have arisen since the State Department denied the initial permit
application in 2012. This report also summarizes key arguments that have been raised, both for
and against the pipeline, by the pipeline’s developers, state and federal agencies, environmental
groups, private property owners, and other stakeholders. Finally, the report discusses the
constitutional basis for the State Department’s authority to issue a Presidential Permit, and
opponents’ possible challenges to this authority.
1 This report provides an overview of the Keystone XL project, permit review process, and general policy issues. For
more detailed legal analysis, see CRS Report R42124, Proposed Keystone XL Pipeline: Legal Issues, by Adam Vann,
Kristina Alexander, and Kenneth R. Thomas. For more analysis of U.S.-Canada energy trade, see CRS Report R41875,
The U.S.-Canada Energy Relationship: Joined at the Well, by Paul W. Parfomak and Michael Ratner. For additional
environmental analysis associated with Canadian oil sands, see CRS Report R42537, Canadian Oil Sands: Life-Cycle
Assessments of Greenhouse Gas Emissions, by Richard K. Lattanzio.
2 The southern segment of the original Keystone XL proposal, now called the Gulf Coast Project, was separated from
the original proposal because it does not require a Presidential Permit. It is currently under construction.
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Presidential Permits
Siting authority for oil pipelines generally lies with the states. However, the construction of
facilities at the U.S. border for exporting or importing petroleum or other fuels requires a
Presidential Permit issued by the Department of State. Before deciding whether to grant or deny a
Presidential Permit, the Secretary must determine whether a project is in the national interest,
taking account of factors such as energy security; environmental, cultural, and economic impacts;
foreign policy; and compliance with relevant federal regulations. To consider those factors, the
Secretary must request the views of the Attorney General, the Secretaries of Defense, Energy, the
Interior, Transportation, Homeland Security, and Commerce, and the U.S. Environmental
Protection Agency. The Secretary may also consult with such state, tribal, and local government
officials and foreign governments, as the Secretary deems appropriate, with respect to each
application. To expedite the process, the Secretary is required to allow for agency and public
comment for a period not to exceed 90 days from the date of the request public input process
begins. (State Department procedures are discussed in “Presidential Permit Applications.”)
2008 and 2012 Permit Applications
One element of the State Department’s national interest determination is the consideration of a
proposed project’s impacts on the environment. The identification and consideration of
environmental impacts is documented within the context of preparing an Environmental Impact
Statement (EIS), pursuant to the National Environmental Policy Act (NEPA, 42 U.S.C. §4321 et
seq.).3 Generally, a draft and final EIS would be prepared for a project (see discussion in
“Consideration of Environmental Impacts Under NEPA”). Project impacts identified in the final
EIS would then be used with other relevant data to inform the Secretary’s national interest
determination.
During the NEPA compliance process for the 2008 Presidential Permit application, a wide range
of environmental issues were identified that drew support for and opposition to the Keystone XL
Project. Once a final EIS had been issued and the national interest determination process was
underway, issues arose that made it clear that a supplemental final EIS would have to be prepared.
In particular, the State Department determined that concern regarding pipeline construction across
the Sand Hills region in Nebraska would require the consideration of an alternative pipeline route.
In response to action taken by Nebraska’s governor and legislature, on November 10, 2011, the
State Department announced that it needed to undertake an in-depth assessment of alternative
pipeline routes that would avoid the Sand Hills.4 That assessment would be necessary before it
could complete its national interest determination. Subsequently, on November 14, 2011,
TransCanada announced an agreement with the Nebraska Department of Environmental Quality
(DEQ) to identify a pipeline route that would avoid the Sand Hills.
3 In processing Presidential Permit applications, the State Department is also explicitly directed to review the project’s
compliance with the National Historic Preservation Act (16 U.S.C. §470f), the Endangered Species Act (16 U.S.C.
§1531 et seq.), and Executive Order 12898 of February 11, 1994 (59 Federal Register 7629), concerning environmental
justice. In processing the permit application for the Keystone XL Project, issues associated with NEPA compliance
have drawn the most attention. In large part, that is likely because it is during the NEPA process that compliance with
these, as well as any other environmental requirements, would be identified, documented, and demonstrated.
4 U.S. Department of State, “Keystone XL Pipeline Project Review Process: Decision to Seek Additional Information,”
November 10, 2011, http://www.state.gov/r/pa/prs/ps/2011/11/176964.htm.
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After the State Department’s announcement of a delay in the permit review, Congress acted to
expedite a permit decision on the Keystone XL Project. The Temporary Payroll Tax Cut
Continuation Act of 2011 (P.L. 112-78), enacted on December 23, 2011, included provisions
requiring the Secretary to issue a permit for the project within 60 days, unless the President
publicly determined the project not to be in the national interest. The act allowed for future
changes to the Nebraska route if approved by the governor of Nebraska. On January 18, 2012, the
State Department, with the President’s consent, denied the Keystone XL permit, citing
insufficient time under the 60-day deadline to obtain all the necessary information to assess the
reconfigured project.5
On February 27, 2012, TransCanada announced that it would proceed with development of the
Gulf Coast Project, a pipeline segment connecting Cushing, OK, to the Gulf Coast refineries
originally proposed as part of the Keystone XL Project (see “Description of the Keystone Pipeline
System”). The construction and operation of the Gulf Cost Project did not require a Presidential
Permit since that segment of the pipeline would be located entirely within the United States. The
Obama Administration stated its support for the Gulf Coast Project, while reserving judgment on
the reconfigured northern segment of the Keystone XL pipeline, until completion of a new
Presidential Permit review.6
On May 4, 2012, the State Department received a new application from TransCanada for a
reconfigured Keystone XL Project running from the Canadian border to an existing pipeline and
oil market hub in Steele City, NE.7 The new application proposes new pipeline routes through
Nebraska. On September 5, 2012, TransCanada submitted to the Nebraska DEQ its preferred
alternative route for the Keystone XL pipeline in Nebraska.8 The governor of Nebraska approved
a new route through the state on January 22, 2013.9 On March 1, 2013, the State Department
issued a draft EIS for the modified Keystone XL Project.10 The reconfigured project would be 875
miles long and cross three states—Montana, South Dakota, and Nebraska.
Past Congressional Actions
Since it was initially proposed in 2008, many Members of Congress have expressed support for
the Keystone XL Project’s potential energy security and economic benefits, while many others
have expressed reservations about its potential environmental impacts.11 Though Congress, to
5 U.S. Department of State, “Briefing on the Keystone XL Pipeline,” briefing transcript, January 18, 2012,
http://www.state.gov/r/pa/prs/ps/2012/01/181492.htm.
6 The White House, Office of the Press Secretary, “Statement by the Press Secretary,” press release, February 27, 2012,
http://www.whitehouse.gov/the-press-office/2012/02/27/statement-press-secretary.
7 See the U.S. Department of State’s “New Keystone XL Pipeline Project” webpage at http://www.keystonepipeline-
xl.state.gov/.
8 TransCanada Corp., “TransCanada Listens to Nebraskans: Updated Keystone XL Nebraska Re-route Reflects Their
Feedback,” press release, September 5, 2012.
9 Dave Heineman, governor of Nebraska, letter to President Obama and Secretary Clinton, January 22, 2013,
http://www.governor.nebraska.gov/news/2013/01/docs/0122_Pipeline_Approval.pdf.
10 Available online at http://keystonepipeline-xl.state.gov/draftseis/index.htm.
11 See, for example, Matthew Daly, “53 Senators Urge Approval of Keystone XL Pipeline,” Associated Press, January
23, 2013; Juliet Eilperin, “Democratic Lawmakers Pressure Obama Administration on Both Sides of Keystone Pipeline
Issue,” Washington Post, October 19, 2011; House Energy & Commerce Committee, Subcommittee on Energy and
Power, Hearing on The American Energy Initiative, Discussion Draft of H.R. ____, the North American Made Energy
Security Act of 2011, May 23, 2011; U.S. Senator Charles Grassley, Letter to Secretary of State Hillary Rodham
(continued...)
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date, has had no direct role in permitting the pipeline’s construction, it may have an oversight role
stemming from federal environmental statutes that govern the pipeline’s application review
process. Congress also may seek to influence the State Department permitting process, or may
seek to assert direct congressional authority over permit approval, through new legislation.
In the 112th Congress, a number of legislative proposals, like P.L. 112-78, would have imposed
deadlines on a national interest determination for the Keystone XL project. The North American-
Made Energy Security Act (H.R. 1938) would have directed the President to issue a final order
granting or denying the Presidential Permit for the Keystone XL Project by November 1, 2011.
The Jobs Through Growth Act (H.R. 3400) would have required the President to issue a final
order granting or denying the Presidential Permit for the Keystone XL Project within 30 days of
enactment. The North American Energy Security Act (S. 1932) would have required the Secretary
to issue a permit for the project within 60 days of enactment, unless the President publicly
determined the project to be not in the national interest. The North American Energy Security Act
(H.R. 3537) and the Middle Class Tax Relief and Job Creation Act of 2011 (H.R. 3630) contained
similar provisions for issuing a Presidential Permit within 60 days of enactment. All of these
proposals were mooted by the State Department’s initial denial of the permit.
Additional legislative proposals followed TransCanada’s second permit application. The North
American Energy Access Act (H.R. 3548) would have transferred the permitting authority over
the Keystone XL pipeline project from the State Department to the Federal Energy Regulatory
Commission, requiring the commission to issue a permit for the project within 30 days of
enactment. The Keystone for a Secure Tomorrow Act (H.R. 3811) would have immediately
approved the original permit application filed by TransCanada in 2008. The Grow America Act of
2012 (S. 2199), the EXPAND Act (H.R. 4301), S. 2041 (a bill to approve the Keystone XL
Project), and the Energizing America through Employment Act (H.R. 4000), would have similarly
approved the original permit upon passage. All six bills included provisions allowing for later
alteration of the pipeline route in Nebraska. A House bill (H.R. 6164) and The Domestic Energy
and Jobs Act (S. 3445) both would have eliminated the Presidential Permit requirement for the
reconfigured Keystone XL Project as proposed in TransCanada’s permit application filed on May
4, 2012. A Senate amendment (S.Amdt. 2789) contained the same language.12
H.R. 3900 sought to ensure that any crude oil transported by the Keystone XL Project, or
resulting refined petroleum products, would be sold only into U.S. markets—not exported
overseas. S. 2100 and H.R. 4211 would have suspended sales of petroleum products from the
Strategic Petroleum Reserve until issuance of a Presidential Permit for the Keystone XL project
application filed in 2008.
Congressional Actions in the 113th Congress
In the 113th Congress, several legislative proposals from the prior Congress have been
reintroduced. The Energy Production and Project Delivery Act of 2013 (S. 17) would eliminate
the Presidential Permit requirement for the reconfigured Keystone XL Project. The Keystone for a
(...continued)
Clinton, May 16, 2011; U.S. Senator Max Baucus, Letter to Secretary of State Hillary Rodham Clinton, September 10,
2010; U.S. Representative Henry A. Waxman, Letter to Secretary of State Hillary Rodham Clinton, July 2, 2010.
12 S.Amdt. 2789 would have amended the Veterans Jobs Corps Act of 2012 (S. 3429).
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Secure Tomorrow Act (H.R. 334) and a Senate bill to approve the Keystone XL Project (S. 582)
would directly approve the Keystone XL Project under the authority of Congress to regulate
foreign commerce. The Northern Route Approval Act (H.R. 3) would eliminate the Presidential
Permit requirement for Keystone XL and require issuance of permits for water crossings by the
Army Corps of Engineers within 90 days of an application, among other provisions. On March
22, 2013, the Senate passed an amendment to the Fiscal 2014 Senate Budget Resolution
(S.Con.Res. 8) that would provide for the approval and construction of the Keystone XL Project
(S.Amdt. 494). Congressional debate continues.
Description of the Keystone Pipeline System
In 2005, TransCanada announced its plan to address expected increases in Western Canadian
Sedimentary Basin production by constructing the Keystone Pipeline System. When complete,
the system would transport crude oil from Hardisty, Alberta, to U.S markets in the Midwest and
Gulf Coast. The pipeline system was proposed as two distinct phases—the Keystone Pipeline
(complete and in service) and Keystone XL Pipeline.
The Keystone and Keystone XL Pipeline Systems
The Keystone Pipeline was completed in two segments—the Keystone Mainline and the Cushing
Extension. The Mainline is 1,353 miles of 30-inch pipeline from Hardisty, Alberta, to the United
States refineries in Wood River and Patoka, Illinois. The U.S. portion of the pipeline runs 1,086
miles and begins at the international border in Cavalier County, ND, and has been in service since
June 2010. The Cushing Extension is 298 miles of 36-inch pipeline and associated facilities that
run from Steele City, NE (near the Kansas border), to existing crude oil terminals and tanks farms
in Cushing, OK. The Cushing Extension has been in service since February 2011.
The Keystone XL Pipeline is also being proposed in two project segments, as follows:
• The Gulf Coast pipeline project, 485 miles of 36-inch pipeline and associated
facilities linking the Cushing, OK, tank farms to refineries in Houston and Port
Arthur, TX. This segment includes the Cushing Marketlink project that will
provide receipt facilities to transport U.S. crude oil to the Gulf Coast.
TransCanada anticipates this segment to be in service mid-to-late 2013.
• The Keystone XL pipeline project, 875 miles of 36-inch pipeline and associated
facilities linking Hardisty, Alberta to Steele City, NE. This segment also includes
the Bakken Marketlink in Baker, MT—receipt facilities that can transport crude
oil from the Williston Basin producing region for delivery to Steele City then
Gulf Coast refineries. Of the Keystone Pipeline’s 830,000 bpd capacity, 100,000
bpd has been set aside to transport Bakken crude oil.
In the 2008 Presidential Permit application, the “Keystone XL Project” referred to both pipeline
segments. For the 2012 Presidential Permit application, the “Keystone XL Project” refers to only
the northern pipeline segment.
