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Wednesday, September 26, 2012

Keystone XL Pipeline Project: Key Issues

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Robert Pirog
Specialist in Energy Economics

Linda Luther
Analyst in Environmental Policy

Adam Vann
Legislative Attorney

In May 2012, Canadian pipeline company TransCanada reapplied to the U.S. Department of State for a Presidential Permit to build the Keystone XL pipeline. The pipeline would transport crude oil from the oil sands region of Alberta, Canada, to the existing Keystone Pipeline System in Nebraska. It also could accept U.S. crude from the Bakken oil fields in Montana and North Dakota. A second segment of the Keystone XL pipeline system, the Gulf Coast Project, is proceeding separately to connect existing pipeline facilities in Oklahoma to refineries in Texas. When completed, the entire Keystone XL pipeline system would ultimately have capacity to transport 830,000 barrels of crude oil per day to U.S. market hubs. TransCanada submitted the May 2012 permit application after its 2008 Keystone XL permit application was denied.

The State Department has jurisdiction over the Keystone XL pipeline’s approval because it would cross the U.S. border. Before it can approve such a permit, the department must determine that the project is in the “national interest,” accounting for potential effects on the environment, economy, energy security, and foreign policy, among other factors. Environmental impacts are considered under the National Environmental Policy Act, as documented in an Environmental Impact Statement (EIS). For the 2008 permit application, a final EIS was issued in August 2011, followed by a public review period. Largely in response to public comments and efforts by the state of Nebraska, the State Department determined that it needed to examine alternative pipeline routes that would avoid the environmentally sensitive Sand Hills region of Nebraska, a sand dune formation with highly porous soil and shallow groundwater that recharges the Ogallala aquifer.

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) required the Secretary of State to approve or deny the original 2008 project application within 60 days. On January 18, 2012, citing insufficient time under this deadline to properly assess the reconfigured project, the State Department denied the Keystone XL permit. Since then, TransCanada has worked with Nebraska officials to identify a pipeline route avoiding the Sand Hills. Its May 2012 permit application reflects that effort. The State Department has begun the NEPA process anew, but will largely supplement the August 2011 final EIS to include analysis of the new route in Nebraska, as well as analysis of any significant environmental issues or information that has become available since August 2011. The department estimates that it will determine whether to approve or deny the new Presidential Permit by early 2013.

Since the State Department’s denial of TransCanada’s original permit application, Congress has debated legislative options addressing the Keystone XL pipeline. The North American Energy Access Act (H.R. 3548) would transfer permitting authority for the Keystone XL pipeline project to the Federal Energy Regulatory Commission, requiring issuance of a permit within 30 days of enactment. Several other bills (H.R. 3811, H.R. 4000, H.R. 4301, S. 2041, and S. 2199) would immediately approve the 2008 permit application filed by TransCanada, allowing for later alteration of the pipeline route in Nebraska. A House bill (H.R. 6164), the Domestic Energy and Jobs Act (S. 3445), and S.Amdt. 2789 would eliminate the Presidential Permit requirement for the reconfigured Keystone XL pipeline as proposed in TransCanada’s permit application filed on May 4, 2012. S. 2100 and H.R. 4211 would suspend sales of petroleum products from the Strategic Petroleum Reserve until issuance of a Presidential Permit for the Keystone XL project. Although some in Congress have asserted congressional authority over Keystone XL, changing the State Department’s role in issuing cross-border infrastructure permits may raise questions about the President’s executive authority. 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 this bill could raise issues related to international trade agreements.

Date of Report: September 13, 2012
Number of Pages: 42
Order Number: R41668
Price: $29.95

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