Thirst for Oil and the Keystone Xl Pipeline

• Publication year: 2022

46 Creighton L. Rev. 1. THIRST FOR OIL AND THE KEYSTONE XL PIPELINE

THIRST FOR OIL AND THE KEYSTONE XL PIPELINE

Sam Kalen(fn*)

The cry that echoed in August 1859 through the narrow valleys of western Pennsylvania-that the crazy Yankee, Colonel Drake, had struck oil-set off a great oil rush that has never ceased in the years since. And thereafter, in war and peace, oil would achieve the capacity to make or break nations, and would be decisive in the great political and economic struggles of the twentieth century. But again and again, through the never-ending quest, the great ironies of oil have been made apparent. It comes with a price.(fn1)

I. INTRODUCTION

The dynamics surrounding the approval of the Keystone XL pipeline symbolize the nation's abstruse approach toward a national energy policy. While the pipeline fits snuggly into such a policy, it is problematic to suggest that we either truly have or operate under any fully consistent holistic national energy policy. For many decades now, presidents have touted the ideal of energy independence amidst myopic efforts to craft-at best-aspects of such a policy.(fn2) Today, as the country has just witnessed two presidential candidates clash over energy policy, "[t]he pipeline has become a powerful symbol and political pawn this election year."(fn3) "For the Obama Administration, moving towards the goal of energy independence has been a clear priority since day one."(fn4) The Keystone pipeline system, stretching from Alberta, Canada through the Midwest to Texas, ostensibly furthers this goal of energy independence. The pipeline could provide U.S. oil producers with enhanced access to U.S. refineries, while simultaneously securing access to oil from North America instead of from overseas.

Yet today's energy policy rhetoric unfortunately perpetuates the United States' failure to develop an institutional structure capable of crafting a consistent, coherent, meaningfully relevant, and imple-mentable policy guiding our use of fossil fuels. This arguably has become evident with the United States Department of State's struggle with the Keystone XL pipeline project. The project has prompted a wide-ranging dialogue with sound bites about energy independence, calls for increased pipeline capacity feeding into Gulf Coast region refineries, and more focused conversations about the Gulf Coast refineries' need for a stable supply of heavy crude oil to support potentially declining amounts of imported crude from Mexico and Venezuela. Each of these issues, as well as many others, demands an acute appreciation of the complexity of energy policy, both domestic and foreign, but little about the current process for assessing the project suggests that these issues are likely to receive sufficiently detailed and balanced scrutiny.

This Article, therefore, illustrates the difficulty inherent in assessing the merits of any potential international oil pipeline, and it offers a brief suggestion for improvement. Part II first reviews the Keystone XL project proposal,(fn5) and Part III briefly reviews the potential for increased crude oil from the Canadian tar sands.(fn6) Then, Part IV explores the issues and problems embedded in any effort to assess whether the Keystone XL proposal serves the "national interest."(fn7)Part IV encourages a dialogue about the appropriate role and expertise of the State Department, and the department's ability to assess complex energy, environmental, and resource issues. Finally, Part V suggests the Department of Energy might be institutionally more capable than the State Department at providing the necessary determination regarding what proposed pipelines are in the "national interest."(fn8)

II. THE KEYSTONE XL PIPELINE

When TransCanada filed its application to expand its cross-border oil pipeline operations in the fall of 2008, it triggered a unique federal approval process and a national dialogue on climate and energy policy. Unlike natural gas pipelines that require a certificate from the Federal Energy Regulatory Commission ("FERC") before construction and operation can begin,(fn9) FERC regulates interstate oil pipelines under a less structured process not requiring a certificate for construction.(fn10) If, however, an oil pipeline will cross a U.S. border, it must first receive a Presidential Permit.(fn11) Decades ago, the executive branch asserted the authority to approve international projects, and then delegated that authority to the State Department for determining whether a proposed project would serve the "national interest."(fn12)Case law beginning in 2009 has either validated executive authority to issue such permits or concluded that the issue is non-justiciable.(fn13)