The existing Keystone Pipeline has the capacity to deliver up to 590,000 bpd of Canadian crude
oil to U.S. refineries and export terminals. The Keystone XL Pipeline project (both the Keystone
XL and Gulf Coast pipeline segments) would have a capacity of 830,000 bpd. As a result, the
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entire Keystone Pipeline System may ultimately have the capacity to deliver up to 1.3 million bpd
of crude oil. The existing Keystone Pipeline and proposed expansions are illustrated in Figure 1.
The proposed Keystone XL Project and associated pipeline segments are illustrated in Figure 2.
Figure 1. Existing Keystone Pipeline and Proposed Keystone Expansions
Source: U.S. State Department, March 2013, Draft EIS for the Keystone XL Project,
Section 1.2 “Overview of Proposed Project,” p. 1.2-5.
TransCanada has estimated the capital cost of the U.S. portion of the 2012 Keystone XL Project,
from the U.S. border to Steele City, NE, would be $5.3 billion.13 This figure is higher than the
cost estimate when the 2008 permit application was filed, reportedly due to currency swings,
changing regulatory requirements, and permitting delays.14
13 TransCanada Keystone Pipeline, L.P., “Application of TransCanada Keystone Pipeline L.P. for a Presidential Permit
Authorizing the Construction, Operation, and Maintenance of Pipeline Facilities for the Importation of Crude Oil to be
Located at the United States-Canada Border,” submitted to the U.S. Department of State, May 4, 2012, p. 39, available
at http://keystonepipeline-xl.state.gov/proj_docs/permitapplication/index.htm.
14 “TransCanada Expects $1-Billion Cost Escalation for Keystone XL Pipeline,” Canadian Press, February 17, 2011.
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Figure 2. The Keystone XL Project and Gulf Coast Pipeline
Source: U.S State Department, March 2013, Draft EIS for the Keystone XL Project.
Section 1.2 “Overview of Proposed Project,” p. 1.2-3.
Marketlink for Bakken Oil Production
The Bakken Formation is a large unconventional petroleum and natural gas resource underlying
parts of North Dakota, Montana, and the Canadian provinces of Saskatchewan and Manitoba.
Although the region has been producing since 1951, it is only since 2006 that prices and
technology have made it economic for industry to increase production. In March 2012, Bakken
production reached a new high of over 510,000 bpd, the first time breaking 500,000 bpd.15 In late
2011, Bakken oil production in North Dakota exceeded 500,000 bpd. Depending on the pace of
well development in the region, production is expected to increase steadily.16 To date,
15 North Dakota Department of Mineral Resources, “North Dakota Monthly Oil Production Statistics,” Bismarck, ND,
2011, p. 14, https://www.dmr.nd.gov/oilgas/stats/historicaloilprodstats.pdf.
16 James Mason, Oil and Gas Journal, “Bakken’s Maximum Potential Oil Production Rate Explored,” April 2, 2012.
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infrastructure to transport oil produced from the Bakken Formation has not kept up with the
increased production. Bakken shale crude oil is transported to refineries by rail and truck, in
addition to more economical transport by pipeline. (For more analysis, see CRS Report R42032,
The Bakken Formation: Leading Unconventional Oil Development, by Michael Ratner et al.).
The proposed Keystone XL Project would include receipt facilities to transport crude produced
from the Williston Basin in North Dakota and Montana to Gulf Coast refineries. That project, the
Bakken Marketlink, would include facilities to provide crude oil transportation service from
Baker, MT, to Cushing, OK, via the proposed Keystone XL pipeline and from Cushing to delivery
points in Texas, via the proposed Gulf Coast Project.17 Keystone Marketlink18 estimates that the
project will cost $140 million and have the ability to deliver approximately 100,000 bpd of crude
oil to the proposed Keystone XL pipeline.19 Keystone Marketlink currently has firm, long-term
contracts to transport 65,000 bpd of the 100,000 bpd.20
The Bakken contracts improve the economics for Keystone XL Pipeline, raising the amount of oil
slated to flow through the pipeline.21 Lower transportation costs and access to new markets may
support further investment in the Bakken. Furthermore, TransCanada is not the only company
adding pipeline capacity in the region. Notably, Enbridge, another Canadian pipeline company,
has proposed the Bakken Pipeline Project, which would add 120,000 bpd of transport capacity to
move Bakken oil to Midwest markets.22 According to Enbridge, sufficient pipeline capacity has
been slow to emerge in the region because “they’re smaller players in the Bakken. They are not
able to make the 20-year commitments and it’s been a lot of work to get them to commit to the
level that [is] required to underwrite a major project out of the Bakken.”23 Rail transport capacity
is also expanding.24
Presidential Permit Applications
As noted above, federal agencies ordinarily have no authority to site oil pipelines, even interstate
pipelines.25 The primary siting authority for oil pipelines generally would be established under
applicable state law (which may vary considerably from state to state). However, the
construction, connection, operation, and maintenance of a pipeline that connects the United States
with a foreign country requires Executive permission conveyed through a Presidential Permit.
17 The Bakken Marketlink project is described in the August 2011 final EIS for the 2008 Presidential Permit application
in Section 2.5.3, available at http://keystonepipeline-xl.state.gov/documents/organization/182012.pdf.
18 Keystone Marketlink, LLC, is a wholly owned subsidiary of TransCanada Pipelines Limited.
19 2012 Application of TransCanada Keystone Pipeline, L.P. for a Presidential Permit (footnote 13), p. 16.
20 Ibid.
21 Vanderklippe, 2011.
22 Enbridge, “Bakken Pipeline Project—Project Overview,” press release, http://www.enbridge.com/
BakkenPipelineProjects/BakkenPipelineProjectUS.aspx.
23 Lauren Krugel, “TransCanada attracts support for Montana-to-Oklahoma crude pipeline,” The Canadian Press,
January 20, 2011.
24 Energy Information Administration, “Rail Deliveries of Oil and Petroleum Products Up 38% in First Half of 2012,”
July 26, 2012, http://www.eia.gov/todayinenergy/detail.cfm?id=7270#.
25 This is in contrast to interstate natural gas pipelines, which, under Section 7(c) (15 USC §717f(c)) of the Natural Gas
Act, must obtain a “certificate of public convenience and necessity” from the Federal Energy Regulatory Commission.
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Executive Order 13337 delegates to the Secretary the President’s authority to receive applications
for Presidential Permits.26 Issuance of a Presidential Permit depends on a State Department
determination that the project would serve the “national interest.” The term is not defined in the
Executive Orders or elsewhere. Regarding its interpretation of the term, the State Department has
asserted that, consistent with the President’s broad discretion in the conduct of foreign affairs, it
has significant discretion in deciding the factors it will examine in making a national interest
determination.27 The State Department will not necessarily evaluate the same factors for each
project seeking a permit. However, for the 2008 Keystone XL Project, the State Department
identified the following as key factors it considered when making determinations for previous
applications for pipeline permits:
• Environmental impacts of the proposed projects;
• Impacts of the proposed projects on the diversity of supply to meet U.S. crude oil
demand and energy needs;
• The security of transport pathways for crude oil supplies to the United States
through import facilities constructed at the border relative to other modes of
transport;
• Stability of trading partners from whom the United States obtains crude oil;
• Relationship between the United States and various foreign suppliers of crude oil
and the ability of the United States to work with those countries to meet overall
environmental and energy security goals;
• Impact of proposed projects on broader foreign policy objectives, including a
comprehensive strategy to address climate change;
• Economic benefits to the United States of constructing and operating proposed
projects; and
• Relationships between proposed projects and goals to reduce reliance on fossil
fuels and to increase use of alternative and renewable energy sources.28
The State Department identifies and considers environmental impacts of a project within the
context of its obligation to comply with NEPA.29 Broadly, NEPA requires federal agencies to
consider the environmental impacts of an action (e.g., granting or denying a Presidential Permit)
before proceeding with them and to inform the public of those potential impacts.
26 See Executive Order 13337, “Issuance of Permits With Respect to Certain Energy-Related Facilities and Land
Transportation Crossings on the International Boundaries of the United States,” 69 Federal Register 25299, May 5,
2004, as amended, and Department of State Delegation of Authority No. 118-2 of January 26, 2006. The source of
Permitting Authority for relevant Executive Orders is discussed further in the Appendix A.
27 U.S. Department of State, “Final Environmental Impact Statement for the Proposed Keystone XL Project,” August
2011, p. 1-4.
28 Ibid. It was noted that this list is not exhaustive and that the State Department may consider additional factors in its
national interest determination process.
29 In processing Presidential Permit applications, the State Department is also explicitly directed to review the project’s
compliance with the National Historic Preservation Act (16 U.S.C. §470f), the Endangered Species Act (16 U.S.C.
§1531 et seq.), and Executive Order 12898 of February 11, 1994 (59 Federal Register 7629), concerning environmental
justice.
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The State Department has broad discretion in determining what additional factors it will examine
to inform its national interest determination and, ultimately, whether a proposed project is in the
national interest. However, the State Department is required to consult with and seek the views of
the Secretaries of Defense, the Interior, Commerce, Transportation, Energy, and Homeland
Security; the Attorney General; and the Administrator of the Environmental Protection Agency.
The department is also required to solicit input from affected local, tribal, and state agencies and
to invite public comment in arriving at its determination.
Consideration of Environmental Impacts Under NEPA
To ensure that environmental impacts are considered before final agency decisions are made, an
Environmental Impact Statement (EIS) must be prepared for every major federal action that may
have a “significant” impact upon the environment.30 With respect to the Presidential Permit
applications submitted by TransCanada, the State Department concluded that approval of a permit
for the proposed construction, connection, operation, and maintenance of the pipeline and its
associated facilities at the United States border could result in significant environmental impacts
and, hence, requires the preparation of an EIS.31
Preparing an EIS is the responsibility of a designated “lead agency,” in this case, the State
Department. In developing an EIS for a private party applicant (TransCanada) the State
Department may use a third-party contractor. Consistent with regulations implementing NEPA,
such a contractor is one that is selected by and works under the direction of the State Department,
but is being paid by the applicant.32
An EIS is generally prepared in two stages resulting in a draft and final EIS. Among other
requirements, an EIS must include a statement of the purpose and need for an action, a
description of all reasonable alternatives to meet that purpose and need, a description of the
environment to be affected by those alternatives, and an analysis of the direct and indirect effects
of the alternatives, including cumulative impacts.33 Accordingly, the State Department EIS must
demonstrate that it has identified and considered potential environmental impacts of the entire
pipeline project (including the construction, operation, and maintenance of the pipeline and its
associated facilities), not just the facilities at the border crossing.
For the 2008 Presidential Permit application, the State Department prepared a draft, supplemental
draft, and final EIS. If the State Department modified its final EIS for the 2008 Presidential
Permit application and continued its national interest determination, as it originally proposed in
November 2011, it could have completed the NEPA process with only the publication of a
30 42 U.S.C. §4332(2)(C).
31 U.S. Department of State, “Notice of Intent to Prepare a Supplemental Environmental Impact Statement (SEIS) and
To Conduct Scoping and To Initiate Consultation Under Section 106 of the National Historic Preservation Act for the
Proposed TransCanada Keystone XL Pipeline Proposed To Extend From Phillips, MT (the Border Crossing) to Steele
City, NE,” 77 Federal Register 36032, June 15, 2012.
32 U.S. Department of State, “Interim Guidance for the Use of Third-Party Contractors in Preparation of Environmental
Documents by the Department of State,” available online at http://www.state.gov/documents/organization/190304.pdf.
33 In preparing an EIS associated with a Presidential Permit, NEPA regulations promulgated by both the Council of
Environmental Quality (CEQ) and the State Department would apply. CEQ regulations implementing NEPA (under 40
C.F.R. §§1500-1508) apply to all federal agencies. NEPA regulations applicable to State Department actions, which
supplement the CEQ regulations, are found at 22 C.F.R. Part 161.
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supplemental final EIS that included analysis of new routes through Nebraska. However, denial
of the Presidential Permit ended the NEPA process for the 2008 project. With the new Presidential
Permit application, the State Department was required to begin a new NEPA process and,
eventually, determine whether that project would serve the national interest.
On March 1, 2013, the State Department released the draft EIS for the 2012-proposed Keystone
XL Project as a supplement to the final EIS prepared for the 2008 Presidential Permit application
(released in August 2011).34 For TransCanada’s 2008 Presidential Permit application, the draft,
supplemental draft, and final EISs identified environmental impacts associated with a proposed
pipeline route that would have extended from the Canadian border in Phillips County, MT, to
Steele City, NE, and construction of a pipeline from Cushing, OK, to the Gulf Coast of Texas.
The draft EIS evaluates potential impacts associated with the new route from Montana to Steele
City, NE, that avoids the Nebraska Sand Hills, and excludes the proposed Gulf Coast Project.
According to the State Department, the 2013 draft EIS includes a “comprehensive review of the
new route in Nebraska as well as any significant new circumstances or information that is now
available on the largely unchanged route in Montana and South Dakota. It also expands and
updates information that had been included in the 2011 Final Environmental Impact Statement
that was prepared for the previous Keystone XL application.”35
To prepare an EIS, the State Department is required to obtain input from “cooperating agencies,”
which include any agency with jurisdiction by law or with special expertise regarding any
environmental impact associated with the project.36 Cooperating agencies for the Keystone XL
Project include the U.S. Environmental Protection Agency (EPA); the Department of
Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of
Pipeline Safety (OPS); the Department of the Interior’s Bureau of Land Management, U.S. Fish
and Wildlife Service, and National Park Service; the U.S. Army Corps of Engineers; the U.S.
Department of Agriculture’s Farm Service Agency, Natural Resources Conservation Service, and
Rural Utilities Service; the Department of Energy’s Western Area Power Administration; and state
environmental agencies.
