Cross-border infrastructure and presidential permits

A recent report casts doubt on whether proposed federal legislation would actually accelerate decisions on the siting of cross-border energy infrastructure.

Cross-border pipelines and electric transmission lines play an important role in the North American energy industry.  Under U.S. law, cross-border energy infrastructure projects require a presidential permit and a finding of consistency with the national interest.  Executive orders give the State Department jurisdiction over cross-border oil pipelines, the Department of Energy jurisdiction over electric transmission lines, and the Federal Energy Regulatory Commission jurisdiction over natural gas pipelines. 

Recent projects like the Keystone XL pipeline have focused attention on the presidential permit process, as that project's presidential permit application has remained pending for years.  Some have raised questions about the scope of agency review and perceived differences in the approaches taken by the State Department, Energy Department, and FERC.

As a result, several members of Congress have proposed legislation designed to accelerate the permitting process.  These bills include:

• the Keystone XL Pipeline Approval Act (S. 1): passed in Congress but vetoed by President Obama
• the American Energy Renaissance Act of 2015 (S. 791 and H.R. 1487)
• the North American Energy Infrastructure Act (S. 1228)

These bills take various approaches, including limiting agency jurisdiction over cross-border energy infrastructure or the scope of agency review, or setting strict deadlines for agency action following completion of environmental review.

Could federal legislation like this speed up the process for reviewing proposed cross-border pipeline and electric transmission projects?  A recent report by the Congressional Research Service suggests that overall timelines for project review are driven by the scope of the environmental review process, not by delays following that environmental review or agency idiosyncrasies.

In particular, the report found that agency review is "driven largely by the National Environmental Policy Act (NEPA)", which requires federal agencies to consider the environmental impacts before acting.  Moreover, the report notes that the same NEPA requirements apply to all three:

Faced with Presidential Permit applications for energy projects of similar physical scope, the agencies appear to perform NEPA reviews of similar proportion. Very short, smaller projects are generally reviewed more narrowly and quickly, whereas multi-state projects of large capacity are subject to more expansive environmental review and tend to face much greater public scrutiny and comment—regardless of which agency has jurisdiction. 

The report also found that NEPA review is the key driver of overall permitting decision timelines:

As long as agencies apply NEPA to Presidential Permitting decisions, changes to the delineation of, or jurisdiction over, the border-crossing portion of large projects for permitting purposes may not change the scope of project environmental review. The imposition of decision deadlines on the permitting agencies after NEPA review is complete, either for national interest or public interest determination, could provide greater process certainty to stakeholders. However, the overall project review would still be contingent on the completion of NEPA review. Thus, the effects of legislative proposals to change cross-border infrastructure permitting on the review or approval of future border crossing energy infrastructure projects are open to debate. 

It's unclear how the Congressional Research Service report will affect pending legislation.  Likely more influential may be any final action by the State Department on the Keystone XL project's application for a presidential permit.  Nevertheless, interest in cross-border energy trade will likely continue to grow.

US Presidential Permits for cross-border infrastructure

As the U.S.'s international trade in energy grows, so too has interest in the process for securing a federally required approval known as a Presidential Permit.

A marker shows the route of a natural gas pipeline in Utah.

The construction, operation, and maintenance of infrastructure that crosses the U.S.'s border with Mexico or Canada -- think pipelines, transmission lines, and bridges -- generally requires prior authorization by the federal government in the form of a Presidential Permit.  How you obtain a Presidential Permit depends on the type of facilities in question, as permits may be issued by several federal agencies under different legal authorities.

Presidential permits for oil, petroleum products, and other liquids pipelines have been issued by the U.S. State Department since since the promulgation of Executive Order 11423 in 1968.  Executive Order 11423 provided that, except with respect to cross-border permits for electric energy facilities, natural gas facilities, and submarine facilities:

The Secretary of State is hereby designated and empowered to receive all applications for permits for the construction, connection, operation, or maintenance, at the borders of the United States, of: (i) pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum, petroleum products, coal, minerals, or other products to or from a foreign country; (ii) facilities for the exportation or importation of water or sewage to or from a foreign country; (iii) monorails, aerial cable cars, aerial tramways and similar facilities for the transportation of persons or things, or both, to or from a foreign country; and (iv) bridges, to the extent that congressional authorization is not required.

The State Department's Bureau of Energy Resources Office of Energy Diplomacy receives and processes permit applications for liquid product pipelines, including water and petroleum products.  The standard by which the Secretary of State reviews applications for presidential permits is prescribed by an executive order issued in 2004.  Executive Order 13337 directs the Secretary of State to authorize those border crossing facilities that the Secretary has determined would “serve the national interest."

