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Wednesday, September 14, 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

Adam Vann
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 830,000 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.

As a facility connecting the United States with a foreign country, the pipeline requires a Presidential Permit from the State Department. In granting or denying a permit application, the State Department must determine whether a proposal is in the “national interest.” Such a determination must be arrived at in consultation with other relevant federal agencies and after public input. It would include an evaluation of various factors including the proposed project’s potential to affect the environment, economy, energy security, or foreign policy.

With regard to potential environmental impacts, the State Department was required to prepare an Environmental Impact Statement (EIS), pursuant to the National Environmental Policy Act (NEPA), for the proposed Keystone XL pipeline. On August 26, 2011, a Final EIS was issued which marked the beginning of a 90-day review period for the National Interest Determination. During that period, the State Department will consult with other relevant federal agencies to define the national interest of the project. The State Department will also host public hearings to gather additional comments on whether granting the permit application would be in the national interest. The State Department expects to make its final determination before the end of 2011.

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 a potential spill could pose a risk to groundwater, that alternative pipeline routes avoiding the Ogallala Aquifer have not been fully considered, and that it promotes continued U.S. dependency on fossil fuels. Arguments criticizing the greenhouse gas emissions of oil sands production, generally, are based to some degree on the assumption 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 would secure growing Canadian oil supplies for the U.S. market, which could offset imports from 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 likely develop.

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. The North American-Made Energy Security Act (H.R. 1938) would direct the President to issue a final order granting or denying the Presidential Permit for the Keystone XL pipeline by November 1, 2011. Whatever the State Department’s decision, legal challenges appear likely.

Date of Report: August 29, 2011
Number of Pages: 22
Order Number: R41668
Price: $29.95

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