EPA Rating of the Environmental Impact Statement
In addition to its role as a cooperating agency, EPA is also required to review and comment
publicly on the EIS and rate both the adequacy of the EIS itself and the level of environmental
impact of the proposed project.37 Rating the EIS takes place after the draft is issued. The EIS
34 See U.S. Department of State, “New Keystone XL Pipeline Application” webpage at http://www.keystonepipeline-
xl.state.gov/. On March 8, 2013, EPA listed the draft EIS in its weekly “Environmental Impacts Statements; Notice of
Availability,” in the Federal Register, see 78 Federal Register 15012. The State Department refers to the EIS released
in March 2013 as a “Draft Supplemental” EIS. This reference apparently reflects the fact that the 2013 draft EIS draws
largely from (or supplements) documentation and analysis included in the final EIS issued for the Keystone XL Project
in 2011. However, for purposes of NEPA compliance, the submission of a new permit application in May 2012 started
the NEPA process anew. While it may draw from the 2011 final EIS, the 2013 draft EIS is a new NEPA document—
not a supplement to an EIS prepared for a different, albeit similar, Presidential Permit application.
35 See footnote 34.
36 40 C.F.R. §1508.5. Also, Executive Order 13337 directs the Secretary to refer an application for a Presidential Permit
to other specifically identified federal departments and agencies on whether granting the application would be in the
national interest.
37 For more information, see the U.S. Environmental Protection Agency’s “Environmental Impact Statement (EIS)
(continued...)
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could be rated either “Adequate,” “Insufficient Information,” or “Inadequate.” EPA’s rating of a
project’s environmental impacts may range from “Lack of Objections” to “Environmentally
Unsatisfactory.” In rating the impact of the action itself, EPA would specify one of the following:
“Lack of Objections,” “Environmental Concerns,” “Environmental Objections,” or
“Environmentally Unsatisfactory.” The federal agency, in this case the Department of State,
would then be required to respond to EPA’s rating, as appropriate.
The State Department accepted public comments on the draft EIS until April 22, 2013. “Public”
comments could come from a range of interested stakeholders, including local, state, tribal, or
federal agencies. EPA reviewed the draft EIS and submitted comments on it to the State
Department.38 EPA’s comments are on its assessment of the proposed project’s impacts and the
adequacy of the draft EIS itself. It rated the draft EIS as “EO-2” (Environmental Objections—
Inadequate Information). EPA states that, while the agency believes the draft EIS strengthens the
analysis presented to date in the NEPA process, it recommends several improvements to the
analysis of the proposed project’s impacts and to mitigate certain impacts. Specifically, EPA
recommended the following:
• Greenhouse Gas Emissions—use monetized estimates of the social cost of the
greenhouse gas (GHG) emissions from a barrel of oil sands crude compared to
average U.S. crude. EPA noted that TransCanada’s market analysis and its
conclusion that oil sands crude will find a way to market with or without the
Project are central to the draft EIS conclusions regarding the Project’s potential
GHG emissions. As a result, the agency asserts that the final EIS should be based
on an updated energy-economic modeling effort. The final EIS should also
explore specific ways the United States might work with Canada to promote
efforts to reduce GHG emissions from oil sands crude production.
• Pipeline Safety—in the wake of the 2010 Enbridge spill of oil sands crude in
Michigan, incorporate into its permit conditions various steps intended to
improve potential oil spill response and cleanup.
• Pipeline Routes Across the Ogallala Aquifer—provide in the final EIS more
detail on pipeline route alternatives that would parallel the existing Keystone
Pipeline, and likely further reduce potential environmental impacts to
groundwater resources across the Ogallala Aquifer, or explain why these
alternatives were not considered.
• Community and Environmental Justice Impacts—document in its permit
conditions TransCanada’s commitments to conduct cleanup and restoration and
to provide alternative water supplies to affected communities in the event of an
oil discharge affecting surface waters or groundwater.
Now that EPA and other public and agency comments have been submitted, the State Department
must respond to those comments and possibly modify the draft EIS to address them. After it does
so, the State Department may issue a final EIS. The time it may take the department to do so will
(...continued)
Rating System Criteria” at http://www.epa.gov/compliance/nepa/comments/ratings.html.
38 Letter from the U.S. Environmental Protection Agency’s Cynthia Giles, Assistant Administrator for Enforcement and
Compliance Assurance to Jose Fernandez and Kerri-Ann Jones, Assistant Secretaries, U.S. Department of State,
available online at http://epa.gov/compliance/nepa/keystone-xl-project-epa-comment-letter-20130056.pdf.
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Keystone XL Pipeline Project: Key Issues
depend on various factors, including the scope and the nature of the comments to which it must
respond. After the final EIS is issued, the State Department may begin the 90-day period to make
the national interest determination.
Major milestones in the NEPA process, for both the 2008 and 2012 Presidential Permit
applications, are listed in Table 1, below (for detail on milestones associated with the 2008 permit
application, see Appendix B).
Table 1. Milestones in the NEPA process for the Keystone XL Project
Federal, State, and Company Actions Relevant to the NEPA Compliance Process
Date Party
Description
NEPA Compliance Milestones Relevant to TransCanada’s 2008 Presidential Permit Application
Sept.
TransCanada
Application for a Presidential Permit submitted to the State Department to
2008
Keystone
authorize “the construction, connection, operation, and maintenance of pipeline
Pipeline, L.P.
facilities for the importation of crude oil to be located at the United States-
Canada border”; “Preliminary Environmental Report” for the project also
submitted.
Apr. 16,
State
Draft EIS for the proposed Keystone XL Pipeline project released for public
2010
Department
comment.
July 16,
EPA
Agency rates the draft EIS as “Inadequate,” noting that potential y significant
2010
impacts were not evaluated, that additional information and analysis was needed,
and the draft EIS would need to be revised and again made available for public
review.
Apr. 15,
State
Supplemental draft EIS issued.
2011
Department
June 6,
EPA
Agency rates the supplemental draft EIS as having “Insufficient Information” and
2011
the action as having “Environmental Objections”; recommends additional
analysis on a range of issues to be addressed in the final EIS.
Aug. 26,
State
Final EIS issued; 90-day public comment related to the national interest
2011
Department
determination process begins.
Nov. 22,
Governor of
Signed legislation passed during the special session directing the Nebraska DEQ
2011
Nebraska
to work col aboratively with the State Department to gather information
necessary for a supplemental EIS.
Nov.
Nebraska
Agencies begin to negotiate a Memorandum of Understanding (MOU) regarding
2011
DEQ/State
their col aboration on the supplemental final EIS. Nebraska DEQ hires a
Department
contractor to delineate the “Sand Hills” region alternative routes must avoid.
Dec. 23,
Congress
The Temporary Payrol Tax Cut Continuation Act of 2011 (P.L. 112-78)
2011
enacted, provisions include a requirement that the Secretary issue a permit for
the project within 60 days, unless the President determines the project is not in
the national interest.
Jan. 18,
State
Department denies, with the President’s consent, the Presidential Permit for the
2012
Department
Keystone XL Project; states that its decision was predicated on the fact that the
60-day deadline under P.L. 112-78 did not provide sufficient time to obtain
information necessary to assess the project’s national interest.
Feb. 3,
State
Formal permit denial issued; State Department and Nebraska DEQ suspend
2012
Department
work on MOU regarding a supplemental EIS.
Feb.
TransCanada
State Department is informed of the company’s intent to continue with the Gulf
2012
Coast Project (a pipeline that would not require an EIS if constructed apart from
the lager project that requires authorization via a Presidential Permit).
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Date Party
Description
April 19,
TransCanada
Submits to Nebraska DEQ, Initial Report Identifying Alternative and Preferred
2012
Corridors for Nebraska Reroute; public meetings on newly proposed routes fol ow.
NEPA Compliance Milestones Relevant to TransCanada’s 2013 Presidential Permit Application
May 4,
TransCanada
Application for a Presidential Permit submitted to the State Department to
2012
authorize “the construction, connection, operation, and maintenance of pipeline
facilities for the importation of crude oil to be located at the United States-
Canada border.”
June, 15,
State
Publishes in the Federal Register: “Notice of Intent To Prepare a Supplemental
2012
Department
Environmental Impact Statement (SEIS) and To Conduct Scoping and To Initiate
Consultation Under Section 106 of the National Historic Preservation Act for
the Proposed TransCanada Keystone XL Pipeline Proposed To Extend From
Phillips, MT (the Border Crossing) to Steele City, NE.”
March 1,
State
Releases draft EIS for the 2012 Keystone XL Project for public comment.
2013
Department
April 22,
State
Deadline for submission of public comments on the draft EIS.
2013
Department
April 23,
EPA
The proposed project and draft EIS is rated “EO-2,” meaning EPA has
2012
“Environmental Objections,” regarding the project’s impacts, and that the draft
EIS includes “Insufficient Information”; recommends mitigation efforts to address
project impacts and additional analysis that should be included in the final EIS.
Source: Congressional Research Service, based on a review of events during, and affecting, the NEPA process
conducted for the 2008 and 2012 Presidential permit applications for the Keystone XL Project.
The National Interest Determination
Generally, after a final EIS is issued, a federal agency may issue a final record of decision (ROD)
for the project. However, for a Presidential Permit, issuance of the final EIS represents the
beginning of a 90-day public review period during which the State Department gathers
information from those necessary to inform its national interest determination. Ultimately, a
decision regarding issuance of a Presidential Permit for a pipeline project would be reflected in a
combined “Record of Decision and National Interest Determination,” issued by the State
Department.39 That document, required under elements of both NEPA and E.O. 11424, formalizes
the selection of a project alternative.
During the 90-day public review period for the 2008 Presidential Permit application, the State
Department held public meetings in each of the six states through which the proposed pipeline
would pass and in Washington, DC.40 The meetings were intended to give members of the public
additional opportunity to voice their opinions on issues they thought should be taken into account
in determining whether granting or denying the Presidential Permit would be in the national
interest. During the review period, the State Department received input from state, local, and
tribal officials as well as members of the public.
39 For example, see U.S. Department of State, “Record of Decision and National Interest Determination, TransCanada
Keystone Pipeline, LP Application for Presidential Permit,” February 25, 2008, http://www.cardnoentrix.com/keystone/
project/SignedROD.pdf.
40 U.S. Department of State press release, “Keystone XL Final Environmental Impact Statement Released; Public
Meetings Set,” August 26, 2011, http://www.state.gov/r/pa/prs/ps/2011/08/171082.htm.
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Keystone XL Pipeline Project: Key Issues
On November 10, 2011, during the public review period, the State Department issued a statement
regarding the public comments and its response to those comments.41 The department stated that
it received comments on a wide range of issues including the project’s potential impact on jobs,
pipeline safety, health concerns, the societal impact of the project, and oil extraction in Canada.
Concern regarding the proposed pipeline route through the Sand Hills area of Nebraska was
identified as one of the most common issues raised. Comments regarding that pipeline route were
consistent with the environmental impacts identified in the final EIS with regard to the unique
combination of characteristics of the Sand Hills region (e.g., a high concentration of wetlands of
special concern, a sensitive ecosystem, and extensive areas of very shallow groundwater).
Further, the Nebraska legislature convened a special session to consider the legislation that would
establish regulations applicable to pipeline siting within the state.
Facing the prospect of new state pipeline siting regulations applicable to the Sand Hills, together
with the concern about the Keystone XL pipeline’s specific “preferred” route, the State
Department announced that it needed additional information about alternative pipeline routes
avoiding the environmentally sensitive Sand Hills area in Nebraska before moving forward with
its national interest determination.42 Although the State Department did not decide that
environmental issues led to a determination that the proposed project was not in the national
interest, environmental issues identified in the final EIS, and further stressed in public comments,
led to its decision to delay that determination until it gathered this information. In a concurrent
press release, President Obama stated
Because this permit decision could affect the health and safety of the American people as
well as the environment, and because a number of concerns have been raised through a
public process, we should take the time to ensure that all questions are properly addressed
and all the potential impacts are properly understood.43
Subsequently, TransCanada announced that it would work with the State Department and the
Nebraska Department of Environmental Quality (DEQ) to conduct an environmental assessment
to define the best location for the Keystone XL pipeline in Nebraska. Further, the company stated
that it would “cooperate with these agencies and provide them with the information they need to
complete a thorough review that addresses concerns regarding the Sandhills region.”44
As noted previously, on December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of
2011 was enacted (P.L. 112-78). Under Section 501, “Permit for Keystone XL Pipeline,” the
Secretary was required to grant the Presidential Permit for the Keystone XL pipeline project
within 60 days, unless the President determined that the pipeline would not be in the national
interest. On January 18, 2012, the State Department announced, with the President’s concurrence,
that the Presidential Permit for the proposed Keystone XL Pipeline would be denied at that time
because it was determined not to serve the national interest. That recommendation “was
41 U.S. Department of State, “Keystone XL Pipeline Project Review Process: Decision to Seek Additional
Information,” Media Note, PRN 2011/1909, Office of the Spokesperson, November 10, 2011.
42 Ibid.
43 The White House, Office of the Press Secretary, “Statement by the President on the State Department’s Keystone XL
Pipeline Announcement,” November 10, 2011.
44 See TransCanada Corp., Media Advisory, “State of Nebraska to Play Major Role in Defining New Keystone XL
Route Away From the Sandhills,” November 14, 2011, available at http://www.transcanada.com/5896.html.
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predicated on the fact that the Department does not have sufficient time to obtain the information
necessary to assess whether the project, in its current state, is in the national interest.”45
The process of determining a project’s national interest illustrates the distinctly different, yet
interrelated requirements applicable to the NEPA process and the Presidential Permit application
process. Under NEPA, the State Department (or any other federal agency considering an action)
must fully assess the environmental consequences of an action and potential project alternatives
before making a final decision. NEPA does not prohibit a federal action that has adverse
environment impacts; it requires only that a federal agency be fully aware of and consider those
adverse impacts before selecting a final project alternative. That is, NEPA is intended to be part of
the decision-making process, not dictate a particular outcome. By contrast, issuance of a
Presidential Permit is predicated on the Secretary’s finding that the proposed project would serve
the national interest. Milestones in the State Department’s process to make its national interest
determination for the 2008 permit application are summarized in Table 2.
