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Thursday, April 7, 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 United States. Keystone XL would have the capacity to transport 700,000 barrels per day, delivering crude oil to the market hub at Cushing, OK, and further to points in Texas. The project is expected to cost more than $7.0 billion, of which at least $5.4 billion would be spent on the U.S. portion. TransCanada is planning to build a short additional pipeline so that oil from the Bakken formation in Montana and North Dakota can also be carried on the Keystone XL pipeline.

The construction of petroleum facilities connecting the United States with a foreign country requires a Presidential Permit from the State Department based on a determination of national interest. An element of that determination for the Keystone XL project is the preparation of an Environmental Impact Statement (EIS) pursuant to the National Environmental Policy Act. On April 16, 2010, the State Department’s draft EIS for the Keystone XL project was released for comment to the general public and interested state and local agencies. Subsequently, the U.S. Environmental Protection Agency determined the EIS to be inadequate. On March 15, 2011, the State Department announced that it expects to issue a supplemental draft EIS in mid-April 2011. It will be available for 45-day public comment. The State Department also announced that, following issuance of a final EIS, it will solicit additional public comment and host a public meeting before making a determination on granting a Presidential Permit. The State Department estimates that it will release a final EIS and final Record of Decision and National Interest Determination by the end of 2011. Whatever the State Department’s decision, legal challenges appear likely.

Opponents to the Keystone XL pipeline project, 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 stemming from federal environmental statutes that govern the pipeline’s application review process.

Date of Report: March 21, 2011
Number of Pages: 19
Order Number: R41668
Price: $29.95

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