Energy Law, Fall 2012
Julia Crowley
Keystone XL Pipeline Project Q&A
1. What is the Keystone XL project?
a. The process of crushing stone to make energy
b. A pipeline project to bring tar sands oil into the US market
c. Harvesting all the solar energy capacity of Pennsylvania, the Keystone State
d. A set of very large windmills being installed in California
The correct answer is B.
Keystone XL is a proposed pipeline project by TransCanada which crosses
international borders from Canada through the center of the US. The XL part of the
Keystone project is a factor of the project being an expansion on an existing, and already
operational, pipeline run by TransCanada. The pipeline was first proposed in 2008 and
would bring tar sands oil from the Athabasca oil sands region in Alberta, Canada to the
US market. The oil would be used either for consumption or export after refining in the
US. The XL expansion is predicted to cost $7 billion.
2. What is tar sands oil?
a. A type of unconventional oil created from processing of mixed deposits
b. The melting down of closed roads to make oil
c. A type of oil only found in Russia in the Tar Sands region
d. A kind of clear oil used to exfoliate rough skin
The correct answer is A.
Tar sand oil is more scientifically called bitumen crude, and it is one of the
heaviest crude oils. The crude in the tar sands is mixed with sand, clay, other minerals
and water. The Athabasca deposit which feeds the XL pipeline, is the largest known
deposit in the world and one of three large reserves in Canada. These three reserves
contain 1.7 trillion barrels of bitumen (170 billion of which are proven, see Mining Mag).
Athabasca is available for surface mining, which is cheaper than other forms of
extraction, yet more ecologically damaging. Until recently, the high cost of extraction
and production of tar sands oil made investment rare. Tar sands oil is only economically
viable when oil prices are high.
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Photo: Tar Sands Tumblr
One of the major environmental concerns for the entire Xl project is that use of tar
sand oil produces more green house gases. In 2010 a group of 50 Congressmen, all
Democrats, sent a letter to Secretary of State Hillary Clinton, urging her to consider that
the use of tar sands would undermine the US commitment to a clean energy future.
One of the major concerns with tar sands extraction is the massive heavy machinery
required to extract and process it when mined at the surface. Photo See: The Guardian.
The section of the Athabasca deposit which is suitable for surface mining
(because it is less than 250 ft below the surface) covers more than 1,800 sq mi and comes
within 12 miles of a UNESCO World Heritage site, the Wood Buffalo National Park. The
deposit is now starting in situ mining (or underground mining) for both economic and
environmental reasons.
3. Where does the oil in the Keystone Pipeline come from, and where is it going?
a. From Hawaii to California
b. From Canada on the eastern coast of North America all the way south to
Florida
c. From the western coast of Canada to the Gulf of Mexico
d. From Texas through Central America
The correct answer is C.
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See: The Green Grok
The pipeline is 36 inches wide and 1,900 miles long (see CSMonitor). There is
some political contention on the pipeline extending to the Gulf of Mexico. Opponents of
the expansion claim that bringing the oil to the Gulf will encourage oil refineries located
there to export the refined gas products instead of using them in the US market. The route
of the XL pipeline serves the major deposits in North Dakota with an extension and goes
through the major US oil hub of Cushing, OK.
4. What are the impacts of the project crossing international borders on the XL
pipeline?
By crossing state borders, this issue becomes one in which the State Department
has jurisdiction. The State Department, unlike the EPA for example, has many angles
from which to consider this project; as a job creator, increasing oil independence,
lowering domestic gas prices (questionably) as well as the potential for ecological and
environmental damage associated with construction, leaks and spills. Because of the
number and variety of interests at stake, this issue has become highly politicized. The
environmental impact assessments have already caused disagreements between the EPA
and the State Department, and in the end the President will have to give the full green
light for the project.
If the pipeline did not cross international borders (which technically the XL
portion does not but the project as a whole does) than the State Department would not be
in the mix and state agencies as well as the federal EPA would be involved in the
contentious environmental impact debates.
5. How much oil would the pipeline add to US markets by 2030 daily?
a. .1 million barrels
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b. 1.7 million barrels
c. No one knows yet
d. 75 billion barrels
The correct answer is B.
The Department of Energy report from 2010 on the pipeline (see: CSMonitor)
says that by 2030 the flow from Keystone could be that high. In reality the projections
offered by TransCanada, and even some of the US government agencies involved in the
approval process, have taken some heat from opponents of the project. Many people
contend that the import rate from Canada will not change because the existing pipelines
are not being used at capacity even now. TransCanada claims that Keystone will help
reduce imports from Venezuela and the Middle East by 40%.
A recent NRDC study has found however that by shifting Canadian imports to the
Gulf Coast instead of the Midwest where they currently reside, the US is primed to export
more oil from Canada than ever before, which means prices in the Midwest could go up.
Even TransCanada concedes that areas in the Midwest which are currently oversupplied
will see an increase in price when the pipeline shifts imports to the Gulf.
6. True or False: The pipeline was quickly approved by state and federal regulatory
agencies required?
