As originally proposed in 2008, the project had two phases. The first phase was the Gulf Coast Project, 435 miles of 36-inch pipeline and associated facilities connecting the Cushing tank farms to refineries in Houston and Port Arthur, Texas. TransCanada anticipated this segment to be in service in mid- to late 2013. The second phase was the Keystone XL project, 1,179 miles of 36-inch pipeline and associated facilities linking Hardisty, Alberta, to Steele City, Nebraska. TransCanada expected this segment to be in service in late 2015.

The State Department indicated in response to public comments and Nebraska state government efforts that there were environmental and other concerns over the pipeline’s proposed route through the Sand Hills region of Nebraska¹ and its impact on the region over time. On November 10, 2011, the State Department stated that as part of its review, it would commence an in-depth assessment of alternative pipeline routes that would avoid the Sand Hills. That assessment would be necessary before completing its national interest determination for the presidential permit. On November 14, 2011, TransCanada announced an agreement with the Nebraska Department of Environmental Quality to identify a pipeline route that would avoid the Sand Hills.

When the State Department announced a delay in the permit review, Congress acted to expedite a permit decision on the Keystone XL project. Enacted on December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011 included provisions requiring the secretary of state to issue a permit for the project within 60 days, unless the president publicly determined the project not to be in the national interest.² The act allowed for future changes to the Nebraska route if approved by the governor of Nebraska. 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. The department indicated that the denial would not prejudice further consideration of a revised route.

On February 27, 2012, TransCanada declared that, despite the rejection of the second phase, it would proceed with developing the Gulf Coast Project. Its construction and operation may continue in accordance with applicable regulatory requirements. While TransCanada’s acquisition of right-of-way and construction for this segment proceeded independently and would allow TransCanada to connect existing pipeline facilities in Oklahoma to refineries in Texas, TransCanada reapplied to the State Department in May 2012 for a presidential permit to build the Keystone XL project. The new application identified proposed new routes through Nebraska. On September 5, 2012, TransCanada submitted to the Nebraska Department of Environmental Quality its preferred alternative route for the Keystone XL Pipeline in Nebraska.

Presidential Permitting Process. Federal agencies generally have no authority to site interstate oil pipelines. The main siting authority for oil pipelines usually would be established under varying applicable state laws to allow a company to acquire right-of-way and to construct the facilities. However, the pipeline construction, connection, operation, and maintenance that connect the United States with a foreign country require specific executive permission expressed through a presidential permit. Thus, because the proposed Keystone XL pipeline was designed to import oil sands crude from Canada, those facilities require a presidential permit.

Executive Order 13337 delegates to the secretary of state the president’s authority to receive applications for presidential permits, which may only issue on a finding that the project is in the “national interest.”³ In determining the national interest, the State Department is required to consider several issues related to the proposed project. Although the State Department does not evaluate the same factors for each project seeking a permit, the department has identified some key factors it considers in making previous national interest determinations for pipeline permit applications, including:

• environmental impacts of the proposed projects;
• impacts of the proposed projects on the diversity of supply to meet US crude oil demand and energy needs;
• economic benefits to the United States of constructing and operating proposed projects;
• the security of transport pathways for crude oil supplies to the United States through import facilities constructed at the border relative to other modes of transport; and
• relationships between proposed projects and goals to reduce reliance on fossil fuels and to increase use of alternative and renewable energy sources.⁴

The State Department is required to consult with relevant federal and state agencies and to invite public comment in determining the national interest. But the State Department has broad discretion in determining what factors it will examine to inform its determination and whether a proposed project is in the national interest.

When gathering information necessary to make its national interest determination, the State Department seeks comments from the public as well as local, state, tribal, and federal agencies. The department receives comments on a wide range of issues, including beneficial and adverse impacts of the proposed project on the environment, jobs, and pipeline safety.

NEPA Process. Environmental impacts are considered under the National Environmental Policy Act (NEPA), as documented in an environmental impact statement (EIS). An EIS must include a statement of the purpose and need for an action, a description of all reasonable alternatives to meet that purpose and need, a description of the environment to be affected by those alternatives, and an analysis of the direct and indirect effects of the alternatives, including cumulative impacts. As a result, the State Department EIS must demonstrate the review and consider potential environmental impacts of the entire pipeline, not just the facilities at the border crossing.

