Keystone XL Pipeline: Permit Issues and Recent Developments

Keystone XL Pipeline: Permit Issues and
Recent Developments

June 29, 2020
On May 25, 2020, TC Energy (previously named TransCanada) announced completion of the 1.4-mile
segment of the Keystone XL Pipeline crossing the U.S. border from Canada into Montana. The border
crossing was authorized under a 2019 Presidential Permit issued by President Trump, superseding a prior
Presidential Permit issued by the U.S. State Department in 2017. Although TC Energy was able to
construct this cross-border segment, a federal court decision on April 15, 2020, vacated and remanded the
pipeline’s permit from the U.S. Army Corps of Engineers (Corps) to cross waterways and wetlands in the
United States. The decision effectively blocks construction of other pipeline segments, pending further
Corps action or successful judicial appeal. An overall decline in oil imports from Canada due to
Coronavirus Disease 2019 (COVID-19) also has reduced demand for oil pipeline transportation, at least
temporarily. Notwithstanding these setbacks, TC Energy expects to eventually receive all necessary
approvals and intends to construct the entire pipeline by 2023.
Keystone XL Pipeline Project
Keystone XL is 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 is motivated by historically constrained oil pipeline capacity for Canadian exports, which has
depressed Western Canadian oil prices. Development of Keystone XL has been controversial. Pipeline
proponents argue for increasing U.S. oil supplies from a stable ally, which they argue offers economic
benefits, especially jobs. Opponents express concern about greenhouse gas emissions, continued U.S.
dependency on fossil fuels, and the environmental risk of an oil release.

Congressional Research Service
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
, J
anuary 2014, p. 1.2-3; and Draft Supplemental Environmental Impact Statement Keystone XL Mainline Alternative
, Sep
tember 2018, p. S-2.
Permit Status and Related 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.
In addition to a Presidential Permit, the Keystone XL project requires other federal agency consultations
and approvals under various statutes for specific parts of the pipeline. These approvals include 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-
to cross U.S. waterways and wetlands due to insufficient consultation under the Endangered Species
Act (ESA).
The court required the Corps to complete the ESA consultation process prior to reissuing

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NWP-12 and prohibited the Corps from authorizing dredge or fill activities under NWP-12 in the
meantime. On June 15, 2020, the Corps filed an application for a stay pending appeal of this decision with
the U.S. Court of Appeals for the 9th Circuit.
In addition to the NWP-12 litigation, project opponents have initiated new 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 challenges the agencies’ NEPA compliance.
The Trump Administration has asserted that the current Presidential Permit, itself, is not subject to NEPA
because the President’s action is not an agency action and, thus, not subject to the statute. Nonetheless,
State Department officials completed a Final Supplemental Environmental Impact Statement (FSEIS) for
the Keystone XL project in December 2019. Project opponents disagree with the subsequent adoption of
the State Department’s FSEIS by both the BLM and the Corps to comply with NEPA in approving their
respective rights-of-way in 2020. If the Corps, BLM, or other federal approvals face continuing legal
challenges or regulatory review, it could further affect the timing, cost, and route of the pipeline.
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 have fallen below $50 per barrel as of June 2020. This drop in oil
prices has reduced the economic attractiveness of Canadian oil sands crude—which is costly to produce—
and, consequently, has caused analysts to question the need for the Keystone XL Pipeline to move it. The
pipeline also faces potential competition from the Trans Mountain Pipeline Expansion, which would
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. To help ensure Keystone XL’s construction, the
Alberta government recently announced a C$1.5 billion equity investment in the pipeline to be followed
by a C$6 billion loan guarantee in 2021.

Presidential Permit Revocation
On May 18, 2020, the campaign of Democratic presidential candidate Joseph Biden reportedly stated that,
if elected, he would rescind Keystone XL’s Presidential Permit. It appears that a future President would
have the authority to do so, as the current permit states that it “may be terminated, revoked, or amended at
any time at the sole discretion of the President.” Whether Mr. Biden—if elected to the Presidency—would
follow through with a revocation, and what recourse the pipeline owner and customers could have if he
did, remain to be seen.

Author Information

Paul W. Parfomak

Specialist in Energy and Infrastructure Policy

Congressional Research Service

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