Significant Obstacles Remain in Building Keystone XL

Co-authored by Liz Barratt-Brown, Senior Advisor, NRDC

Co-authored by Liz Barratt-Brown, Senior Advisor, NRDC

President Trump issued on his “working day 2” a series of memorandums aimed at reviving the Keystone XL and Dakota Access pipelines and expediting the environmental review of these and other pipelines and infrastructure. The Keystone XL memorandum invites TransCanada, the Canadian proponent of Keystone XL, to re-submit its application and then requires that a decision be made within 60 days. The memorandum also states that, to the maximum extent permitted by law, the National Environmental Policy Act (NEPA) and Endangered Species Act (ESA) requirements are satisfied by an environmental review completed in early 2014. This reopens a decision to reject Keystone XL that was reached following a rigorous, robust process with substantial public engagement, replacing it with a rubber stamp that prevents meaningful consideration of public concerns and the fundamental changes that have occurred when the project was evaluated three years ago.

However, in spite the intent of the memorandum to speed Keystone XL’s approval, significant obstacles remain to the project.

First and foremost is the coalition of Native Americans, ranchers, landowners, clean energy businesses, student activists, Nobel Laureates, scientists, and many many others that are ready to draw a line in the sand again against this dangerous project. They will be making their voices heard.

But significant legal and regulatory barriers remain as well.

Cross-border permitting process

While Trump’s executive memorandum requires State to rely on a three year old Environmental Impact Statement insofar as the law permits, the National Environmental Policy Act (NEPA) sets standards to prevent major federal decisions to be made on the basis of fundamentally outdated information and in ignorance of material developments. And the world has changed dramatically since Keystone XL was proposed in 2008 and reviewed in 2014 in a number of ways that matter for the project:

  • Assumptions about the price of oil driving the analysis are now wildly outdated: In the 2014 SEIS, the State Department assumed that oil prices would average $140 a barrel over the next twenty years and generally stay above a floor of $100 a barrel. They are now half that today, with substantial implications for the tar sands industry, which produces both some of the dirtiest and the most expensive crude in the world. No new tar sands projects have been green lighted for construction for several years and some major oil companies—notably Statoil—are pulling out of the tar sands due to both costs and climate concerns. Tar sands reserves are marginal and some companies may have to write down their tar sands assets.
  • The Paris Accord will inevitably limit the development of high-carbon fuels: In the meantime, the Paris climate accord brings into question plans to expand long lived high carbon energy projects, and tar sands mines and facilities not only produce some of the world's most environmentally damaging oil, they also are able to maintain high production for many decades (unlike most conventional oil fields) thus prompting concerns about their longevity.
  • Climate Regulations. Additionally, the Alberta Government has committed to a cap on emissions from tar sands production. That cap, at 100m Metric tons of carbon, is roughly equivalent to 3.2 million barrels per day of production, no where near the earlier projections for tar sands oil growth. Increased efficiency could raise that more limited production level in theory, but it would also raise the cost of the production. So, even if oil prices recover, the tar sands industry will never go back to the unfettered growth of earlier periods.
  • The National Academy of Sciences has raised new concerns about tar sands oil: The National Academy of Sciences released a report last year finding that tar sands diluted bitumen spills presented far more significant challenges when compared with conventional oil spills and, following a review of U.S. regulations, determined that oil spill responders do not have the necessary tools and techniques to contain and clean tar sands spills. Most notably, they found that tar sands oil sinks when released in water, compounding clean up challenges.
  • Tar sands by rail never materialized: Contrary to expectations in 2014, there was no inundation of Canadian tar sands on our rails following Keystone XL’s rejections. In fact, Canadian crude by rail shipments to the Gulf have declined since Keystone XL’s rejection—and after major failures there are no plans to ship large volumes of tar sands on our railroads to reach the Gulf Coast. While oil trains are certainly a continuing issue, the vast majority of these trains are moving domestic production which is cheaper to ship by rail.

Failures to consider these and other issues that are material to the question of whether the Keystone XL pipeline is in the United State’s interest will increase the risk of legal challenges to an approval of Keystone XL, while efforts to consider these issue in a transparent and credible manner will require more than the 60 day period that Trump’s executive memorandum allows.