Under NEPA, the State Department must fully assess an action’s environmental consequences and potential project alternatives before making a final decision. The National Environmental Policy Act does not prohibit a federal action that has adverse environment impacts. It requires only that a federal agency be fully aware of and consider those adverse impacts before selecting a final project alternative. Specifically, NEPA’s intent is that environmental assessment be part of the decision-making process, not that it dictate a particular outcome. That is, NEPA does not prohibit federal actions with adverse environmental impacts, but a project’s adverse environmental impacts may lead the State Department to determine that it is not in the national interest.

Environmental impact statement preparation has two stages—a draft and final EIS. The National Environmental Policy Act regulations require the draft EIS to be circulated for public and agency comment, followed by a final EIS that incorporates those comments. The designated lead agency prepares the environmental impact statement. In developing the EIS, the lead agency—in this case, the State Department—must rely to some extent on information provided by TransCanada. For instance, TransCanada’s original permit application included an environmental report that was intended to provide the State Department with sufficient information to understand the scope of potential environmental impacts of the project.⁵ In preparing the draft EIS, the lead agency must request input from cooperating agencies, which include any agency with jurisdiction by law or with special expertise regarding any environmental impact associated with the project.⁶

For the Keystone XL pipeline project, the State Department released its draft EIS for public comment on April 16, 2010. During public comment, the US Environmental Protection Agency found that potentially significant impacts were not evaluated and that the additional information and analysis needed was so important that the draft EIS would need to be revised and again made available for public review.⁷ The State Department in 2011 suggested further environmental review, which would lead to a “supplemental” EIS. That process was short-circuited by the determination to deny the application in light of the congressionally imposed deadline. In August 2011, the State Department issued the final EIS for the proposed Keystone XL Pipeline. Among other elements of the final EIS, it identified various major pipeline route alternatives and environmental analyses of potential impacts associated with those alternatives.⁸ TransCanada’s May 2012 permit re-application allowed the environmental process to continue, through consideration of new routes. The State Department began an additional NEPA process, but this process would supplement the August 2011 final EIS to include analysis of the new route in Nebraska, as well as an analysis of any significant environmental issues or information that became available since August 2011.

Critics of the State Department’s draft and supplemental draft EIS asserted that the environmental review did not consider the pipeline project’s overall impact on greenhouse gas emissions such as from the extraction and refining processes. As a result, the US Environmental Protection Agency recommended that the final EIS include mitigation approaches for greenhouse gas emissions from extraction activities that were either currently used or could be employed to help lower greenhouse gas emissions.

Legislative Initiatives. Congress has no direct role in permitting the pipeline’s construction. When the State Department denied TransCanada’s original permit application, Congress attempted to amend the State Department permitting process. Congress debated legislative options addressing the Keystone XL pipeline, which imposed deadlines on a national interest determination for the Keystone XL pipeline project. For example, the proposed North American Energy Access Act would transfer the permitting authority over the Keystone XL pipeline project from the State Department to the Federal Energy Regulatory Commission (FERC), requiring the commission to issue a permit for the project within 30 days of enactment.⁹ The State Department testified before Congress that this legislation raised serious questions about existing legal authorities, questioned the continuing force of much of the federal and all of the state and local environmental and land use management authority over the pipeline, and overrode foreign policy and national security considerations implicated by a cross-border permit, which were properly assessed by the State Department.¹⁰

This legislation may also raise some administrative and legal challenges for federal agencies. A senior FERC official testified that the North American Energy Access Act did not provide enough time for an adequate public record, provided no clear authority for enforcing measures required in the EIS, did not articulate a process for authorizing alterations to the pipeline route in Nebraska, and was unclear about permits required from other federal agencies, among other concerns.¹¹

Additionally, other proposed legislation such as the American Energy First Act¹² and the Strategic Petroleum Supplies Act¹³ would have suspended petroleum products sales from the Strategic Petroleum Reserve until issuance of a presidential permit for the Keystone XL project. Likewise, several bills were introduced to eliminate the presidential permit requirement for a reconfigured Keystone XL pipeline, as proposed in TransCanada’s permit application filed on May 4, 2012, and to grant the permitting authority to Congress. Upon enactment of the bill, the original permit application filed in 2008 would be immediately approved, allowing for a later altered pipeline route in Nebraska.¹⁴ Although some in Congress have asserted congressional authority over Keystone XL pipeline, changing or eliminating the State Department’s role in issuing cross-border infrastructure permits may raise questions about the president’s executive authority.