Table 2. Milestones in National Interest Determination Process for the 2008
Keystone XL Pipeline
Date Party
Description
Aug.-
State
The 90-day public review period for national interest determination begins;
Oct.
Department
State Department holds public meetings in the six states through which the
2011
proposed pipeline would pass and in Washington, DC.
Oct.
Congress
Fourteen Members of Congress request the State Department Office of
2011
Inspector General (IG) to investigate the department’s handling of the EIS and
national interest determination for the Keystone XL project.
Oct. 24,
Governor of
The governor calls the Nebraska legislature into a special session to determine if
2011
Nebraska
siting legislation can be crafted and passed for pipeline routing in Nebraska.
Nov. 4,
State
IG announces it is initiating a special review to determine to what extent the
2011
Department
department and all other parties involved complied with Federal laws and
regulations relating to the Keystone XL pipeline permit process.
Nov. 10,
State
The agency announces that additional information will be needed regarding
2011
Department
alternative pipeline routes that would avoid the Nebraska Sand Hills before
national interest determination can be made. Officials suggest that analysis
needed to prepare the supplemental EIS, including additional public comment,
could be completed as early as the first quarter of 2013.
Nov. 14,
TransCanada
The company announces that it will work with the Nebraska Department of
2011
Environmental Quality (DEQ) to identify a potential pipeline route that would
avoid the Nebraska Sand Hills.
Nov. 22,
Governor of
The governor signs legislation passed during the special session directing the
2011
Nebraska
Nebraska DEQ to work col aboratively with the State Department to gather
information necessary for a supplemental EIS.
Nov.
Nebraska
The agencies begin to negotiate a Memorandum of Understanding (MOU)
2011
DEQ/State
regarding their col aboration on the supplemental EIS. Nebraska DEQ hires a
Department
contractor to delineate the “Sand Hills” region that alternative routes must
avoid.
45 U.S. Department of State, Media Note, “Denial of the Keystone XL Pipeline Application,” January 18, 2012,
available at http://www.state.gov/r/pa/prs/ps/2012/01/181473.htm.
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Date Party
Description
Dec. 23,
Congress
The Temporary Payrol Tax Cut Continuation Act of 2011 (P.L. 112-78) is
2011
enacted, including provisions requiring the Secretary to issue a permit for the
project within 60 days, unless the President determines the project is not in the
national interest.
Jan. 18,
State
The agency announces, with the President’s consent, that it will deny the
2012
Department
Keystone XL permit.
Source: Congressional Research Service, based on a review of events during, and affecting, the State Department’s
national interest determination for the 2008 Presidential Permit application for the Keystone XL pipeline project.
State Siting and Additional Environmental Requirements
As the NEPA compliance process for TransCanada’s permit application moves forward, it is
helpful to understand the distinction between what is required under NEPA itself and what may be
required pursuant to other environmental requirements identified within the context of the NEPA
process. NEPA itself requires federal agencies to identify the environmental impacts of an action
before proceeding with them and to involve the public in that process when environmental
impacts are significant. In that process of identifying a proposed project’s environmental impacts,
within the context of preparing the EIS, the lead agency should identify any compliance
obligations (licenses, permits, or approvals) established under additional state, tribal, and federal
law applicable to the portion of the project constructed in the United States.
As noted above, the federal government does not currently exercise siting authority over oil
pipelines. Instead, pipeline siting for the Keystone XL Project must comply with any applicable
state law—which can vary from state to state. South Dakota, for example, required TransCanada
to apply for a permit for the Keystone XL Project from the state public utility commission, which
issued the permit on April 25, 2010.46 Montana requires a certificate from the state’s Department
of Environmental Quality.47
At the time of TransCanada’s initial application for a Presidential Permit, Nebraska did not have
any permitting requirements that applied specifically to the construction and operation of oil
pipelines, although a state statute does include an “eminent domain” provision, which grants
eminent domain authority to oil pipeline companies that are unable to obtain the necessary
property rights from the relevant property owners.48 However, due to the controversy surrounding
the Keystone XL Project, Nebraska’s governor called a special session of its legislature to enact
legislation to assert state authority over pipeline siting. Subsequently, the state enacted two
laws—one that would affect the siting of the Keystone XL pipeline and one that outlines
procedures for siting any future oil pipeline in Nebraska.49 The latter will require an oil pipeline
carrier proposing to construct a major oil pipeline in Nebraska to file an application with the
46 South Dakota Public Utilities Commission, Final Decision and Order; Notice of Entry Before the Public Utilities
Commission of the State of South Dakota, In the Matter of the Application by TransCanada Keystone Pipeline, LP for
a Permit Under the South Dakota Energy Conversion and Transmission Facilities Act to Construct the Keystone
Pipeline Project, HP07-001, http://puc.sd.gov/commission/orders/HydrocarbonPipeline/2008/hp07-001.pdf.
47 Montana Major Facility Siting Act, Title 75, Chapter 20.
48 Nebraska Rev. Stat. §57-1101.
49 See Nebraska governor Dave Heineman’s November 23, 2011, statement “Common Sense Solution,” available at
http://www.governor.nebraska.gov/columns/2011/11/23_solution.html.
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state’s Public Service Commission and receive approval before beginning construction.
Additionally, the law authorized the commission to follow certain procedures before deciding
whether a proposed oil pipeline would serve the public interest.
Although there are limited federal requirements applicable to oil pipeline siting, there are
numerous local, state, tribal, and federal requirements applicable to pipeline construction,
operation, and maintenance. For example, the 2013 draft EIS for the Keystone XL Project lists
major permits, licenses, approvals, and consultation requirements for the proposed project that
would be required by federal, state, and local agencies prior to implementation of the project.50
Following are selected requirements included on that list:
• The U.S. Army Corps of Engineers—issuance of a permit for sections of the
project that require placement of dredge and fill material in waters of the United
States, including wetlands (pursuant to Section 404 of the Clean Water Act), or
for pipeline crossings of navigable waters (pursuant to Section 10 of the Rivers
and Harbors Act);
• The Environmental Protection Agency—review and issue National Pollutant
Discharge Elimination System permits for the discharge of pollutants in state
waters (pursuant to Section 402 of the Clean Water Act);
• The Bureau of Land Management—grant temporary use permits for portions of
the project that would encroach on federal lands;
• U.S. Fish and Wildlife Service—consider impacts to federally listed endangered
species (pursuant to the Endangered Species Act) and provide a Biological
Opinion if the project is likely to adversely affect federally listed species.
• Multiple state/county agencies—consult on and/or consider issuance of permits
for projects that cross navigable waters or state highways, or involve work
potentially affecting state streams, cultural resources, or natural resources.
The time it took to complete the NEPA process was a focus of attention for the 2008 Presidential
Permit application. However, for past pipeline projects, obtaining all required local, state, tribal,
and federal permits, approvals, and licenses took a similar amount of time. By way of example,
for the Alberta Clipper pipeline project (another oil sands pipeline) completion of the NEPA
process, the national interest determination, and issuance of a Presidential Permit took
approximately two years. Obtaining the necessary permits, approvals, and licenses for
construction of the pipeline took an additional two years.
Legislative Efforts to Change Permitting Authority
In light of the State Department’s denial of the 2008 permit application for the Keystone XL
Project, some in Congress have sought alternative means to support development of the pipeline.
There were a number of legislative proposals in the 112th Congress to change the federal
permitting authority for the pipeline. H.R. 3548 would have transferred the permitting authority
over the Keystone XL Project from the State Department to the Federal Energy Regulatory
Commission (FERC), requiring the commission to issue a permit for the project within 30 days of
50 U.S. Department of State, March 2013, Draft EIS, Section 1.9, “Permits, Approvals, and Regulatory Requirements.”
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enactment.51 Other proposals, such as H.R. 3811 and S. 3445, would have directly shifted
permitting authority to Congress, effectively approving upon enactment the permit applications
filed by TransCanada in 2008 and 2012, respectively.
Changing, or eliminating altogether, the State Department’s role in issuing cross-border
infrastructure permits may raise questions about the President’s executive authority (further
discussed in Appendix A). In response to H.R. 3548, for example, the State Department’s key
official on Keystone XL testified before Congress:
The legislation raises serious questions about existing legal authorities, questions the
continuing force of much of the federal and all of the state and local environmental and land
use management authority over the pipeline, and overrides foreign policy and national
security considerations implicated by a cross border permit, which are properly assessed by
the State Department.52
Such proposals may also raise some administrative and legal challenges for FERC or other
federal agencies. A senior FERC official testified that a proposal like H.R. 3548 does not provide
enough time for an “adequate” public record, provides no clear authority for enforcing measures
required in the EIS, does not articulate a process for authorizing alterations to the pipeline route
in Nebraska, and is unclear about permits required from other federal agencies, among other
concerns.53 For additional analysis of associated legal issues, see CRS Report R42124, Proposed
Keystone XL Pipeline: Legal Issues, by Adam Vann, Kristina Alexander, and Kenneth R. Thomas.
Given the State Department’s initial permit denial, and opposition from various environmental
groups and stakeholders along the pipeline route, legal challenges are a possibility. However, in
the event of a challenge based on an environmental issue, the distinction between State
Department actions required under NEPA and those required under its authority to issue a
Presidential Permit would be relevant. NEPA does not create a private right of action. Instead,
judicial challenges to a federal agency action under NEPA are brought pursuant to the
Administrative Procedure Act (APA, 5 U.S.C. §§706 et seq.). Presidential actions, however, are
not subject to judicial review under the APA.54 That is, the final agency action reflected in an
ROD is subject to judicial review, but the State Department’s national interest determination,
made under its authority to issue a Presidential Permit, is not. For more analysis of the State
Department’s authority to grant a Presidential Permit, see Appendix A.
51 The Surface Transportation Extension Act of 2012, Part II (H.R. 4348), which passed in the House on April 18,
2012, also contained these provisions, but they were subsequently dropped from the bill in conference committee with
the Senate.
52 Kerri-Ann Jones, Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs,
Testimony before the House Energy and Commerce Committee, Subcommittee on Energy and Power Hearing on the
North American Energy Access Act, January 25, 2012.
53 Jeff Wright, Director, Office of Energy Projects, Federal Energy Regulatory Commission, Testimony before the
House Energy and Commerce Committee, Subcommittee on Energy and Power Hearing on the North American Energy
Access Act, January 25, 2012.
54 While the APA’s definition of “agency” does not specifically exclude or include the president, the Supreme Court
has held that exercises of presidential authority are not subject to judicial review because the president is not an agency
(Dalton v. Specter, 511 U.S. 462, 470 (1994)). The Court has also held that the APA does not apply to the president
based on separation of powers principles (Franklin v. Massachusetts, 505 U.S. 788, 800-01 (1992)).
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Arguments For and Against the Pipeline
Proponents of the Keystone XL Project, including Canadian agencies and U.S. and Canadian
petroleum industry stakeholders, base their arguments supporting the pipeline primarily on
increasing the security and diversity of the U.S. petroleum supply and economic benefits,
especially jobs. Pipeline opponents are generally environmental organizations and community
groups. Their concerns stem from issues that can be broadly categorized as the pipeline’s global
or community impacts. “Global” impacts stem primarily from concern regarding the lifecycle
greenhouse gas (GHG) emissions associated with the development of Canadian oil sands,
compared to conventional oil or renewable fuels.55 Although the concern regarding GHG
emissions is focused primarily on the extraction process, opponents also argue that use of the oil
sands crude promotes continued U.S. dependency on fossil fuels. Concern over adverse
community impacts of the pipeline stems primarily from impacts associated with the pipeline’s
construction and long-term use on private land—particularly its potential to affect agricultural
uses and cattle grazing. Communities along the pipeline route are also concerned about the risk of
a potential release of heavy crude and the operators’ ability to respond to a release, particularly in
remote areas.
Impact on U.S. Energy Security
In its Presidential Permit application, TransCanada asserts that constructing the proposed
Keystone XL pipeline is in the U.S national interest to maintain adequate crude oil supplies for
U.S. refineries. The application argues that the pipeline will allow U.S. refiners to substitute
Canadian supply for other foreign crude supply and to obtain direct pipeline access to secure and
growing Canadian crude output. In particular, the application asserts that the pipeline would allow
the United States to decrease its dependence on foreign crude oil supplies from Mexico and
Venezuela, the two largest oil exporters into the U.S. Gulf Coast.56 Consistent with this argument,
H.R. 3900 would seek to ensure that any crude oil and bitumen transported by the Keystone XL
pipeline, or any resulting refined products, would have to remain in U.S. markets subject to a
presidential waiver allowing foreign export.57 Depending upon the circumstances, however, such
restrictions could raise concerns with respect to international trade agreements, among other
considerations.
Energy security arguments have taken on additional weight in light of the recent geopolitical
tensions in the Middle East and North Africa. However, it is worth noting that even if Keystone
XL is built, prices for the crude oil it carries as well as for domestically produced oil from
elsewhere will continue to be affected by international events. The oil market is globally
integrated and events in major producer and consumer countries can affect prices everywhere.58
55 For additional analysis of greenhouse gas issues associated with Canadian oil sands crudes, see CRS Report R42537,
Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions, by Richard K. Lattanzio.
56 TransCanada Keystone Pipeline, L.P., September 19, 2008, pp. 6-8.
57 On February 7, 2012, the House Energy and Committee rejected an amendment to H.R. 3548 offered by
Representative Edward Markey containing similar export restrictions.