Federal Clean Water Act permits are still required

While the Keystone XL memorandum asks the Army Corps of Engineers to expedite federal Clean Water Act 404 permits for water and stream crossings by using, to the extent permitted by law, the Nationwide Permit 12, this will be subject to a lot of scrutiny and potential legal action on whether a consolidated permit can be used. Keystone XL would cross over some 1000 water bodies, Yellowstone and North Platte rivers, some of our most iconic waterways.

There is no route in Nebraska and in-state opposition is united and growing

The public in Nebraska has been strongly behind ranchers and Native American’s that have joined forces to protect the land they have stewarded for generations.  Due to their opposition, there is no route in Nebraska. There are numerous legal barriers to establishing a route:

  • The underlying pipeline approval law was found to be unconstitutional: The routing law (LB 1161) that TransCanada helped get passed through the Nebraska Legislature was challenged in court by Bold Nebraska and landowners and found to be unconstitutional. President Obama's rejection of the pipeline compelled the judge to dismiss the landowners' case, but the unconstitutional law LB 1161 remains on the books. Therefore, TransCanada's route for Keystone XL approved under the law is void.
  • TransCanada must seek approval from the Public Service Commission: Faced with the unconstitutional routing law, a law TransCanada pressured Nebraska lawmakers to pass, it must now submit an application for the route before the state's Public Service Commission (PSC)—a process that can take 8 months to a year. The PSC can tell TransCanada to choose a different route or deny the application altogether.
  • TransCanada cannot use eminent domain until September 2017 and its use is highly controversial: TransCanada cannot apply to use eminent domain authority to take farmers' and ranchers' land again against their will until September 2017, according to applicable Nebraska state law governing the use of eminent domain. The collective of Nebraska landowners who held out against selling their land to TransCanada remains strong and the State Legislature may limit use of eminent domain by foreign corporations.

South Dakota is facing opposition led by the Great Sioux Nation

The Keystone XL proposed route runs near the Rosebud and Pine Ridge Reservations and through their traditional territories. These Sioux reservations, like Standing Rock in North Dakota, are part of the Oceti Sakowin (Great Sioux Nation) and are likely to convene large number of Water Protectors from all over the country. The Tribes have strong legal claims relating to failure of TransCanada and federal agencies to properly study the route and consult with the tribes.

Trump's statements have questioned the benefit of the pipeline to America

On the campaign trail, Trump alluded to asking TransCanada for a share of the profits from Keystone XL. He re-iterated, in signing the memorandum, that the pipeline terms were subject to renegotiation. For example, he referenced the use of US steel in building the pipeline.  The majority of the steel previously purchased by TransCanada for Keystone XL is from outside the U.S. Additional requirements could cause TransCanada and Canadian oil producers to de-prioritize the project.

Deteriorating business case for Keystone XL

The business case for Keystone XL has deteriorated markedly following the collapse of oil prices, reductions in tar sands production outlooks, growing opposition to high carbon fossil fuel project and increasing efforts to address carbon emissions. There is more than enough pipeline capacity to move existing tar sands production and production that is already in construction. Meanwhile, companies like Kinder Morgan and Enbridge are already ahead in the queue on proposals to vie for new tar sands production which may never come in the face of low oil prices and increasing efforts to reduce carbon pollution. In these economic circumstances, TransCanada may not be inclined—or have the backers—to support another controversial pipeline project for which there is little demand for.

Keystone XL is still not in our national interest

Keystone XL has been the darling of the oil industry and Republicans for many years, which is likely why it had its debut on “working day two” of the new Trump regime. But it will not move the ticker forward in improving our infrastructure (it goes through not to the US), making us more energy secure (it takes the oil to a global port where millions of barrels of crude and refined products are exported), or providing meaningful, lasting jobs. Even TransCanada itself has admitted that the pipeline will create 35 permanent jobs in the US.  Yes, there will be important jobs to pipeline fitters over two years in building it, but then those jobs will be gone. 

Decision makers—and the public—should have an opportunity to make sure there is a thorough review of the new developments and of the risks associated with a route through Nebraska and South Dakota. By requiring a decision within 60 days and the use of a three plus year old environmental review, Trump is preventing that from happening. It undermines decades of environmental policy as well as commitment to public engagement and transparency in the United States.

President Obama had the foresight to declare Keystone XL not in our National Interest after an extensive review. Nothing about the pipeline has made it any more attractive. If anything, it is now obsolete.