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Monday, March 26, 2012

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

In 2008, Canadian pipeline company TransCanada 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 on the U.S. Gulf Coast. Keystone XL would ultimately 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. TransCanada plans to build a pipeline spur so that oil from the Bakken formation in Montana and North Dakota can also be carried on Keystone XL.

As a facility connecting the United States with a foreign country, the pipeline requires a Presidential Permit from the State Department. In evaluating such a permit application, after consultation with other relevant federal agencies and public input, the department must determine whether a proposal is in the “national interest.” This determination considers the project’s potential effects on the environment, economy, energy security, foreign policy, and other factors. Pursuant to the National Environmental Policy Act, the State Department considered potential environmental impacts of the proposed Keystone XL project in a final Environmental Impact Statement (EIS) issued on August 26, 2011. A wide range of public comments both for and against the pipeline were received during a subsequent 90-day review period. The State Department noted, in particular, concerns about the pipeline’s route through the Sand Hills region of Nebraska, an extensive sand dune formation with highly porous soil and shallow groundwater.

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) included provisions requiring the Secretary of State to issue a permit for the project within 60 days, unless the President determined the project not to be in the national interest. On January 18, 2012, the State Department, with the President’s consent, denied the Keystone XL permit, citing insufficient time under the 60-day deadline to obtain all the necessary information to assess the reconfigured project. On February 27, 2012, TransCanada announced that it would proceed with development of the Keystone XL segment connecting Cushing, OK, to the Gulf Coast as a stand-alone project not requiring a Presidential Permit. The company also informed the State Department that it intended to file a new Presidential Permit application “in the near future” for the segment of the Keystone XL project from the Canadian order to Steele City, NE, with a future supplement to the application specifying an alternative route in Nebraska. The company has stated that it expects to establish the new route by October 2012. The Obama administration supports TransCanada’s plan to proceed with the southernmost segment of the Keystone XL pipeline while reserving judgment on a reconfigured northern segment until completion of a new Presidential Permit review.

The North American Energy Access Act (H.R. 3548) would transfer the permitting authority over the Keystone XL pipeline project to the Federal Energy Regulatory Commission, requiring the commission to issue a permit for the project within 30 days of enactment. The Keystone For a Secure Tomorrow Act (H.R. 3811) would immediately approve the original permit application filed by TransCanada. S. 2041 and the Energizing America through Employment Act (H.R. 4000) would similarly approve the original permit upon passage. All four bills include provisions allowing for later alteration of the pipeline route in Nebraska. S. 2100 would suspend sales of petroleum products from the Strategic Petroleum Reserve until issuance of a Presidential Permit for the Keystone XL project. Changing, or eliminating altogether, the State Department’s role in issuing cross-border infrastructure permits may raise questions about the President’s executive authority, however. H.R. 3900 would seek to ensure that crude oil transported by the Keystone XL pipeline, or resulting refined petroleum products, would be sold only into U.S. markets, but could raise issues related to international trade agreements.

Date of Report: March 13, 2012
Number of Pages: 31
Order Number: R41668
Price: $29.95

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