58 This is the case unless the oil is stranded due to transport bottlenecks. Ironically, the bottleneck for crude oil flowing
south from the Midwest to the Gulf Coast—which Keystone XL would help alleviate—helped insulate Midwestern
crude oil prices from the impacts of unrest in the Middle East and North Africa. However, as is discussed below, this
may have benefited Midwestern refiners but probably did not significantly reduce costs for U.S. consumers.
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For example, the disruption of Libyan supply in early 2011 contributed to higher crude oil prices
in the United States, even though the United States imported almost no oil from Libya before the
unrest broke out.59
Canadian Oil Imports in the Overall U.S. Supply Context60
Gross U.S. imports of crude oil and petroleum products averaged 11.4 million bpd (Mbpd) in
2011.61 U.S. oil exports averaged 2.9 Mbpd (almost entirely petroleum products), leaving net
imports at 8.4 Mbpd.62 U.S. net imports have fallen by 4.1 Mbpd or 33% since they peaked in
2005 as a result of lower total oil consumption and higher domestic production. Some of this
decline could be mitigated in the near term as oil demand recovers from the recession. However,
there is increasing sentiment among forecasters that U.S. oil imports have passed their high water
mark already and may remain relatively flat or fall in the foreseeable future.63
Among the largest sources of U.S. gross oil imports are Canada (2.7 Mbpd), the Persian Gulf (1.9
Mbpd), Mexico (1.2 Mbpd), and Venezuela (0.9 Mbpd). Imports from the latter two sources have
decreased in recent years in part due to lower need for imports described above and in part due to
developments in those countries. Mexican production has been falling since 2004 because new oil
developments have not been able to offset depletion at Mexico’s giant Cantarell field. Imports
from Venezuela, another key source of U.S. imports, have also fallen. Venezuelan production
never fully recovered after a strike at its national oil company, Petróleos de Venezuela, in 2002-
2003. Venezuelan production today is nearly 1 Mbpd less than that achieved in 2001. In recent
years, Venezuela has also been trying to diversify business away from the United States, for
example, by increasing exports to China.64
Meanwhile, Canadian production and exports to the United States have increased, primarily due
to growing output from the oil sands in western Canada. Energy markets in the United States and
Canada are well integrated by pipeline infrastructure; nearly all Canadian energy exports go to the
United States.65 Canadian oil production has increased about 0.2 Mbpd since 2005 and exports to
59 For more about this, see CRS Report R41683, Middle East and North Africa Unrest: Implications for Oil and
Natural Gas Markets, by Michael Ratner.
60 For a primer on the oil market, see CRS Video Brief Introduction to the Oil Market, at http://www.crs.gov/analysis/
Pages/WVB00002.aspx.
61 All data in this section are from the U.S. Energy Information Administration’s (EIA’s) Petroleum & Other Liquids
(http://www.eia.gov/petroleum/data.cfm), International Energy Statistics (http://tonto.eia.doe.gov/cfapps/ipdbproject/
IEDIndex3.cfm), and the Short Term Energy Outlook (http://www.eia.gov/forecasts/steo/).
62 For context, the United States consumed 18.8 Mbpd in 2011, more than 20% of the world’s oil market. Net imports
are gross or total imports less total exports. This section will focus on gross imports, though it should be noted that
among U.S. petroleum exports about 0.2 Mbpd of petroleum products go to Canada and 0.4 Mbpd to Mexico.
63 For more analysis, see CRS Report R42465, U.S. Oil Imports and Exports, by Robert Pirog.
64 U.S. Energy Information Administration, “Country Analysis Brief: Venezuela,” February 2010,
http://www.eia.doe.gov/emeu/cabs/Venezuela/Oil.html.
65 For further analysis of U.S.-Canada energy trade, see CRS Report R41875, The U.S.-Canada Energy Relationship:
Joined at the Well, by Paul W. Parfomak and Michael Ratner.
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the United States have increased by 0.5 Mbpd (see Figure 3).66 Some expect Canadian oil
production to grow by nearly 2 Mbpd by 2025 due to increased output from the oil sands.67
Figure 3. Gross U.S. Oil Imports by Major Sources
Average annual imports in Mbpd
14
12
10
8
Rest of World
6
Other OPEC
4
Persian Gulf OPEC
2
Mexico
Canada
0
1
95
7
99
1
03
5
09
1
199 1993 19
199 19
200 20
200 2007 20
201
Source: U.S. Energy Information Administration, Petroleum & Other Liquids: U.S. Imports by
Country of Origin, March 19, 2012. http://www.eia.gov/petroleum/data.cfm#imports.
Oil Sands, Keystone XL, and the U.S. Oil Market
Oil sands (also referred to as tar sands) are a mixture of clay, sand, water, and heavy black
viscous oil known as bitumen. Oil sands require more processing than conventional crude oil. Oil
sands are processed to extract the bitumen, which can then be sent to refineries in one of two
forms. Bitumen can be upgraded into “syncrude,” a light crude that is suitable for pipeline
transport and is relatively easy to refine. Alternatively, bitumen can be blended with lighter
hydrocarbons to form a heavy crude (diluted bitumen or “dilbit”) that can be transported by
pipeline. The bulk of oil sands supply growth is expected to be in the form of the latter.68
Most oil sands imports into the United States currently go to the Midwest, where refineries have
been investing in complex refining capacity to process growing volumes of heavy Canadian
crude.69 The U.S. Gulf Coast region already has a large amount of complex refining capacity and
66 As in the United States, Canadian consumption fell due to economic downturn. This allowed the increment in exports
to be higher than the increment in production.
67 Canadian Association of Petroleum Producers (CAPP), Crude Oil: Forecast, Markets, and Pipelines, June 2011, p.
2, http://www.capp.ca/forecast/Pages/default.aspx.
68 CAPP, 2011, p. 7.
69 CAPP, 2011, p. 13. According to CAPP, refineries adding capacity to process more heavy oil in the Midwest include
those in Roxana, IL; Whiting, IN, and Detroit, MI.
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is well suited for processing Canadian heavy crude oil. Gulf Coast refiners currently process
heavy crudes from Venezuela, Mexico, and elsewhere. Complex refineries in the Gulf Coast may
be best equipped to handle a large increase of heavy oil sands crude, though they may still need to
adjust processes and make new capital investments in equipment to accommodate particular
crudes’ characteristics,70 especially if the new Canadian crudes will be used in large amounts.71
There are 58 refineries in the Gulf Coast region (potentially served by the proposed Gulf Coast
Project) that could process heavy crude oil similar in composition to the oil that Keystone XL
pipeline would carry.72
Oil production from the oil sands is increasing, as is production from the Bakken and other areas
of the U.S. Midwest.73 Transport options to carry crude from the Midwest to the Gulf Coast are
limited. (In the past, crude oil had been shipped up from the Gulf Coast to Midwestern refineries.)
The resulting abundance of crude oil in the Midwest has driven down crude oil prices in that
region relative to Gulf Coast and international crude markets. Midwestern refiners benefit from
the lower cost of crude, but it does not translate to substantially lower consumer prices for
gasoline or other products in the region. The Midwest still brings in refined products from the
Gulf Coast, which keeps refined products prices in line with national and international levels.74
Oil sands producers are interested in Keystone XL because it would expand their market reach
into the Gulf Coast. The Gulf Coast region holds half of U.S. refining capacity, including a
substantial amount of technologically advanced capacity capable of processing heavy sour crudes
in large volumes. Reaching a larger market and one with more advanced refining capacity could
increase the price these producers receive for their crude. For their part, Gulf Coast refiners are
interested in the Keystone XL pipeline because it increases the supply of heavy sour crude in the
Gulf Coast region, potentially bringing down their input costs relative to the options they
currently have available. Canadian Natural Resources Limited, an oil sands producer, and Valero
Energy Corporation, a large U.S. refiner, are among those that contracted for shipping capacity on
the Keystone XL pipeline.
With expanded pipeline capacity extending to the U.S. Gulf Coast, Canadian oil sands crude may
compete with other heavy crudes such as those from Mexico, Venezuela, and elsewhere.75 It is
difficult to predict precisely how this competition will play out, but it may take place through
shifting discounts or premiums on crude oils from various sources.76 It may be possible for
70 Baker Hughes, Planning Ahead for Effective Canadian Crude Processing, Baker Petrolite White Paper, 2010,
http://www.bakerhughes.com/assets/media/whitepapers/4c2a3c8ffa7e1c3c7400001d/file/28271-
canadian_crudeoil_update_whitepaper_06-10.pdf.pdf&fs=1497549.
71 For a description of which units refineries may need to add (or have added) to be able to process more Canadian oil
sands supply, see Praveen Gunaseelan and Christopher Buehler, “Changing US Crude Imports Are Driving Refinery
Upgrades,” Oil and Gas Journal, August 10, 2009.
72 TransCanada Keystone Pipeline, L.P., May 2012 Presidential Permit application submitted to the U.S. Department of
State (see footnote 13), p. 14.
73 See increased U.S. crude oil production in the Midwest under the PADD2 heading at the following source: Energy
Information Administration, U.S. Department of Energy, Crude Oil Production (by PADD), Petroleum & Other
Liquids, http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm.
74 Adjusted for transport costs and other regional differences.
75 Center for Energy Economics and Bureau of Economic Geology, Overview of the Alberta Oil Sands, University of
Texas at Austin, 2006, p. 16, http://www.beg.utexas.edu/energyecon/documents/overview_of_alberta_oil_sands.pdf.
76 For more about the U.S. refining system, see CRS Report R41478, The U.S. Oil Refining Industry: Background in
Changing Markets and Fuel Policies, by Anthony Andrews et al.
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Canadian oil supplies to effectively “push out” waterborne shipments from other countries,
although this depends on a wide range of market conditions. Waterborne crudes may more easily
go to other destinations than Canadian crudes, though like Canadian crudes they can be tied to
specialized refining capacity, as is true for Venezuelan heavy crudes.
There is concern that increased supply of crude to the Gulf Coast may result in larger petroleum
product exports rather than contributing to lower domestic fuel cost. Although the United States is
a net importer of oil and petroleum products, it does export some petroleum products. U.S.
petroleum product exports rose when domestic demand declined in the wake of the recession
while foreign demand for certain fuels, such as diesel, remained relatively robust. Issues around
potential export of Canadian crude oil carried on Keystone XL or export of products made from
that crude oil are addressed in CRS Report R42465, U.S. Oil Imports and Exports, by Robert
Pirog.
If Keystone XL secures growing oil sands output for the United States, it could push out seaborne
crudes from elsewhere, regardless of where the product is ultimately sold. If the absence of the
pipeline encourages Canadian oil sands producers and pipeline companies to find an alternate
export route through the Canadian West Coast, Canadian supplies may displace heavy oil supplies
in other markets and potentially allow relatively more overseas imports coming into the Gulf
Coast. This possibility is discussed further below.
It should be noted that Keystone XL aims to alleviate two potential bottlenecks in the pipeline
transportation system: Between Western Canada and the United States, and between the U.S.
Midwest and the Gulf Coast. Existing pipelines between Canada and the United States have spare
capacity to carry rising Canadian production for the time being. According to some estimates,
additional capacity, such as Keystone XL, may not be needed until 2019.77 The latter bottleneck,
between the Midwest and the Gulf Coast, is already at capacity and, as described above, has
resulted in a discount for crude oil in the Midwest (though not for petroleum products). The Gulf
Coast Pipeline Project, the lower leg of originally proposed Keystone XL pipeline, would address
this second bottleneck and help alleviate the discount for Midwestern crudes.
Other Pipeline Projects
Apart from Keystone XL, several other pipeline proposals could help carry growing Canadian
crude oil supplies to the U.S. Gulf Coast. On October 16, 2011, Enbridge announced it would
purchase ConocoPhillips’ share of the Seaway pipeline and reverse its direction to bring crude oil
from the Midwest to the Gulf Coast. ConocoPhillips had kept the pipeline running northward to
serve its refinery in Ponca City, OK. However, the glut of oil in the Midwest had resulted in the
pipeline running at low volumes. Nonetheless, ConocoPhillips had been uninterested in reversing
the pipeline. ConocoPhillips, which is spinning off its refining business,78 sold its share of
Seaway to Enbridge. Enbridge and Seaway shareholder Enterprise Products Partners L.P. reversed
the direction of crude oil flows on the Seaway pipeline to enable it to transport oil from Cushing,
OK, to the U.S. Gulf Coast. The pipeline began running southward at an initial capacity of
77 Testimony of Jim Burkhard, U.S. Congress, Senate Committee on Energy and Natural Resources, US and Global
Energy Outlook for 2012, 112th Cong., 2nd sess., January 31, 2012.
78 ConocoPhillips, “ConocoPhillips Pursuing Plan to Separate into Two Stand-Alone, Publicly Traded Companies,”
press release, July 14, 2011, http://www.conocophillips.com/EN/newsroom/news_releases/2011news/Pages/07-14-
2011.aspx.
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150,000 bpd in 2012, with capacity expected to increase to 400,000 bpd in 2013. The reversal and
expansion are expected to reduce the glut of crude oil in the Midwest and reconnect Midwestern
crude prices to global prices (driving the U.S. Benchmark West Texas Intermediate crude
higher).79
Prior to the Seaway sale, Enbridge had reported significant commitments for two new pipeline
projects: Flanagan South, which would carry oil from Illinois to Oklahoma, and Wrangler, which
would carry oil from Oklahoma to Texas.80 According to Enbridge, the project would duplicate
existing routes and would not cross an international border, so it would not require a Presidential
Permit. Enbridge already has cross border pipeline capacity connecting Alberta to Illinois.
However, according to press reports, Wrangler has been canceled in light of the Seaway purchase
and reversal.81 Enbridge is moving forward with the Flanagan South project, which will have an
initial capacity of about 600,000 bpd and run alongside Enbridge’s existing Spearhead pipeline
(see Figure 4).82 Like Keystone XL/Gulf Coast Project, Flanagan South and a southbound
Seaway may facilitate increased flow of Canadian crude to the U.S. Gulf Coast.
