Since the Administration denied a Presidential (border crossing) Permit to the Keystone XL Project in 2015, a number of regional, state or local objections to new pipeline construction projects have emerged around the U.S. Most of the protests have continued themes relied on by opposition to Keystone, including the claim that fossil fuels should remain in the ground in order to limit the impacts of climate change. Groups such as the Sierra Club and Earth Justice have acknowledged that they selected Keystone as a tangible subject to carry their climate change message, which is otherwise rather abstract. Ironically, the Keystone and subsequent protests seem to focus on oil and gas as more emblematic of fossil fuels than coal, and they ignore the significant safety advantages in transporting energy by pipeline as compared to any other method. In addition, they ignore economic and safety factors that counsel in favor of new pipeline construction, and avoid discussion about the realistic availability of alternative energy resources provide a majority of U.S. demand in the near future.
The question of whether Presidential Permit authority is constitutional and/or subject to judicial review has been and continues to be an unsettled issue. A little more than a month after the State Department’s November 2015 denial of TransCanada’s application for a Presidential Permit to construct its Keystone XL pipeline project, the United States District Court for the District of Minnesota ruled in White Earth Nation et al. v. Kerry et al. that State Department Presidential Permitting decisions are Presidential in nature and are therefore not subject to judicial review. Approximately one month later, in January 2016, TransCanada filed two separate actions to challenge the Obama administration’s rejection of its application for a Presidential Permit for the Keystone XL pipeline. The first action was filed in federal district court in Texas to challenge the denial of the Keystone Presidential Permit, and the second is a Notice of Intent to submit a claim to arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA).
The US oil and gas industry has been transformed over the past few years by development of new shale resources. The US is now the world’s largest producer of natural gas and on track to be the world’s largest producer of oil. These changes have affected America’s energy future, as well as global markets. With so much new production on the market, and continuing economic stagnation in Europe and China reducing demand, the global price of oil dropped dramatically in the last half of 2014. As Pulitzer Prize-winning analyst Daniel Yergin observed recently, America has now unexpectedly replaced OPEC as the world’s “swing producer” of oil and gas. As a result, US oil and gas producers must now make new decisions about investment, production and rate of return ratios. Against this backdrop, there are, as always, many other issues that will affect decisions and the market landscape.
A recent string of oil train derailments has renewed focus on rail safety and boosted support for oil pipelines as a safer mode of transportation, potentially affecting the public’s perception of pipeline projects such as the Keystone XL pipeline, whose southern leg went into service on January 22, 2014 and whose northern leg was the subject of a relatively objective final supplemental Environmental Impact Statement from the Department of State, issued on January 31, 2014.
The State Department recently released the Final Environmental Impact Statement (FEIS) for the Keystone XL Pipeline. As a final installment to the project’s review under the National Environmental Policy Act (NEPA), the FEIS assesses the potential impacts associated with the proposed pipeline and its alternatives. The State Department concludes that the Keystone pipeline is unlikely to significantly impact oil sands production and, in turn, unlikely to alter global greenhouse emissions (i.e., finding no new objection to the project). Notably, the FEIS is unusually careful not to identify a preferred alternative or express a strong opinion on any one topic. As such, the fate of the project remains largely political. The ultimate decision on the whether to issue a Presidential Permit to Keystone is left to Secretary of State John Kerry and the President to determine whether the project serves the national interest, with no firm deadline for doing so.
TransCanada’s proposed new pipeline construction project to carry tar sands oil from Canada to the US Gulf Coast received considerable scrutiny when initially proposed. Because the new pipeline crosses an international border, it requires a Presidential Permit from the State Department, and that process in turn requires preparation of an Environmental Impact Statement (EIS) under NEPA. The State Department issued a draft EIS in 2011, but the Administration rejected it in early 2012, and requested that a new route be considered. The draft SEIS issued as a result of this request does not identify any environmental effects of the pipeline that would preclude issuance of a Presidential Permit, but it also does not contain a recommended alternative, instead leaving that decision to the Administration. Earlier this year, the Governor of Nebraska advised the Administration of his approval of a revised route that avoids the Nebraska Sand Hills region, and recommended that the state Final Evaluation Report of the route be included in the federal SEIS. Although the draft SEIS was announced on March 1st, formal publication of a notice of availability was not published until March 8, 2012. The 45 day public comment period runs through April 22, 2013, but given the intense public interest in the Keystone project, it is likely that this comment period may be extended. Click here for a copy of the draft SEIS and here for the Federal Register Notice.
On August 5, 2012, the Western District of Oklahoma denied Sierra Club’s attempt to seek a temporary injunction to stop commencement of construction of the southern leg of the Keystone XL pipeline project scheduled to begin August 6, 2012. In mid-July, Sierra Club challenged the Army Corps of Engineer’s (Corps) Nationwide Permit 12 (NWP 12) permit as a violation of the CWA, NEPA, and the APA, and contended that the Corps’ issuance of a verification that the project fell within the scope of NWP 12 was improper. NWP 12 is a general permit authorized by section 404 of the Clean Water Act (CWA) issued to linear construction projects, such as pipelines and other utilities. In denying the injunction, the Court found that the Corps’ issuance of NWP 12 complied with the CWA, NEPA and the APA and that Sierra Club failed to show that the southern segment of the Keystone project would “have more than a minimal impact on the environment.” Click here to read the Court’s Order in Sierra Club v. Bostick, 5:12-cv-00742 in the Western District of Oklahoma.
In a lawsuit that could have a broader impact than just halting the pipeline, the Sierra Club has brought a lawsuit against the US Army Corps of Engineers’ issuance of a NWP 12 permit to the Keystone Gulf Coast Project. The NWP 12 permit authorizes construction, maintenance and repair of linear utility lines in waters of the US along the entire permitted route of the pipeline. The lawsuit is challenging the project permit and is a facial challenge to the Corps’ authority to issue the NWP 12, which, if successful, would cancel the Corps’ ability to issue the NWP 12 and force operators to apply for individual permits for each impacted water of the US. The case is Sierra Club, Inc. v. Bostick, 5:12-cv-00742, filed in the West District Court for Oklahoma. Click here for the Complaint.
President Obama denied the Keystone XL permit application based on a recommendation from the State Department that it did not have enough time to vet alternative pipeline routes before the February 21st approval deadline imposed by Congress in the payroll tax extension legislation. While the current Keystone XL application has been denied, the administration will allow TransCanada to reapply for a permit after it develops an alternative route around the Nebraska Sandhills. On the same day as the President’s announcement, the House Energy and Commerce Committee responded by scheduling a hearing on January 25, 2012 regarding legislation introduced by Nebraska Congressman Lee Terry to transfer permitting approval authority over the Keystone XL pipeline project to FERC, H.R. 3548. The Committee also invited Secretary of State Hilary Clinton to testify on the State Department’s final Environmental Impact Statement. Click here for the text of H.R. 3548.
On December 23, 2011, President Obama signed the Temporary Payroll Tax Cut Continuation Act of 2011, HR 3765, that temporarily extends the two percentage point payroll tax cut for employees, and also includes a Republican negotiated deadline for the President to either approve the Keystone XL pipeline or determine that the project is not in the national interest. The law also includes a provision allowing Nebraska and TransCanada time to find an alternative route in the State if the project is approved.