March 01, 2015

The Keystone XL Pipeline: Fueling the debate over presidential permit authority

Robin M. Rotman and Frances T. Bishop

TransCanada’s proposed Keystone XL Pipeline has cast a spotlight on the presidential permit process for cross-border oil pipelines, which has otherwise gone largely unnoticed since its inception. The Keystone XL Pipeline would originate in Alberta, Canada, and transport up to 830,000 barrels per day of Canadian oil sands crude and Bakken shale oil to a hub in Steele City, Nebraska. From there, the Keystone Cushing Extension Pipeline (already in service) transports oil to Cushing, Oklahoma; the Gulf Coast Project Pipeline (already in service) delivers the oil from Cushing to Gulf Coast refineries. This article provides a brief overview of the presidential permit authority for cross-border oil pipelines, summarizes the ongoing presidential permit proceeding for the Keystone XL Pipeline, and looks ahead to possible congressional action.

Under a series of Executive Orders, a presidential permit is required to build oil pipeline facilities that cross an international border of the United States. The federal government’s siting authority is limited to facilities located at an international border; siting authority otherwise rests with the state(s) where the pipeline will be located. The U.S. Department of State acts as the gatekeeper in a presidential permit proceeding, but other federal agencies and the public are afforded an opportunity to participate. The president retains the ultimate authority to grant or deny the permit.

History of the presidential permit authority

Although presidential authority to approve cross-border infrastructure dates from the late 1800s, the State Department did not receive authority to issue presidential permits for oil pipelines until 1968, when President Lyndon Johnson issued Executive Order 11423. The State Department’s authorization was revised in 1994 to include requirements for consulting with other federal agencies. However, its current procedures for reviewing presidential permit applications for oil pipelines are based on Executive Order 13337, issued by President George W. Bush in 2004.

Evaluation criteria

The State Department is directed, upon receipt of an application, to determine whether a proposed project would serve the “national interest.” The State Department has substantial discretion in making national interest determinations and often considers impacts on the environment, economy, energy security, and foreign policy.

The State Department evaluates the potential environmental effects of a cross-border oil pipeline by performing a review under the National Environmental Policy Act (NEPA). Under NEPA, the State Department is required to prepare an Environmental Impact Statement (EIS) if a federally authorized project may have a significant impact on the environment. The public may comment on the State Department’s draft and final EIS.

Timeframe for issuance

After the NEPA process is complete, the State Department turns to the national interest determination in preparation for issuing or denying a permit. There is no deadline for completing these actions. Certain federal agencies have 15 days to object to the State Department’s determination; if none object, the Department’s decision to issue or deny the permit is final. If the State Department receives an objection, the president, under no specific timeframe, has ultimate authority to grant or deny the permit.

Legal challenges to presidential permit authority

While not subject to many legal challenges, federal courts have upheld the presidential permit process for cross-border oil pipeline facilities as a legitimate exercise of the executive branch’s constitutional powers. In Sisseton-Wahpeton Oyate v. U.S. Department of State, 659 F. Supp. 2d 1071, 1081 (D. S.D. 2009), for example, the U.S. District Court for the District of South Dakota determined that because Congress had not acted to exercise legislative authority over the permitting process for oil pipelines, “the President has the sole authority to allow oil pipeline border crossings under his inherent constitutional authority to conduct foreign affairs.” In Sierra Club v. Clinton, 689 F. Supp. 2d 1147, 1163 (D. Minn. 2010), the U.S. District Court for the District of Minnesota similarly held that the president’s authority over permitting emanates from the president’s “constitutional authority over foreign affairs and authority as Commander in Chief.”

Keystone XL presidential permit process—developments to date

The presidential permit proceeding for the Keystone XL Pipeline began in the final year of the George W. Bush administration and continues to the present day. During that time, two presidential elections have taken place, the State Department has completed two environmental reviews, and the pipeline route has been revised. In addition, the U.S. Congress and state legislatures have debated and, in some cases, passed laws relating to the project. Meanwhile, production of Canadian oil sands crude and Bakken shale oil continues to increase. More specifically during this time period, the following developments occurred:

  • September 2008: TransCanada files initial Keystone XL presidential permit application.
  • November 2011: Nebraska’s state legislature enacts new siting requirements in response to environmental concerns regarding the Sand Hills region, causing TransCanada to revise the pipeline’s route.
  • November 2011: Due to the Nebraska rerouting, the State Department announces it needs additional time to evaluate the presidential permit application.
  • December 2011: Congress enacts the Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78), requiring the State Department to issue the permit within 60 days unless the president determines it is not in the national interest.
  • January 2012: The State Department denies the permit, citing insufficient time to meet the deadline imposed by Congress.
  • May 2012: TransCanada reapplies for a permit for the revised Keystone XL route.
  • January 2014: The State Department completes environmental review and releases Final Supplemental Environmental Impact Statement (FSEIS).
  • March 2014: Interagency and public comment period on FSEIS expires.

Current actions

When this article was submitted for publication in February 2015, the State Department had not issued its final national interest determination and the presidential permit application for the Keystone XL Pipeline remained pending. Although not directly related to the presidential permit process, there were also two notable issues pending at the state level. Under opposition from several American Indian tribes, the South Dakota Public Utilities Commission was considering TransCanada’s bid for recertification of the project’s state construction permit, which expired in June 2014. In addition, following the Nebraska Supreme Court’s recent rejection of a constitutional challenge to a 2012 law (LB 1161) that transferred routing authority from the Nebraska Public Services Commission to the governor, two new challenges attempting to overcome the standing deficiencies in the previous suit had been filed in Nebraska state court.

Possible legislative and executive action

The Keystone XL Pipeline has received considerable attention in Congress. On January 29, the Senate passed the Keystone XL Pipeline Act, authorizing TransCanada to build and operate the Keystone XL Pipeline without a presidential permit. On February 11, 2015, the House of Representatives passed a bill authorizing construction of the Keystone XL Pipeline. The White House reiterated President Obama’s opposition to any legislation that would circumvent the presidential permit requirement, indicating he will veto the bill. Many political commentators have suggested there is insufficient support in Congress to override a veto.

It is clear that a central aspect of the Keystone XL discourse is the tension between the executive and legislative branches regarding permitting authority for cross-border energy facilities. This project has also called into question the appropriate role of federal, state, local, and tribal governments in determining the routing of oil pipelines, both cross-border and domestic. As the congressional debates of recent weeks have shown, these questions are relevant not only for the future of the Keystone XL Pipeline, but for U.S. energy policy more generally.

Robin M. Rotman and Frances T. Bishop

Robin M. Rotman is an associate at Van Ness Feldman, LLP focusing on energy infrastructure project finance and development. Frances T. Bishop is an associate at Van Ness Feldman, LLP focusing on pipeline safety matters.