Judicial Challenges to Presidential Permitting Authority. In Sierra Club v. Clinton,¹⁵ the plaintiff challenged the secretary of state’s decision to issue a presidential permit authorizing the Alberta Clipper pipeline. The plaintiff claimed that issuance of the permit was unconstitutional because the president had no authority to issue the permits referenced in E.O. 13337.¹⁶ The defendant responded that the authority to issue presidential permits for these border-crossing facilities “does not derive from a delegation of congressional authority . . . but rather from the President’s constitutional authority over foreign affairs and his authority as Commander in Chief.”¹⁷ The US District Court for the District of Minnesota agreed, noting that the defendant’s assertion regarding the source of the president’s authority has been “well recognized” in a series of attorney general opinions, as well as a 2009 judicial opinion.¹⁸ The court also noted that these permits had been issued many times before and that “Congress has not attempted to exercise any exclusive authority over the permitting process. Congress’s inaction suggests that Congress has accepted the authority of the President to issue cross-border permits.”¹⁹

In Sisseton v. United States Department of State, the plaintiff tribes filed suit and asked the court to suspend or revoke the presidential permit issued under E.O. 13337 for the TransCanada Keystone Pipeline.²⁰ The US District Court for the District of South Dakota found that the plaintiffs lacked standing because they would be unable to prove their injury could be redressed by a favorable decision.²¹ The court determined that even if the plaintiffs’ injury could be redressed, “the President would be free to disregard the court’s judgment,” as the case concerned the president’s “inherent Constitutional authority to conduct foreign policy,” as opposed to statutory authority granted to the president by Congress.²²

The court further found that even if the tribes had standing, the issuance of the presidential permit was a presidential action, not an agency action subject to judicial review under the Administrative Procedure Act (APA).²³ The court stated that the authority to regulate the cross-border pipeline lies with either Congress or the president.²⁴ The court found that “Congress has failed to create a federal regulatory scheme for the construction of oil pipelines, and has delegated this authority to the states. Therefore, the President has the sole authority to allow oil pipeline border crossings under his inherent constitutional authority to conduct foreign affairs.”²⁵ The president could delegate his permitting authority to the US Department of State, but delegation did not transform the permit’s issuance into an agency action reviewable under the APA.²⁶

Arguments. Proponents of the Keystone XL pipeline support the pipeline because it increases the diversity of the US petroleum supply and would provide economic benefits, especially jobs. TransCanada declared in its presidential permit application that constructing the proposed Keystone XL pipeline was in the US national interest to maintain adequate crude oil supplies for US refineries. The application asserted that the pipeline will allow US refiners to substitute Canadian supply for other foreign crude supply and to obtain direct pipeline access to secure and growing Canadian crude output. The application also asserted that the pipeline would allow the United States to decrease its dependence on foreign crude oil supplies from Mexico and Venezuela, the two largest oil exporters into the US Gulf Coast. However, any reduced foreign crude oil supplies from these two countries could raise concerns with respect to international trade agreements.

Some Keystone XL pipeline proponents support the project based on economic benefits associated with expanding US pipeline infrastructure. A recent study by the Energy Policy Research Foundation concluded that “the Keystone expansion would provide net economic benefits from improved efficiencies in both the transportation and processing of crude oil of $100 million–$600 million annually, in addition to an immediate increase in construction employment.”²⁷ Some stakeholders point to State Department and other studies reporting much lower anticipated economic benefits.²⁸ Hence, it is difficult to determine what specific economic and employment impacts may be credited to the Keystone XL pipeline. Nonetheless, given the physical scale of the project, it could be expected to increase employment and investment at least during construction.

Pipeline opponents are concerned about the pipeline’s global or community impacts. The global impact concerns include greenhouse gas (GHG) emissions associated with the development of Canadian oil sands compared to conventional oil or renewable fuels. Although GHG emission concerns are focused mostly on the extraction process, opponents also argued that use of the oil sands crude promotes continued US dependency on fossil fuels. The community impact pipeline concerns originated from impacts associated with the pipeline’s construction and long-term use on private land, particularly its potential to affect agricultural uses and cattle grazing. Opponents are also concerned about the risk of a potential release of heavy crude and the operators’ ability to respond to a release, particularly in remote areas.

Several stakeholders oppose the Keystone XL pipeline because it expands access to new markets for the oil produced by those projects, thereby encouraging more environmentally destructive oil sands development. Some stakeholders object to the Keystone XL pipeline because it would increase US supplies of oil, and thereby continuing the nation’s dependence on imported fossil fuels and increase carbon emissions from the transportation sector. However, many argued that the constructed Keystone XL pipeline would have little relevance on greenhouse gas emissions as there are other export routes available for Canadian oil sands crude, and therefore, the same crude oils would still be transported and refined, notwithstanding in different locations.