In February 2013, Enbridge also announced a proposal to convert segments of existing natural
gas pipeline owned by Trunkline Gas Company to carry crude oil from western Canada and North
Dakota to refineries in the eastern Gulf of Mexico. The pipeline conversion could potentially
carry up to 660,000 bpd from the market hub at Patoka, IL, more than 700 miles to St. James,
LA.83
79 Jenny Gross, “NYMEX Oil Gets Boost From Pipeline Reversal,” Wall Street Journal, April 22, 2012.
80 Bradley Olson, “Enbridge Pursuing Alternative to Transcanada’s Keystone XL,” Bloomberg, November 9, 2011.
81 Ben Lefebvre, “Enterprise Products Cancels Wrangler Pipeline,” Dow Jones Newswires, November 16, 2011.
82 Enbridge, “Flanagan South Project Fact Sheet,” April 1, 2012, http://www.enbridge.com/
FlanaganSouthPipeline.aspx.
83 Enbridge, “Enbridge and Energy Transfer Join to Provide Crude Oil Pipeline Access to Eastern Gulf Coast Market,”
press release, February 15, 2013.
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Figure 4. Proposed Enbridge Flanagan South Pipeline Route
Source: Enbridge, “Flanagan South Project Fact Sheet,” April 1, 2012, http://www.enbridge.com/FlanaganSouthPipeline.aspx.
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Keystone XL Pipeline Project: Key Issues
Rail Transportation
While the oil industry has been making substantial investments in pipeline capacity to relieve
transportation bottlenecks for Canadian crudes, there has also been a substantial increase in oil
transportation from the region by rail. As the State Department’s 2013 DEIS for the Keystone XL
project states:
In the past 2 years, there has been exponential growth in the use of rail to transport crude oil
throughout North America, primarily originating from the Bakken in North Dakota and
Montana, but also increasingly utilized in other production areas, including the [Western
Canadian Sedimentary Basin]. Because of the flexibility of rail delivery points, once loaded
onto trains the crude oil could be delivered to refineries, terminals, and/or port facilities
throughout North America, including the Gulf Coast area.84
Consistent with this view, both Canadian National Railway and Canadian Pacific Railway
reportedly have long been pursuing a “pipeline on rails” business strategy, including new track
investments, to move Canadian crudes to new markets throughout North America.85 While the
potential volumes associated with rail transportation of crude would likely be lower than pipeline
volumes, they could still be significant. Increasing cross-border movements of crude oil by rail
does not require State Department approval, so such an approach seeks to avoid regulatory
delays. As rail volumes have increased, however, some policymakers have expressed concern
about the potential safety of crude transport by rail compared to pipelines.86
Canadian Oil to East and West Coast Markets
There are proposals to increase the capacity for oil from Alberta to reach the Canadian east and
west coast. Currently, nearly all of Canada’s oil exports go to the United States, mostly through
north-south pipelines. Only one major oil pipeline extends from Alberta to Canada’s west coast:
the Trans Mountain Pipeline, which is owned by Houston-based Kinder Morgan and has a
capacity of 300,000 bpd. Some of the oil from the Trans Mountain Pipeline is loaded onto tankers
and shipped from Vancouver. Nearly all of the quantities shipped by sea go to the United States,
with a small amount going to China and other Asian countries.87 Proposals for additional east and
westbound capacity include the following.
• Kinder Morgan has plans to expand the Trans Mountain Pipeline to 850,000 bpd
by 2017, more than doubling its existing capacity, and expanding west coast
shipping facilities.88 The expansion has received the necessary commitments
from parties interested in shipping additional crude volumes. Some shippers are
interested in using the additional capacity to export more Canadian crude oil to
Asia. Kinder Morgan still needs regulatory approvals from Canadian authorities
84 U.S. Department of State, March 2013, Draft EIS, Section 5.1, “No Action Alternatives.”
85 Nathan Vanderklippe, “CN, CP Push for a ‘Pipeline on Rails,’” The Globe and Mail, February 7, 2011.
86 See, for example, David Sheppard and Jeffrey Jones, “Train Hauling Canadian Oil Derails in Minnesota,” Reuters,
March 27, 2013.
87 According to the Global Trade Atlas, about 0.5% of Canadian crude exports went to China in 2011 (accessed April
25, 2012).
88 Christopher Smith, “KMEP Advances Trans Moutain Crude Pipeline Expansion,” Oil & Gas Journal, April 6, 2012.
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Keystone XL Pipeline Project: Key Issues
and is working to gain the support of stakeholders.89 There is some opposition to
the project, including from groups concerned about additional tanker traffic near
Vancouver and potential oil spill risks.90
• Enbridge has proposed a new pipeline: the Northern Gateway project would have
a 525,000 bpd capacity to send oil from Edmonton to Kitimat, British
Columbia.91 However, Northern Gateway faces opposition from groups including
some First Nations communities and environmental groups.92
• Several projects are considering moving oil east rather than to the west coast.
According to reports, TransCanada is considering a pipeline project sending oil
east from Alberta to Quebec and New Brunswick, which could also carry crude
bound for export.93 Enbridge is also interested in expanding eastbound capacity
by reversing its Line 9 Pipeline.94 Some suggest this could potentially lead to oil
sands crude traveling east, through Montreal and then through another pipeline to
Portland, ME, from which point it could be exported.95 As with other pipeline
projects, these also face opposition from environmental groups concerned about
oil spill risks and/or generally opposed to oil sands development.
These projects reflect anticipated growth of western Canadian oil production and an interest by
Canadian oil producers to diversify their available markets beyond U.S. customers, including to
reach rapidly growing Asian oil demand. Proposals have received criticism from
environmentalists. Because it would require construction of a completely new pipeline, Northern
Gateway in particular has been criticized by some environmental and First Nations groups.96
Canadian interests assert that Canadian oil sales to Asian markets, where oil demand is growing
rapidly, are more likely if greater shipments to the United States are not possible.97 A study
commissioned by the U.S. Department of Energy suggested that
if pipeline projects to the BC [British Columbia] coast are built, they are likely to be utilized.
This is because of the relatively short marine distances to major northeast Asia markets,
future expected growth there in refining capacity and increasing ownership interests by
Chinese companies especially in oil sands production. Such increased capacity would alter
global crude trade patterns. Western Canadian Sedimentary Basin (WCSB) crudes would be
89 David Ebner and Justine Hunter, “U.S. Company Plans Billion-Dollar Expansion of Trans Mountain Pipeline,” The
Global and Mail, April 13, 2012.
90 Jeff Lee, “Vancouver Council, Park Board to Formally Oppose Kinder Morgan Pipeline Expansion,” Vancouver Sun,
April 24, 2012.
91 Enbridge, “Northern Gateway at a Glance,” press release, 2011, http://www.northerngateway.ca/project-info/
northern-gateway-at-a-glance. The project would also include a pipeline to allow the import of 193,000 bpd of
condensate, a light hydrocarbon that can be blended with bitumen to allow pipeline transport.
92 “Enbridge Pipeline and Tanker Opposition Mounts as Risks Multiply,” Marketwire, March 13, 2012.
93 Nathan Vanderklippe and Shawn McCarthy, “TransCanada Looks East as Gateway Pipeline Gets Bogged Down,”
The Globe and Mail, March 22, 2012.
94 “Enbridge Pipelines Inc. - Line 9 Reversal Phase I Project (OH-005-2011),” (Project Application), National Energy
Board (Government of Canada), http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/nbrdgln9phs1/nbrdgln9phs1-
eng.html.
95 Matt Dodge, “Court Decision Affects South Portland-Montreal Pipeline,” Maine Biz, April 3, 2012.
96 Derrick Penner, “Opposition to Enbridge Northern Gateway pipeline grows,” Vancouver Sun, December 2, 2010.
97 Edward Welsch, “TransCanada: Oil Sands Exports Will Go to Asia if Blocked in U.S.,” Dow Jones Newswires, June
30, 2010.
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“lost” from the USA, going instead to Asia. There they would displace the world’s balancing
crude oils, Middle Eastern and African predominantly OPEC grades, which would in turn
move to the USA. The net effect would be substantially higher U.S. dependency on crude
oils from those sources versus scenarios where capacity to move WCSB crudes to Asia was
limited.98
Economic Impact of the Pipeline
In addition to supply diversity arguments, some Keystone XL pipeline proponents support the
project based on economic benefits associated with expanding U.S. pipeline infrastructure. A
recent study by the Energy Policy Research Foundation, for example, concludes that “the
Keystone expansion would provide net economic benefits from improved efficiencies in both the
transportation and processing of crude oil of $100 million-$600 million annually, in addition to an
immediate boost in construction employment.”99 A 2009 report from the Canadian Energy
Research Institute (CERI) commissioned by the American Petroleum Institute similarly
concludes that
As investment and production in oil sands ramps up in Canada, the pace of economic activity
quickens and demand for US goods and services increase rapidly, resulting in an estimated
343 thousand new US jobs between 2011 and 2015. Demand for U.S. goods and services
continues to climb throughout the period, adding an estimated $34 billion to US GDP in
2015, $40.4 billion in 2020, and $42.2 billion in 2025.100
These CERI estimates apply to the entire oil sands industry, however, not only the Keystone XL
project, and they are derived from a proprietary economic analysis which has not been subject to
external review. Some stakeholders point to State Department and other studies reporting much
lower anticipated economic benefits.101 With the separation of the Gulf Coast Project from the
northern segment of the original proposal, the potential economic impact of the reconfigured
Keystone XL project has clearly changed. Consequently, it is difficult to determine what specific
economic and employment impacts may ultimately be attributable to the Keystone XL pipeline.
Nonetheless, given the physical scale of the project, it could be expected to increase employment
and investment at least during construction.
Lifecycle Greenhouse Gas Emissions
Oil production from oil sands is controversial because it has significant environmental impacts,
including emissions of greenhouse gases during extraction and processing, disturbance of mined
land, and impacts on wildlife and water quality.102 Because bitumen in oil sands cannot be
98 EnSys Energy & Systems, Inc., Keystone XL Assessment: Final Report, Prepared for the U.S. Department of Energy,
Office of Policy & International Affairs, December 23, 2010, p. 118.
99 Energy Policy Research Foundation, Inc., The Value of the Canadian Oil Sands (….to the United States): An
Assessment of the Keystone Proposal to Expand Oil Sands Shipments to Gulf Coast Refiners, Washington, DC,
November 29, 2010, p. 2, http://www.eprinc.org/pdf/oilsandsvalue.pdf.
100 Canadian Energy Research Institute, The Impacts of Canadian Oil Sands Development on the United States’
Economy, Final Report, Calgary, Alberta, October 2009, p. vii.
101 See, for example, Cornell University Global Labor Institute, Pipe Dreams? Jobs Gained, Jobs Lost by the
Construction of Keystone XL, September 28, 2011; National Wildlife Federation, “TransCanada Exaggerating Jobs
Claims for Keystone XL,” November 9, 2010, http://www.dirtyoilsands.org/files/Keystone_XL_Jobs_11-09-10.pdf.
102 For more analysis of oil sands and their environmental impacts, see CRS Report RL34258, North American Oil
(continued...)
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pumped from a conventional well, it must be mined, usually using strip mining or open pit
techniques, or the oil can be extracted with underground heating methods.103 Large amounts of
water and natural gas are also required (for heating) during the extraction process.104 The
magnitude of the environmental impacts of oil sands production, in absolute terms and compared
to conventional oil production, has been the subject of numerous, and sometimes conflicting,
studies and policy papers.105 Some stakeholders who object to oil sands projects oppose the
Keystone XL pipeline because it expands access to new markets for the oil produced by those
projects, thereby encouraging what they consider to be further environmentally destructive oil
sands development. As discussed earlier, however, if oil sands production can be diverted to other
markets (e.g., Asia), preventing the Keystone XL project may not necessarily limit oil sands
development.106
Some stakeholders object to the Keystone XL pipeline because it would increase U.S. supplies of
oil, and thereby perpetuate the nation’s dependence on imported fossil fuels and increase carbon
emissions from the transportation sector.107 Acknowledging this concern, in a public forum on
October 20, 2010, Secretary of State Clinton reportedly remarked that “we’re either going to be
dependent on dirty oil from the [Persian] Gulf or dirty oil from Canada … until we can get our act
together as a country and figure out that clean, renewable energy is in both our economic interests
and the interests of our planet.”108 Critics of the State Department’s draft and supplemental draft
EIS assert that the environmental review overlooks the pipeline project’s overall impact on
greenhouse gas emissions, for example, from the extraction and refining processes. To address
those potential emissions, EPA recommended that the final EIS include discussion of mitigation
approaches for greenhouse gas emissions from extraction activities that are either currently used
or could be employed to help lower lifecycle greenhouse gas emissions.109 However, others have
argued that whether the Keystone XL Pipeline is constructed would have little bearing on
greenhouse gas emissions as there are likely to be other export routes available for Canadian oil
sands crude, and therefore, the same crude oils would still be transported and refined, albeit in
different locations.110 For further analysis of greenhouse gas emissions associated with the
Canadian oil sands, see CRS Report R42537, Canadian Oil Sands: Life-Cycle Assessments of
Greenhouse Gas Emissions, by Richard K. Lattanzio.
(...continued)
Sands: History of Development, Prospects for the Future, by Marc Humphries.
103 U.S. Bureau of Land Management, “About Tar Sands,” web page, January 11, 2011, http://ostseis.anl.gov/guide/
tarsands/index.cfm.
104 Cecilia Jamasmie, “The Challenges and Potential of Canada’s Oil Sands,” Mining, September-October 2010, pp.
7-8.
105 For an example of contrasting views, see IHS CERA Inc., Oil Sands, Greenhouse Gases, and US Oil Supply,
Getting the Numbers Right, 2010; and Natural Resources Defense Council, “Setting the Record Straight: Lifecycle
Emissions of Tar Sands,” November 2010.