The correct answer is False.
The project was approved by Canadian authorities in 2010 by the Canadian
National Energy Board. The US State Department conducted the original environmental
impact statement, however this was rejected by the EPA in July 2010 as too narrow. The
statement was prepared by a contractor, Cardno Entrix, and there were claims in
Congress and the press that the report was not impartial. The revised environmental
impact statement was submitted in August 2011.
By November of 2011 the State Department started considering alternative routes
to the sensitive environmental areas of Nebraska effected by the pipeline. In late
November the Governor of Nebraska signed a compromise for the route. Congress passed
a bill for Presidential approval in December of 2012 however President Obama rejected
the application for reasons relating to the incomplete impact investigations. In September
of 2012 TransCanada submitted a revised environmental impact assessment given the
new Nebraska route.
7. Who has the authority to grant the permits for the Keystone XL project?
a. The President
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b. Congress
c. Individual executive agencies, most notably the State Department
d. Each state’s Governor
The answer is… up in the air.
The Congressional Research Service has stated that it is constitutional for
Congress to legislate cross-border pipeline permits however as of yet the President has
been the only one to exercise that power. States concerns are important however, it is the
pleas from Nebraska state environmentalists which led President Obama to put the
project on hold in 2012. The southern half of the project starting in Cushing, OK was
approved by President Obama in March of 2012 and is currently under construction.
8. Name two possible legal hurdles a major pipeline project like Keystone XL might
have to overcome?
a. Environmental regulations. Regulations concerning the sensitive Sandhills
wetlands and Ogallala Aquifer have posed major difficulties for the Keystone XL
projects, issues the first Keystone pipeline evaded by being situated farther east. The
Ogallala Aquifer provides drinking water for 2 million people and there are serious
concerns about the impact an oil spill could have in this region.
See: Mt. Holyoke: Water
b. Eminent domain cases. As of October 2011, TransCanada had received 34 eminent
domain actions in Texas alone and an additional 22 in South Dakota. In May of 2011
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there was a Congressional hearing on the pipeline and some of the landowners effected
testified.
Eleanor Fairchild, an elderly Texas Landowner was charged with criminal
trespassing on her own property after refusing to let TransCanada equipment on her
property. Her land was eventually taken by eminent domain by the state after coaxing
from TransCanada. In order to take the land for a private pipeline, the state first
condemned it. Then as condemned property the owner no longer has a say in its control
and eminent domain is easy to establish. See Grist.
The Texas courts have not been friendly to suits by landowners against the Texas
Railroad Commission (who control the land for pipelines), one case by Michael Bishop
was thrown out on a paperwork technicality concerning proper service on TransCanada.
See Bloomberg.
Other land owners sign agreements with TransCanada willingly, although there
have been some claims of misrepresentations in the contracts.
9. True or False: Interested parties can sue TransCanada for issues related to the
pipeline?
The correct answer is True, if you can get standing.
The NRDC sued TransCanada in 2009 claiming the underlying environmental
impact assessments which supported the permit were insufficient. The NRDC was found
to lack standing by a federal judge and thus the case did not proceed.
The Sierra Club, in conjunction with Clean Energy Oklahoma and the East Texas
Sub Regional Planning Commission filed for an injunction in federal district court in
Oklahoma in June of 2012. The injunction concerns the southern portion of the pipeline,
where construction has begun and seeks review by the Army Crops of Engineers. The
group is suing under the Administrative Procedure Act, 5 U.S.C. §701 claiming the
issuance of the original permits was arbitrary and capricious.
You do not have to sue in federal court, Suncor Energy went to Federal Energy
Regulatory Commission (FERC) in an attempt to recoup costs from TransCanada for
construction costs on a previous project when the project went way over budget. Suncor
alleged that TransCanada mislead them when they signed onto the contract in 2007 as to
the actual cost of the pipeline. The request was denied.
10. Opinion Question: How will the rest of the regulatory and legislative action play
out on the pipeline?
There is no correct answer.
Here is my prediction though. The southern XL section of the pipeline is already
being built. The Republicans in Congress, the oil and gas industry, and TransCanada
especially will not the project die out after such serious financial and political capital has
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been spent on it. The real issue is how long will it take for negotiations about an
environmentally safe (or tolerable) route through Nebraska will take and how long the
EPA will take to consider the proposal acceptable. The risk of spills is real and with such
a precious resource as the Ogallala aquifer hanging in the balance environmentalists are
not going to let the issue go quietly. The additional concerns about how dirty tar sands oil
is compared to imported Middle Eastern oil is not likely to die down even after the
pipeline is up and running.
How the final project will turn out can not be predicted however. There have been
proposals in Congress to force oil in the Keystone XL system to be sold in the US and not
exported, there have been talks about Canadian favored tax reduction to ease the burden
the pipeline will place on Midwestern oil prices. What the final package will look like is
anyone’s guess, but the pipeline is happening even after all the regulatory, pubic opinion
and political hurdles it had to go through.
Photo: OJ Blog
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