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Wednesday, March 9, 2011

Keystone XL Pipeline Project: Key Issues

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Neelesh Nerurkar
Specialist in Energy Policy

Linda Luther
Analyst in Environmental Policy

Vanessa K. Burrows
Legislative Attorney

Canadian pipeline company TransCanada has filed an application with the U.S. Department of State to build the Keystone XL pipeline, which would transport crude oil from the oil sands region of Alberta, Canada, to refineries in the U.S. Gulf Coast and Midwest region. Keystone XL would have the capacity to transport 700,000 barrels a day (bpd) and can deliver crude to the oil market hub at Cushing, OK, and further to points in Texas. The project is expected to cost approximately $7.0 billion, of which an estimated $5.4 billion would be spent on the U.S. portion of the pipeline. TransCanada is also planning to build a short additional pipeline so that oil from the Bakken formation in Montana and North Dakota can be carried on the Keystone XL pipeline.

Facilities such as the Keystone XL pipeline which are intended to import oil from a foreign country need a Presidential Permit from the State Department. Such a permit requires that the State Department assess potential environmental consequences, through an Environmental Impact Statement (EIS), weighing them against potential benefits of the project. The U.S. Environmental Protection Agency (EPA) found the State Department’s draft EIS on the Keystone XL project to be inadequate. The State Department is still reviewing comments by the EPA, other agencies, and the public. The project may not proceed until the State Department publishes a final EIS and issues a Record of Decision on whether or not to grant a Presidential Permit. Regardless of the State Department’s decision, legal challenges appear likely.

Opponents to the pipeline, primarily environmental groups and affected communities along the route, object to the project principally on the grounds that it supports “dirty” Canadian oil sands development, that it could pose an environmental risk to groundwater, and that it promotes continued U.S. dependency on fossil fuels. Arguments criticizing the greenhouse gas emissions of oil sands production are based to some degree on the belief that limiting pipeline capacity to U.S. markets may limit output from Canada’s oil sands.

Proponents of the Keystone XL pipeline, including Canadian agencies and petroleum industry stakeholders, point to energy security and economic benefits, such as job creation. Some contend that the Keystone XL project secures growing Canadian oil supplies for the U.S. market, which could offset imports from other, less dependable foreign sources. They also claim that if oil sands output cannot flow to the United States, infrastructure to export it to Asia will develop. Further, having recently permitted the original Keystone pipeline, the State Department could face a consistency challenge if it were to come to a different conclusion on similar environmental issues for the Keystone XL permit.

International pipeline projects like Keystone XL are not subject to the direct authority of Congress, but numerous Members of Congress have expressed support for, or opposition to, the pipeline proposal because of its potential environmental, energy security, and economic impacts. Congress may have an oversight role to play stemming from federal environmental statutes that govern the pipeline’s application review process.

Date of Report: March 4, 2011
Number of Pages: 19
Order Number: R41668
Price: $29.95

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