106 For more analysis of oil sands, including the environmental effects of its extraction, see CRS Report RL34258,
North American Oil Sands: History of Development, Prospects for the Future, by Marc Humphries.
107 See, for example: Natural Resources Defense Council, Tar Sands Invasion: How Dirty and Expensive Oil from
Canada Threatens America’s New Energy Economy, May 2010.
108 See Secretary of State Hillary Clinton’s “Remarks on Innovation and American Leadership to the Commonwealth
Club,” San Francisco, CA, October 15, 2010, available at http://www.state.gov/secretary/rm/2010/10/149542.htm.
109 See EPA’s July 16, 2010, letter to the U.S. Department of State rating the supplemental EIS for the Keystone XL
pipeline project, available at http://yosemite.epa.gov/oeca/webeis.nsf/%28PDFView%29/20100126/$file/
20100126.PDF. Discussion of the analysis of GHG emissions is included on pp. 3-4.
110 EnSys Energy & Systems 2010, p. 116.
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Private Land Use and Oil Spill Impacts
For the proposed Keystone XL Project, approximately 88% of the land affected by pipeline
construction and operation would be privately owned, with the remaining 12% primarily state and
federal land.111 Private land uses along the proposed pipeline routes are primarily agricultural—
farmers and cattle ranchers.
The pipeline’s construction and continued operation would involve a 50-foot-wide permanent
right-of-way along the length of the pipeline. Keystone agreed to compensate landowners for
losses on a case-by-case basis. However, a concern among landowners and communities along
the route is the potential for their land or water (used for drinking, irrigation, or recreation) to be
contaminated by an accidental release (spill) of oil. That concern is heightened in areas where the
pipeline will be located near or would cross water or is in a remote location.
A primary environmental concern of any oil pipeline is the risk of a release, leak, or spill of oil. A
release is a loss of integrity of a pipeline (from the mainline or other components); a leak is a
release over time; and a spill is the liquid volume of a leak that escapes any containment system
and enters the environment.112 In estimating potential environmental impacts, several factors will
be important—including the size and location of the release, leak, or spill, and how quickly it is
remediated.
A release of oil on land would not necessarily result in surface or groundwater contamination.
The potential for a spill to reach water would depend on factors such its proximity to a water
source (e.g., on or near a creek or stream or located on land where the groundwater table is close
to the surface) and the characteristics of the environment into which the crude oil is released (e.g.,
porous underlying soils), and the volume of the spill, the duration of the release, and the viscosity
and density of the crude oil.
The size of potential spills and the type of oil that would likely be released from the Keystone XL
pipeline have been issues of concern to opponents of the project. In its July 16, 2010, comments
on the draft EIS for the Keystone XL Project, EPA expressed particular concern over the potential
adverse impacts to surface and ground water from pipeline leaks or spills. That concern stemmed
from two areas—the toxicity of chemical diluents that may be used to allow bitumen to be
transported by pipeline and the lack of risk assessment for potential “serious or significant spills,”
including an evaluation of spill response procedures in the wake of such a spill.
Concerns reflected in EPA’s letter were realized 10 days later when the Enbridge Energy Partners’
Alberta Pipeline ruptured near Marshall, MI. The resulting spill released dilbit crude into a
tributary creek of the Kalamazoo River and traveled approximately 40 miles downstream in the
Kalamazoo River. Initially estimated by Enbridge as a release of approximately 800,000 gallons
of crude, EPA subsequently estimated that over 1.1 million gallons were released. The spill
resulted in over 220 areas of moderate-to-heavy contamination, including over 200 acres of
submerged oil on the river bottom and over 300 solidified oil deposits.113 Enbridge estimates that
cleanup will cost approximately $700 million.
111 U.S. Department of State, March 2013, Draft EIS: “Section 4.9, Land Use, Recreation, and Visual Resources,” p.
4.9-2.
112 U.S. Department of State, March 2013, Draft EIS: “Executive Summary,” p. ES-16.
113 For more information see EPA’s regarding the response to the Enbridge oil spill at http://www.epa.gov/
(continued...)
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The Enbridge spill highlighted several issues of concern among environmental groups and
communities along the pipeline route—in particular, the nature of the dilbit crude likely carried
by the Keystone XL pipeline. The dilbit crude in the Enbridge spill had been diluted with benzene
and other hazardous constituents. Following the spill, high levels of benzene in the air prompted
the issuance of voluntary evacuation of residents in the area. Concern over the presence of
similarly toxic constituents, particularly the degree to which the level of toxic constituents may be
unknown at the time of a release, has been an ongoing concern among environmental and
community groups.
The Enbridge spill was considered a “very large spill” and not necessarily one that would likely
occur along the Keystone XL pipeline route. However, in its first year of operation,
TransCanada’s Keystone pipeline experienced 14 spills. Although mostly minor spills, one spill at
the Ludden, ND, pump station resulted in the release of 21,000 gallons of oil. Like the Enbridge
release, that release was first reported by local citizens, not as a result of the Keystone’s release
detection equipment. A March 29, 2013, release of oil sands crude from an Exxon Mobil pipeline
in Mayflower, AR, has continued to draw attention to the risk of potential spills from crude oil
pipelines.114 These incidents have made pipeline opponents concerned that such spills may be
significant and that, absent a witness to a spill, a leak in a remote area could potentially go
undetected for a long period.
Also as illustrated in the aftermath of the Enbridge spill, cleanup of bitumen crude presents
certain challenges. Dilbit is a relatively heavy crude oil mixture compared to other crude oils. In
general, heavier oils are more persistent and present greater technical challenges in removal after
a spill compared to lighter oils. Almost two years after the Enbridge spill, cleanup efforts
continue. Since the spill, public access to 39 miles of the river system was banned to protect
public health and safety. The first three-mile segment of river reopened to the public on April 27,
2012. Elements of the cleanup are expected to last until 2015.
Regardless of design, construction, and safety measures, the Keystone XL pipeline will likely
have some number of spills over the course of its operating life. The unique oil spill response
efforts necessary for dilbit crude make an accurate assessment of potential oil spill risk
particularly relevant when addressing concerns expressed by opponents to the Keystone XL
pipeline. The need for more conclusive analysis of potential risks associated with the transport of
dilbit crude was addressed, in part, in the Pipeline Safety, Regulatory Certainty, and Job Creation
Act of 2011 (P.L. 112-90, enacted January 16, 2012). In particular, under Section 16, “Study of
transportation of diluted bitumen,” the Secretary of Transportation is required to conduct an
analysis to determine whether there is any increased risk of a release for pipeline facilities
transporting diluted bitumen. In response to that directive, the PHMSA contracted with the
National Academy of Sciences to conduct a full and independent study of this topic, which is not
yet completed. For further analysis of environmental issues associated with the Keystone XL
project, see CRS Report R42611, Oil Sands and the Keystone XL Pipeline: Background and
Selected Environmental Issues, coordinated by Jonathan L. Ramseur.
(...continued)
enbridgespill/.
114 Arkansas Department of Environmental Quality, “Mayflower Oil Spill Response,” fact sheet, March 30, 2013,
http://www.adeq.state.ar.us/hazwaste/mayflower_oil_spill_2013/files/mayflower_pipeline-_fact_sheet.pdf.
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Issues with the Original Pipeline Route Across the Sand Hills
In the process of examining factors necessary to determine whether the Presidential Permit for the
original Keystone XL Project was in the national interest, the State Department decided that it
needed to assess potential alternative pipeline routes that would avoid the Sand Hills region of
Nebraska. Unique characteristics of the Sand Hills—including its high concentration of wetlands,
extensive areas of very shallow groundwater, and its sensitive ecosystem—were identified as
factors that resulted in increasing public concern over the proposed pipeline location. For these
reasons, TransCanada announced it would work with the Nebraska DEQ to identify a potential
pipeline route that would avoid the Sand Hills. New pipeline routes through Nebraska, identified
in the 2013 draft EIS, reflect the work between TransCanada and Nebraska DEQ.
To understand concerns about the potential environmental impacts of a pipeline crossing the Sand
Hills (also referred to as the Sandhills), an understanding of the unique size and structure of the
region is useful. The Sand Hills region is a 19,600 square mile sand dune formation stabilized by
native grasslands that cover 95% of its surface. The surface is highly susceptible to wind erosion
if the grassland is disturbed.115 Below its surface lie hundreds of feet of coarse sand and gravel.
Essentially, the porous soil acts like a giant sponge that quickly absorbs precipitation, allowing
very little to run off. In some areas, the water table reaches the land surface—a characteristic that
creates lakes that dot the region as well as 1.3 million acres of wetlands. The loose, porous soil
and sensitivity to wind erosion have been factors contributing to a lack of development on the
Sand Hills. As a result, the region contains the most intact natural habitat of the Great Plains of
the United States. The porosity of the soil is also relevant because the Sand Hills sits atop the
Ogallala Aquifer—one of the largest freshwater aquifer systems in the world.116
The highly porous soil of the Sand Hills makes it a significant recharge zone in the northern
Ogallala Aquifer. That is, the sandy, porous soil of the Sand Hills allows a significant amount of
surface water to enter (recharge) the aquifer system. Water from the aquifer also accounts for a
significant amount of water use—78% of the region’s public water, 83% of irrigation water in
Nebraska, and 30% of water used in the United States for irrigation and agriculture.
Potential impacts to the Ogallala Aquifer and the Sand Hills identified in the final EIS for
TransCanada’s original permit application included groundwater contamination after an
accidental spill or leak of crude oil during the construction or operation of the proposed pipeline.
Along the preferred route of the originally proposed pipeline configuration, areas in the Sand
Hills region were identified as locations where the water table may be close to the surface. The
depth to groundwater was less than 10 feet for approximately 65 miles of the preferred pipeline
route in Nebraska. Both the soil porosity and the close proximity of groundwater to the surface
increase the potential that a release of oil from the pipeline could contaminate groundwater in the
region.117
115 For more information, see the Department of the Interior’s U.S. Fish and Wildlife Service web page on the Sand
Hills at http://www.fws.gov/mountain-prairie/pfw/ne/ne4.htm.
116 The entire Ogallala Aquifer system stretches across eight states generally from north to south to include South
Dakota, Nebraska, Wyoming, Colorado, Kansas, Oklahoma, New Mexico, and Texas and underlies about 174,000
square miles.
117 Generally, a release of crude oil to land would not necessarily result in groundwater contamination. In addition to
the depth from the land surface to groundwater and the characteristics of the environment into which the crude oil is
released (e.g., characteristics of the underlying soils), the potential for crude oil to reach groundwater would depend on
factors such as the volume of the spill, the duration of the release, and the viscosity and density of the crude oil.
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On January 13, 2013, the governor of Nebraska approved a proposed reroute of the Keystone XL
pipeline through Nebraska.118 The new route alternatives proposed for the Nebraska section of the
Keystone XL pipeline avoids the Sand Hills and certain areas nearby with similar soil properties.
Figure 5. Keystone XL Project—Pipeline Route in Nebraska
Comparison of Currently and Previously Proposed Project Segments
Source: State Department, March 2013, “Draft Supplemental
Environmental Impact Statement for the Keystone XL Project: Executive
Summary,” p. ES-7.
118 See U.S. Department of State, March 2013, Draft EIS: “Volume III. Appendix A. Governor Approval of the
Keystone XL Project in Nebraska.”
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Appendix A. Presidential Permitting Authority119
The executive branch has exercised permitting authority over the construction and operation of
“pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum,
petroleum products” and other products at least since the promulgation of Executive Order 11423
in 1968.120 Executive Order 13337 amended this authority and the procedures associated with the
review, but did not substantially alter the exercise of authority or the delegation to the Secretary
in E.O. 11423.121 However, the source of the executive branch’s permitting authority is not
entirely clear from the text of these Executive Orders. Generally, powers exercised by the
executive branch are authorized by legislation or are inherent presidential powers based in the
Constitution. E.O. 11423 makes no mention of any authority, and E.O. 13337 refers only to the
“Constitution and the Laws of the United States of America, including Section 301 of title 3,
United States Code.”122 Section 301 simply provides that the President is empowered to delegate
authority to the head of any department or agency of the executive branch.
The legitimacy of this permitting authority has been addressed by federal courts. In Sisseton v.
United States Department of State, the plaintiff Tribes filed suit and asked the court to suspend or
revoke the Presidential Permit issued under E.O. 13337 for the TransCanada Keystone
Pipeline.123 The U.S. District Court for the District of South Dakota found that the plaintiffs
lacked standing because they would be unable to prove their injury could be redressed by a
favorable decision.124 The court determined that even if the plaintiff’s injury could be redressed,
“the President would be free to disregard the court’s judgment,” as the case concerned the
President’s “inherent Constitutional authority to conduct foreign policy,” as opposed to statutory
authority granted to the President by Congress.125
The court further found that even if the Tribes had standing, the issuance of the Presidential
Permit was a presidential action, not an agency action subject to judicial review under the
Administrative Procedure Act (APA).126 The court stated that the authority to regulate the cross-
border pipeline lies with either Congress or the President.127 The court found that “Congress has
failed to create a federal regulatory scheme for the construction of oil pipelines, and has delegated
this authority to the states. Therefore, the President has the sole authority to allow oil pipeline
border crossings under his inherent constitutional authority to conduct foreign affairs.”128 The
119 For a more expansive treatment of this topic, see CRS Report R42124, Proposed Keystone XL Pipeline: Legal
Issues, by Adam Vann, Kristina Alexander, and Kenneth R. Thomas.
120 Providing for the performance of certain functions heretofore performed by the President with respect to certain
facilities constructed and maintained on the borders of the United States, 33 Federal Register 11741, August 16, 1968.
121 Issuance of Permits With Respect to Certain Energy-Related Facilities and Land Transportation Crossings on the
International Boundaries of the United States, 69 Federal Register 25299, May 5, 2004.
122 Ibid.
123 659 F. Supp. 2d 1071, 1078 (D. S.D. 2009).
