Keystone Xl: the Pipeline to Energy Security

• Publication year: 2022

46 Creighton L. Rev. 61. KEYSTONE XL: THE PIPELINE TO ENERGY SECURITY

KEYSTONE XL: THE PIPELINE TO ENERGY SECURITY

Congressman Lee Terry (NE-2)(fn*)

I. INTRODUCTION

The Keystone XL Pipeline ("Keystone XL") represents one of the most promising economic opportunities currently available. When government officials talk about an economic opportunity for the country, often they should be talking about an opportunity for the federal government to get out of the way. Keystone XL is one such opportunity. Nonetheless, critics hope the government will block Keystone XL's construction based on several concerns: that Keystone XL would carry a type of oil that is especially corrosive, that greenhouse gas emissions would be especially high with the type of product it will transport, that oil and gas prices could actually increase as a result of increased petroleum supply, or that the use of carbon based fuels could continue for some time.

However, these concerns are only superficial attempts to express a deeper ideological fixation-the fear that Keystone XL would further an entrenchment in oil dependence. The problem with this view, of course, is that it ignores the tremendous economic benefits the pipeline can provide as well as its critical importance to our energy supply. We simply do not have the luxury of letting long-term environmental concerns deaden our senses to the immediate threats to our nation's energy security. Moreover, our recovering economy cannot afford to pass up a private investment of twenty billion dollars and the addition of tens of thousands of jobs. Developing alternative energy sources is always a high priority, but we cannot ignore the need to protect our energy supply. We face a number of challenges in securing these vital sources, and Keystone XL represents a key element of a more secure future on this front.

Given the amount of oil we import every day into this country- about 11.4 million barrels per day,(fn1) representing nearly half the oil we consume(fn2)-it seems obvious that if we could choose our suppliers, we would select the most stable and trustworthy trading partners. Like it or not, we depend heavily on petroleum products; oil fulfilled about thirty-six percent of all of our energy needs in 2011.(fn3) Moreover, oil is a global commodity. Demand for oil is rising worldwide while production has stagnated.(fn4) Swelling populations in India and China, as well as increasing car ownership in these countries and other developing nations, have caused worldwide demand for oil to soar.(fn5) Oil production, however, has not kept pace with this increase in demand, which threatens to drive prices of oil-based products even higher.(fn6)

Meanwhile, oil production in Canada is rapidly expanding. The Energy Policy Research Foundation estimates that Canada has about 170 billion barrels of recoverable oil resources in the form of bitumen.(fn7)With production of this resource ramping up, Canada needs a trading partner for its product and we are the first choice. It is imperative that we take advantage of this opportunity before the window closes because it will not last forever. Going forward, we must ensure the political winds that have blown Keystone XL's construction off track no longer play a role in the decision-making process for such an economically important investment.

I have consistently supported efforts to establish infrastructure and policies that enable greater diversity of energy sources and sup-plies.(fn8) The foregoing are a few of the major reasons why Keystone XL represents a critical component of this broader strategy. By creating a dedicated line to Canadian production, Keystone XL will allow us to increase our reliance on dependable energy sources while reducing our dependence on sources that expose our entire economy to serious risk.

II. BACKGROUND

A. FEDERAL REGULATION OF OIL TRANSPORTATION

The federal government treats petroleum pipelines traveling across international borders differently from pipelines beginning and ending inside the United States. Cross-border pipelines must obtain a federal permit, but domestic oil pipelines generally need not seek federal permission in order to begin construction. In fact, the Federal Energy Regulatory Commission's ("FERC") regulatory authority over oil pipelines is narrow compared to natural gas pipelines.(fn9)

Nonetheless, oil pipeline operators must file tariffs with FERC, which has jurisdiction over pipelines' terms of service and rates.(fn10) Although pipeline companies propose rates and terms of service, FERC has the exclusive jurisdiction to determine whether they are just, reasonable, and not unduly discriminatory.(fn11) If pipeline proposals fail to reach this threshold, FERC has the authority to prescribe the rates or terms of service if need be.(fn12) FERC has set its policy through a series of adjudications under this authority, which inevitably affects pipeline construction and expansion decisions.(fn13) In addition, oil pipelines operate under obligations to file reports with FERC, including annual and quarterly reports.(fn14) These activities have given FERC institutional knowledge of the oil pipeline business both in modern times and dating back to the nineteenth century in the agency's previous incarnations.

