Keystone XL Pipeline: The End of the Road?

Keystone XL Pipeline: The End of the Road?

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Keystone XL Pipeline: The End of the Road?
Updated January 22, 2021
On January 20, 2021, President Biden signed an executive order revoking the Presidential Permit for the
cross-border segment of the Keystone XL Pipeline between Canada and Montana. The order asserts that
the pipeline “disserves the national interest” and that leaving the permit in place “would not be
consistent” with the Administration’s “economic and climate imperatives.” The border crossing had been
authorized under a 2019 Presidential Permit issued directly by President Trump, superseding a prior
Presidential Permit issued by the U.S. State Department in 2017 under delegated presidential authority.
President Biden was able to revoke the permit as the 2019 permit stated that it “may be terminated,
revoked, or amended at any time at the sole discretion of the President.” In anticipation of the president’s
action, the pipeline’s developer, TC Energy (previously named TransCanada) announced that the project
would be “suspended.” Although TC Energy said it would “review the decision ... and consider its
options,” it appears that the Keystone XL Pipeline project will not be completed.
Keystone XL Pipeline Project
Keystone XL was intended to transport oil sands crude from western Canada, and shale oil from North
Dakota and Montana, to a hub in Nebraska for further delivery to Gulf Coast refineries (Figure 1). The
project was motivated by historically constrained oil pipeline capacity for Canadian exports, which
depressed Western Canadian oil prices. Development of Keystone XL had been controversial. Pipeline
proponents argued for increasing U.S. oil supplies from a stable ally, which they argued offers economic
benefits, especially jobs. Opponents expressed concern about greenhouse gas emissions, continued U.S.
dependency on fossil fuels, and the environmental risk of an oil release.

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Figure 1. Proposed Keystone XL Pipeline Route

Source: CRS, adapted from U.S. Department of State, Final Supplemental Environmental Impact Statement for the Keystone
XL Project, January 2014, p. 1.2-3; and Draft Supplemental Environmental Impact Statement Keystone XL Mainline Alternative
Route, September 2018, p. S-2.
Past Litigation
A series of decisions by the U.S. District Court for the District of Montana in 2018 and early 2019
vacated the 2017 Presidential Permit on the grounds that its environmental review under the National
Environmental Policy Act (NEPA) was inadequate, among other reasons. A November 2018 decision
identified a number of shortcomings in the State Department’s NEPA compliance efforts and enjoined the
government “from engaging in any activity in furtherance of the construction or operation of Keystone
and associated facilities” until it addressed those shortcomings. However, in June 2019 the U.S. Court of
Appeals for the 9th Circuit lifted the injunction, agreeing with the assertions by the developer and the
federal government that the President’s issuance of a new Presidential Permit, and concurrent revocation
of the 2017 Permit, mooted the legal dispute over that earlier Permit. Under the authority of the 2019
Presidential Permit, TC Energy was able to construct the 1.4-mile border crossing segment in 2020.
In addition to a Presidential Permit, the Keystone XL project required other federal agency consultations
and approvals under various statutes for specific parts of the pipeline. These approvals included Corps
permits under the Clean Water Act for construction at regulated water crossings and wetlands as well as
rights-of-way granted to cross federal lands from the Bureau of Land Management (BLM). The 2020
decision—also by the U.S. District Court of Montana—vacated the Corps’ Nationwide Permit 12 (NWP-
12) to cross U.S. waterways and wetlands due to insufficient consultation under the Endangered Species

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Act (ESA). The court required the Corps to complete the ESA consultation process prior to reissuing
NWP-12 and prohibited the Corps from authorizing dredge or fill activities under NWP-12 in the
meantime. On July 6, 2020, the U.S. Supreme Court granted a stay of the NWP-12 vacatur, except as it
applied to Keystone XL, pending disposition of an appeal in the 9th Circuit Court of Appeals. The appeal
had not yet been ruled upon when President Biden revoked the Presidential Permit.
In addition to the NWP-12 litigation, project opponents had initiated litigation challenging the approval of
the Keystone XL rights-of-way on BLM lands and on Corps-managed lands in Montana around Fort Peck
Dam. Among other things, the litigation challenged the agencies’ NEPA compliance. The Trump
Administration asserted that the 2019 Presidential Permit, itself, was not subject to NEPA because the
President’s action was not an agency action and, thus, not subject to the statute. Nonetheless, State
Department officials later completed a Final Supplemental Environmental Impact Statement (FSEIS) for
Keystone XL. BLM and the Corps subsequently adopted the State Department’s FSEIS as sufficient to
satisfy their own NEPA obligations in approving their respective rights-of-way, a decision objected to by
project opponents.
Project Economics
The Keystone XL Pipeline initially was proposed when U.S. crude oil prices exceeded $100 per barrel.
However, due to global oil market oversupply—including U.S. oil production growth and reduced
demand due to COVID-19—prices had fallen below $50 per barrel through the end of 2020. This drop in
prices reduced the economic attractiveness of Canadian oil sands crude—which is costly to produce—
and, consequently, caused analysts to question the need for the Keystone XL Pipeline to move it. The
pipeline also faced potential competition from the Trans Mountain Pipeline Expansion, intended to
increase oil sands shipment capacity to Canada’s west coast, and the Enbridge Line 3 replacement, which
would increase existing capacity to the U.S. Midwest. Notwithstanding these setbacks, TC Energy
expected to eventually receive all necessary approvals and intended to construct the entire pipeline by
2023. To help ensure Keystone XL’s construction, the Alberta government had announced a C$1.5 billion
equity investment in the pipeline to be followed by a C$6 billion loan guarantee in 2021. In its
announcement of the project’s suspension, TC Energy stated that it would stop capitalizing the costs of
the project and would “evaluate the carrying value of its investment in the pipeline.” What additional
actions the company might take to terminate the project and recoup any of its investments remain to be
seen.

Author Information

Paul W. Parfomak

Specialist in Energy and Infrastructure Policy

Disclaimer

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This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
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as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
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IN11445 · VERSION 5 · UPDATED