124 Ibid. at 1078.
125 Ibid. at 1078, 1078 n.5.
126 See ibid. at 1080-81.
127 Ibid. at 1081.
128 Ibid.
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President could delegate his permitting authority to the U.S. Department of State, but delegation
did not transform the permit’s issuance into an agency action reviewable under the APA.129
In Sierra Club v. Clinton,130 the plaintiff Sierra Club challenged the Secretary’s decision to issue a
Presidential Permit authorizing the Alberta Clipper pipeline. Among the plaintiff’s claims was an
allegation that issuance of the permit was unconstitutional because the President had no authority
to issue the permits referenced in E.O. 13337 (in this case, for the importation of crude oil from
Canada via pipeline).131 The defendant responded that the authority to issue Presidential Permits
for these border-crossing facilities “does not derive from a delegation of congressional authority
... but rather from the President’s constitutional authority over foreign affairs and his authority as
Commander in Chief.”132 The U.S. District Court for the District of Minnesota agreed, noting that
the defendant’s assertion regarding the source of the President’s authority has been “well
recognized” in a series of Attorney General opinions, as well as a 2009 judicial opinion.133 The
court also noted that these permits had been issued many times before and that “Congress has not
attempted to exercise any exclusive authority over the permitting process. Congress’s inaction
suggests that Congress has accepted the authority of the President to issue cross-border
permits.”134 Based on the historical recognition of the President’s authority to issue these permits
and Congress’s implied approval through inaction, the court found the Presidential Permit
requirement for border facilities constitutional.
129 Ibid. at 1082.
130 689 F.Supp.2d 1147 (D. Minn. 2010).
131 Ibid. at 1162.
132 Ibid.
133 Ibid. at 1163 (citing 38 U.S. Atty Gen. 162 (1935); 30 U.S. Op. Atty. Gen. 217 (1913); 24 U.S. Op. Atty. Gen. 100;
and Natural Resources Defense Council (NRDC) v. U.S. Department of State, 658 F.Supp.2d 105, 109 (D.D.C. 2009)).
The court in NRDC held that the State Department’s issuance of a presidential permit under Executive Order 13337
was not subject to judicial review under the Administrative Procedure Act for abuse of discretion because “the issuance
of presidential permits is ultimately a presidential action.” 658 F. Supp. 2d at 109, 111-12. The court said that to allow
judicial review of such decisions would raise separation of powers concerns. Ibid. at 111.
134 Ibid.; see also Youngstown Sheet and Tube Co. v. Sawyer, 343 U.S. 579 (1952) (establishing a three-part test for
analyzing the validity of presidential actions in relation to constitutional and congressional authority).
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Appendix B. Details of the Initial NEPA Review
The NEPA process for TransCanada’s 2008 Presidential Permit application for the Keystone XL
pipeline project included several significant milestones (summarized in Table 1). These events,
and resulting documents, will likely have varying degrees of influence over TransCanada’s 2012
permit application.
Draft EIS issued
The State Department released its draft EIS for the proposed Keystone XL Pipeline project for
public comment on April 16, 2010.135 The draft EIS identified TransCanada’s “preferred
alternative” for the project as well as other alternatives considered. On July 16, 2010, EPA rated
the draft EIS “Inadequate.”136 EPA found that potentially significant impacts were not evaluated
and that the additional information and analysis needed was of such importance that the draft EIS
would need to be formally revised and again made available for public review. Additional
criticism of the State Department’s implementation of the NEPA process followed an October 21,
2010, statement by Secretary Clinton that, while analysis of the project was not complete and a
final decision had not been made, the State Department was “inclined to” approve the project.137
Critics of the project, including some Members of Congress, stated that the Secretary’s statement
appeared to prejudge its permit approval for the pipeline proposal as a foregone conclusion.138
Supplemental Draft EIS Issued
The State Department issued a supplemental draft EIS on April 15, 2011. In addition to
addressing issues associated with EPA’s inadequacy rating, the supplemental draft EIS addressed
comments received from other agencies and the public. On June 6, 2011, EPA sent a letter to the
State Department that rated the supplemental draft EIS as having “Insufficient Information” and
having “Environmental Objections” to the proposed action.139 EPA acknowledged that the State
Department had “worked diligently” to develop additional information in response to EPA’s
comments and the large number of other comments on the draft EIS. However, EPA believed that
additional analysis needed to be included in the final EIS to fully respond to its earlier comments.
135 Documents submitted for the initial 2008 Presidential Permit application have now been archived by the State
Department. Documents related to that original application are available at http://keystonepipeline-xl.state.gov/archive/
index.htm.
136 U.S. Environmental Protection Agency’s July 16, 2010, letter to the U.S. Department of State commenting on the
draft EIS for the Keystone XL project is available at http://yosemite.epa.gov/oeca/webeis.nsf/%28PDFView%29/
20100126/$file/20100126.PDF.
137 See Secretary of State Hillary Clinton, “Remarks on Innovation and American Leadership to the Commonwealth
Club,” San Francisco, CA, October 15, 2010, available at http://www.state.gov/secretary/rm/2010/10/149542.htm. The
statement by Secretary Clinton was actually made in response to a question about the Alberta Clipper pipeline project
which received a Presidential Permit from the State Department in 2009; a State Department spokesman later clarified
that the Secretary was referring to the Keystone XL pipeline permit approval.
138 For example, see the October 21, 2010, letter from Senator Mike Johanns to Secretary Clinton expressing his
concern that her statement gave the appearance that approval of the pipeline was a foregone conclusion,
http://johanns.senate.gov/public/?a=Files.Serve&File_id=8b090aa5-76fe-41ca-a674-ae9e37db8d36.
139 U.S. Environmental Protection Agency’s June 6, 2011, letter to the U.S. Department of State commenting on the
supplemental draft EIS for the Keystone XL project is available at http://yosemite.epa.gov/oeca/webeis.nsf/
%28PDFView%29/20110125/$file/20110125.PDF?OpenElement.
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Among other items, EPA recommended that the State Department should do the following:
improve the analysis of the potential oil spill risks, including additional analysis of other
reasonable alternatives to the proposed pipeline route; provide additional analysis of potential oil
spill impacts, health impacts, and environmental justice concerns to communities along the
pipeline route and adjacent refineries; and improve its characterization of lifecycle greenhouse
gas emissions associated with Canadian oil sands crude.
In its June 6 letter to the State Department, EPA refers to agreements with the State Department
that certain deficiencies identified in the supplemental draft EIS would be addressed in the final
EIS. Further, in its conclusion, EPA stated that it would carefully review the final EIS to
determine if it fully reflects those agreements and if measures to mitigate adverse environmental
impacts are fully evaluated.
Final EIS Issued
On August 26, 2011, the State Department issued the final EIS for the proposed Keystone XL
Pipeline. Among other elements of the final EIS, it identified various major pipeline route
alternatives and an environmental analyses of potential impacts associated with those
alternatives.140
In October 2011, 14 Members of Congress wrote to the State Department’s Office of Inspector
General requesting an investigation of the department’s handling of the EIS and national interest
determination for the Keystone XL project.141 The request was prompted, in part, by press reports
suggesting bias or potential conflicts of interest in the State Department’s hiring of an outside
contractor to perform the EIS and in its communications with the pipeline’s developer,
TransCanada.142 On November 4, the Inspector General’s Office (IG) announced that, in response
to this request, it was initiating a special review “to determine to what extent the Department and
all other parties involved complied with Federal laws and regulations relating to the Keystone XL
pipeline permit process.”143 On February 9, 2012, the IG released its findings, reporting that the
State Department “did not violate its role as an unbiased oversight agency,” among other specific
findings generally supportive of the department’s Keystone XL permit review process.144
Public Review and National Interest Determination
Following the release of the Keystone XL project’s final EIS, a review period began to determine
if the proposed project was in the national interest. As part of the process for the Keystone XL
project, the State Department held public meetings in each of the six states through which the
140 Environmental analysis associated with pipeline project alternatives is provided in Volumes 1 and 2 of the final EIS.
141 U.S. Senator Bernard Sanders, et al., Letter to The Honorable Harold W. Geisel, Office of Inspector General, U.S.
Department of State, October 26, 2011.
142 See. for example, Elisabeth Rosenthal and Dan Frosch, “Pipeline Review Is Faced with Question of Conflict,” New
York Times, October 7, 2011.
143 Harold W. Geisel, United States Department of State, Office of Inspector General, “Information Memo for Deputy
Secretary Burns,” November 4, 2011, http://sanders.senate.gov/imo/media/doc/
Special%20Review%20Keystone%20XL%20Pipeline%20Nov%2020112.pdf.
144 Harold W. Geisel, United States Department of State, Office of Inspector General, Special Review of the Keystone
XL Pipeline Permit Process, AUD/SI-12-28, February 2012.
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proposed pipeline would pass and in Washington, DC.145 The meetings were intended to give
members of the public additional opportunity to voice their opinions on issues they thought
should be taken into account in determining whether granting or denying the Presidential Permit
would be in the national interest.146 During the review period, the State Department received input
from state, local, and tribal officials as well as members of the public.
After the public review period, the State Department issued a statement regarding the public
comments and its response to those comments.147 The State Department stated that it received
comments on a wide range of issues, including the Keystone XL project’s potential impact on
jobs, pipeline safety, health concerns, the societal impact of the project, and oil extraction in
Canada. Concern regarding the proposed pipeline route through the Sand Hills area of Nebraska
was identified as one of the most common issues raised. Comments regarding that pipeline route
were consistent with the environmental impacts identified in the final EIS with regard to the
unique combination of characteristics of the Sand Hills region.
In the final EIS, the preferred pipeline route through Nebraska would have been located entirely
above the Ogallala Aquifer. Potential impacts to the Ogallala Aquifer and the Sand Hills
identified in the final EIS include potential groundwater contamination after a release (e.g., a spill
or leak from a hole or damaged portion of the pipeline) of crude oil during the construction or
operation of the proposed pipeline. Both the soil porosity and the close proximity of groundwater
to the surface increase the potential that a release of oil from the pipeline could contaminate
groundwater in the region.
During the public review period, the governor of Nebraska called a special session of the
legislature to determine if siting legislation could be crafted and passed for pipeline routing in
Nebraska. Facing the prospect of new state pipeline siting regulations applicable to the Sand
Hills, together with the concern about the Keystone XL pipeline’s specific “preferred” route, the
State Department announced that it would require additional information about alternative
pipeline routes avoiding the environmentally sensitive Sand Hills area in Nebraska before moving
forward with its national interest determination.148 Although the State Department did not decide
that environmental issues led to a determination that the proposed project was not in the national
interest, environmental issues identified in the final EIS, and further stressed in public comments,
led to its decision to delay that determination until it gathered this information.
Although no new decision deadline was established, State Department officials suggested that it
would be “reasonable to expect that this process including a public comment period on a
supplement to the final EIS consistent with NEPA could be completed as early as the first quarter
of 2013.”149 In a prior press interview, President Obama also appeared to suggest that,
145 U.S. Department of State press release, “Keystone XL Final Environmental Impact Statement Released; Public
Meetings Set,” August 26, 2011, http://www.state.gov/r/pa/prs/ps/2011/08/171082.htm.
146 These additional public meetings are not part of the NEPA process. Considering the strong public interest in the
pipeline proposal (both opposed and in favor), the public hearings were part of the State Department’s national interest
determination.
147 U.S. Department of State, November 10, 2011.
148 U.S. Department of State, “Keystone XL Pipeline Project Review Process: Decision to Seek Additional
Information,” Media Note, PRN 2011/1909, Office of the Spokesperson, November 10, 2011.
149 U.S. Department of State, November 10, 2011.
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Keystone XL Pipeline Project: Key Issues
notwithstanding the delegation of Presidential Permit authority to the State Department, he would
be personally involved in the final decision on the Keystone XL Pipeline permit application.150
Directive to the President to Approve or Deny the Permit
In the wake of the State Department determination that supplemental analysis was needed,
Congress directed the President to make a determination on the Presidential permit application for
the Keystone XL pipeline. Specifically, the Temporary Payroll Tax Cut Continuation Act of 2011
(P.L. 112-78), enacted on December 23, 2011, included provisions requiring the Secretary to issue
a permit for the project within 60 days, unless the President publicly determined the project to be
not in the national interest.
Subsequently, the State Department, with the President’s consent, announced that it would deny
the Keystone XL permit on January 18, 2012. In its announcement the department stated that its
decision “was predicated on the fact that [P.L. 112-78] ... passed in December does not provide
sufficient time to obtain the information that we think is necessary to assess whether the project,
in its current state, is in the national interest.”151 However, the department also stated that its
decision did not preclude TransCanada from reapplying for a Presidential Permit in the future,
although such a reapplication “will trigger ... a completely new review process.”152
As a result of that denial, instead of developing a supplemental EIS incorporating analysis
applicable to a new pipeline route through Nebraska, a new Presidential permit application
process will be required. As a result, a “new” NEPA process will be required. Although much of
the analysis and documentation will likely be the same, issuance of a draft and final EIS, and
corresponding public and agency comment periods, will be required.
Author Contact Information
Paul W. Parfomak
Linda Luther
Specialist in Energy and Infrastructure Policy
Analyst in Environmental Policy
pparfomak@crs.loc.gov, 7-0030
lluther@crs.loc.gov, 7-6852
Robert Pirog
Adam Vann
Specialist in Energy Economics
Legislative Attorney
rpirog@crs.loc.gov, 7-6847
avann@crs.loc.gov, 7-6978
Acknowledgments
The authors would like to acknowledge the contributions of Kristina Alexander, Vanessa
Burrows, and Jim Uzel to the content of this report.
150 KETV NewsWatch 7, “Uncut: KETV’s Rob McCartney Interviews President Obama,” Omaha, NE, November 1,
2011, http://www.ketv.com/video/29652519/detail.html.
151 U.S. Department of State, January 18, 2012.
152 Ibid.
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