Conclusion. Various experts consider the Keystone XL pipeline critical for America’s energy future, while environmental groups believe that the pipeline will worsen global warming. For more than four years, the Keystone XL pipeline has undergone environmental review. In January 2013, the governor of Nebraska approved a revised pipeline route through his state. The State Department’s decision whether to approve or deny the new presidential permit may occur after March 2013. In the end it remains to be seen whether the hotly debated, controversial pipeline will be approved.

Endnotes

1. The Sand Hills are a sand dune formation with highly porous soil and shallow groundwater that recharges the Ogallala aquifer, and is regarded as environmentally sensitive, both because of the risk of contamination of the aquifer and because of the wildlife supported by the habitat.

2. P.L. No. 112-78.

3. Exec. Order No. 13,337, 69 Fed. Reg. 25299 (May 5, 2004).

4. This list was included in the State Department’s Final Environmental Impact Statement for the Keystone Xl Project under a discussion regarding the Presidential Permit Review Process (p. 1–4). It was noted that this list is not exhaustive, and that the State Department may consider additional factors in its national interest determination process.

5. US Dep’t State, Keystone XL Pipeline Project, http://keystonepipeline-xl.state.gov/archive/index.htm.

6. 40 C.F.R. §1508.5

7. U.S. Environmental Protection Agency’s July 16, 2010, letter to the U.S. Department of State commenting on the draft EIS for the Keystone XL project, available at http://tinyurl.com/by72quu.

8. Environmental analysis associated with pipeline project alternatives is provided in Volumes 1 & 2 of the final EIS.

9. North American Energy Access Act, H.R. 3548, 112th Cong. (2011).

10. The North American Energy Access Act: Hearing on H.R. 3548 Before the House Energy and Commerce Committee, Subcommittee on Energy and Power, 112th Cong. (2012) (testimony of Kerri-Ann Jones, Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs).

11. The North American Energy Access Act, Hearing on H.R. 3548 Before the House Energy and Commerce Committee, Subcommittee on Energy and Power, 112th Cong. (2012) (testimony of Jeff Wright, Director, Office of Energy Projects, Federal Energy Regulatory Commission).

12. American Energy First Act, H.R. 4211, 112th Cong. (2012).

13. Strategic Petroleum Supplies Act, S. 2100, 112th Cong. (2012).

14. Keystone for a Secure Tomorrow Act, H.R. 3811, 112th Cong. (2012); Energizing America Through Employment Act, H.R. 4000, 112th Cong. (2012); Energy Exploration and Production to Achieve National Demand Act, H.R. 4301, 112th Cong. (2012); To approve the construction, operation, and maintenance of the northern portion of the Keystone XL pipeline from the Canadian border to the South Dakota/Nebraska border, H.R. 6164, 112th Cong. (2012); Domestic Energy Jobs Act, S. 3445, 112th Cong. (2012).

15. 689 F. Supp. 2d 1147, 1163 (D. Minn. 2010).

16. Id. at 1162.

17. Id.

18. Id. at 1163 (citing 38 U.S. Atty Gen. 162 (1935); 30 U.S. Op. Atty. Gen. 217 (1913); 24 U.S. Op. Atty. Gen. 100; and Natural Resources Defense Council (NRDC) v. U.S. Department of State, 658 F. Supp. 2d 105, 109 (D.D.C. 2009)).

19. Id.; see also Youngstown Sheet and Tube Co. v. Sawyer, 343 U.S. 579 (1952) (establishing a three-part test for analyzing the validity of presidential actions in relation to constitutional and congressional authority).

20. 659 F. Supp. 2d 1071, 1078 (D. S.D. 2009).

21. Id. at 1078.

22. Id. at 1078, 1078 n.5.

23. See id. at 1080–81.

24. Id. at 1081.

25. Id.

26. Id. at 1082.

27. Energy Policy Research Foundation, Inc., The Value of the Canadian Oil Sands (. . . .to the United States): An Assessment of the Keystone Proposal to Expand Oil Sands Shipments to Gulf Coast Refiners, Washington, DC, Nov. 29, 2010, p. 2, http://www.eprinc.org/pdf/oilsandsvalue.pdf.

28. See, Cornell University Global Labor Institute, Pipe Dreams? Jobs Gained, Jobs Lost by the Construction of Keystone XL, Sept. 28, 2011; Nat’l Wildlife Federation, TransCanada Exaggerating Jobs Claims for Keystone XL, Nov. 9, 2010, http://tinyurl.com/78bpmdu.