Even though FERC manages only a narrow set of oil pipeline issues, it is responsible for a broad set of natural gas pipeline activi-ties.(fn15) This responsibility has required FERC to develop expertise in the wide range of issues that generally arise with pipelines. For example, natural gas pipeline companies must obtain a certificate from FERC prior to beginning construction.(fn16) Under its authority to permit, FERC must determine whether the pipeline would serve "public convenience and necessity."(fn17) FERC also has authority to deny applications by pipeline companies that seek to abandon existing facilities in operation.(fn18) These regulatory activities have established the agency as the key policymaker on natural gas pipeline issues in addition to regulating oil pipelines.

Pipelines originating across national borders may not operate inside the United States without a Presidential Permit.(fn19) The Department of State ("DOS") oversees the vetting process for permit applicants and the President has the authority to approve or block the application.(fn20) This authority comes from a series of executive orders granting the executive branch authority to issue permits for pipelines that export and import oil.(fn21)

Although DOS is not bound by the procedures set forth in the National Environmental Policy Act(fn22) ("NEPA"),(fn23) DOS has opted to conform to them for the purpose of the Presidential Permit. Under this process, when a company submits an application for a permit, DOS must collect comments from interested stakeholders before issuing a determination.(fn24) At its discretion, DOS can also conduct environmental impact statements as part of its permit application review.(fn25) At the end of its review, if DOS finds that the pipeline would "serve the national interest," it recommends that the President issue a permit.(fn26)Although the language "national interest" is used in Executive Order 13,337, it has no content.(fn27) That is, factors demonstrating what serves the "national interest" are nowhere to be found.

Interestingly, although permit applications are subject to DOS review, courts have considered final permitting decisions to be presidential actions not subject to the Administrative Procedure Act(fn28)("APA").(fn29) As a result, final determinations are essentially immune to judicial review.(fn30) However, when DOS finds it necessary to perform an Environmental Impact Study ("EIS"), as it did with Keystone XL, courts are split on whether the EIS is reviewable as an agency action under the APA.(fn31) In any case, the immunity to judicial review enjoyed by final decisions to issue a permit is concerning.

B. KEYSTONE XL AND THE PERMITTING PROCESS

Keystone XL would carry heavy crude oil through a three-foot-diameter pipe produced from the oil sands region of Alberta, Canada to production sites in North Dakota and Montana, and then to refineries in Oklahoma and on the Texas Gulf Coast.(fn32) The pipe would be manufactured subject to a number of Pipeline and Hazardous Materials Safety Administration ("PHMSA") specifications aimed at ensuring the strength and durability of the material.(fn33) As planned, the U.S. portion of the Keystone pipeline would stretch 1,380 miles and would carry approximately 830,000 barrels of oil per day ("bpd").(fn34)

In 2010, the first phase of the Keystone project was completed, connecting crude producers in Alberta to refiners in Illinois.(fn35) The second phase's original route runs from Alberta to the Gulf Coast.(fn36)The southern portion of the second phase has been approved; however the northern portion, crossing the U.S.-Canada border, is the controversial section.(fn37) This upper portion would connect producers in Har-disty, Alberta to Steele City, Nebraska, and would increase heavy crude transport capacity by 509,000 bpd.(fn38)

Keystone XL would originate in Canada, so TransCanada must obtain a Presidential Permit from DOS.(fn39) To this end, the company filed a permit application in September 2008.(fn40) DOS issued a Draft Environmental Impact Statement ("DEIS") regarding the project on April 16, 2010.(fn41)...