TransCanada triggered this process when it requested a permit to transport 700,000 barrels per day ("bpd") of Western Canadian Sedimentary Basin crude from a supply hub near Hardisty, Alberta to Cushing, Oklahoma and southeastern Texas.(fn14) The proposal included 1,384 miles of pipeline in the United States and approximately 327 miles in Canada.(fn15) It proposed adding to the existing Keystone project, which already can deliver up to 590,000 bpd of crude through its mainline segment that extends from the Canadian border to Wood River and Patoka, Illinois, as well as its Cushing Extension running from Steele City, Nebraska to Cushing, Oklahoma.(fn16) A critical aspect of the State Department's process involved the preparation of an environmental document,(fn17) pursuant to the National Environmental Policy Act ("NEPA"),(fn18) before it could render its "national interest" determination. Therefore, the State Department prepared an Environmental Impact Statement ("EIS").(fn19)

Once the State Department completed its EIS,(fn20) the Department postponed its decision in order to address concerns by the State of Nebraska and others about the potential environmental effects of routing the pipeline through the Nebraska Sand Hills region and over the Ogallala Aquifer. The Keystone XL project quickly became embroiled in energy policy politics. Congress added a provision to the Temporary Payroll Tax Cut Continuation Act of 2011(fn21) requiring that the Secretary of State issue a permit within sixty days unless the President determined the project was not in the "national interest."(fn22) President Barack Obama responded by rejecting the application, asserting that sixty days was insufficient time to render a reasoned decision.(fn23)This decision intensified the political dynamic surrounding the U.S.Canada relationship, the debate regarding the entire pipeline project, and the rhetoric surrounding the United States' energy policy. American Petroleum Institute president Jack Gerrard spoke favorably about the pipeline and raised the mantle of energy security by stating, "The opportunity here is too great; the stakes too high; the shared imperative for both countries too urgent."(fn24) Others pondered whether the pipeline might affect gasoline prices.(fn25) Congress reacted by debating whether to mandate favorable action on the pipeline.(fn26)

Meanwhile, TransCanada navigated the political rhetoric by negotiating an alternative route through Nebraska and deciding to split its proposal into two independent pipeline projects. A southern segment, the Gulf Coast Project, would transport up to 830,000 bpd of crude from Cushing, Oklahoma to various Gulf Coast refineries.(fn27) Its wholly American origin and termini avoid any requirement for State Department approval.(fn28) A separate northern segment, requiring State Department approval, would cross the international border in Phillips County, Montana, avoid the Nebraska Sand Hills, and then terminate by joining existing Keystone system at Steele City, Ne-braska.(fn29) In May 2012, when TransCanada filed its new application for the northern segment, it noted that the project would have the capacity to transport approximately 830,000 bpd and hoped to commence construction in early 2013.(fn30)

The Obama Administration has moved swiftly on the southern segment, while responding cautiously toward the company's northern proposal. On March 22, 2012, President Obama issued a memorandum designed to facilitate environmental review of the pipeline's southern leg.(fn31) The ostensible purpose of an independent southern segment would be to remove the Midwest bottleneck of heavy Canadian crude and Bakken formation oil. Pipeline opponents hoped to retard the review by, among other things, questioning the application of the expedited process for constructing crossings over various bodies of water.(fn32) So far, the United States Army Corps of Engineers, in charge of reviewing the pipeline crossings, supports allowing the streamlined process.(fn33) The Sierra Club and others unsuccessfully sought review of that decision.(fn34) For the northern segment, the Obama Administration is preparing a supplemental EIS, which will examine TransCanada's proposed new route around the Nebraska Sand Hills, extending from the U.S.-Canadian border at Phillips, Montana to Steele City, Nebraska.(fn35)

The decision on the presidential permit application appears likely to occur soon. Until then, opponents and proponents are likely to continue to square off, with each side presenting sound bites and platitudes. The conversation about the merits of the project, however, deserves a balanced discussion that focuses on the relationship of the project to U.S. policies in energy...