By contrast, cross-border natural gas pipelines are regulated by the Federal Energy Regulatory Commission, while electric transmission infrastructure is regulated by the Department of Energy.  Section 3 of the Natural Gas Act requires any person desiring to export any natural gas from the United States to a foreign country or to import any natural gas from a foreign country to the United States to obtain an order from the Federal Power Commission authorizing it to do so.   Section 202(e) of the Federal Power Act requires any person desiring to transmit any electric energy from the United States to a foreign country to obtain an order from the Federal Power Commission authorizing it to do so.

Executive Order 10485 designated the FERC's predecessor agency, the Federal Power Commission, to receive applications for natural gas and electricity facilities.  When the Department of Energy Organization Act of 1977 eliminated the Federal Power Commission, it shifted most of the FPC's responsibilities to the FERC, but Section 402(f) of that act specifically reserved import/export permitting functions for the Department of Energy.  For facilities governed by the Department of Energy, the Presidential Permit process is governed by Part 205 of the Department's rules.  In 2006, the Department delegated its authority to issue Presidential Permits for natural gas pipeline border crossings to FERC, via DOE Delegation Order No. 00-004.00A.

Infrastructure projects subject to the Presidential Permit process range widely in type, scope, and controversy, from the proposed Keystone XL oil pipeline from Canada to the proposed Champlain Hudson Express high-voltage direct current electric transmission line.

Keystone XL pipeline supplemental Environmental Impact Statement

The proposed Keystone XL pipeline took a step forward this month, as the U.S. State Department released its evaluation of the project's potential environmental impacts.  The draft Supplemental Environmental Impact Statement (EIS) released on March 1, 2013 documents the State Department's analysis of the pipeline's impacts to environmental resources based on the currently proposed route.  The EIS is still preliminary, and is now subject to public comment.  Moreover, even a final EIS would not reach any conclusion as to whether the pipeline serves the national public interest, and the project would still need a presidential permit to ship oil across the US-Canadian border.  Nevertheless the draft EIS does suggest that any environmental impacts from the pipeline would be relatively minor.

The Keystone XL project is a proposed extension of an existing crude oil pipeline.  The $7 billion project would run from the Canadian province of Alberta to Texas, delivering Canadian crude to refineries on the U.S. Gulf Coast.  The oil shipped on the pipeline would likely include so-called synthetic crude derived from Canada's oil sands or "tar sands" resources.

The draft EIS (available from the State Department's website) makes a series of findings about the project's potential environmental impacts, ranging from direct impacts along the pipeline's route to indirect impacts like further development of the Alberta oil sands.  As the State Department found in its earlier environmental review, the supplemental EIS found that the pipeline would not have significant impacts to any resources along the proposed project route.

Notably, the draft EIS found that Keystone XL would not be likely to substantially increase the rate of development of the oil sands, nor would it likely increase the volume of crude oil refined in the Gulf Coast.  For example, the draft found that denial of the pipeline's presidential permit would not mean a reduction in oil production in Western Canada or from the Bakken formation; rather, oil producers would resort to other transportation modes such as pipelines to British Columbia or even rail shipment of crude.  For similar reasons, the draft EIS found that the Keystone XL pipeline would not substantively change global greenhouse gas emissions.

Next steps for the Keystone XL project include a 45-day public comment period, after which the State Department will issue a final EIS.  Later this year, the State Department is expected to issue a so-called national interest determination, considering factors including foreign policy, economics, environmental concerns, and national security. This determination will involve consultation with other agencies, including the U.S. Departments of Defense, Justice, Interior, Commerce, Transportation, Energy, Homeland Security and the Environmental Protection Agency.  The final decision whether to allow the pipeline falls to President Obama.

Presidential permits for cross-border energy facilities

Presidential permits for the import and export of energy resources across the United States' borders are critical to the development of cross-border energy facilities.

Millions of dollars of energy resources flow across the United States' borders every day.  Trade in energy resources with Canada and Mexico accounts for the bulk of these transactions.  Canada is the single largest foreign supplier of energy to the United States, providing about 20% of U.S. oil imports and 18% of U.S. natural gas imports according to the U.S. State Department.  Canada and the United States share an integrated electricity grid and provide all of each other's electricity imports.  Today and tomorrow, members and guests of the New England - Canada Business Council are meeting in Boston to discuss this close relationship.

Facilities spanning the border -- whether pipelines for oil or natural gas or transmission lines for electricity -- can only be built and operated once a federal approval called a "presidential permit" has been obtained.  Since a 1968 Executive Order, presidential permits have been issued by the State Department.  Presidential permits cover not only the facilities themselves, but also the commodities (oil, gas, electricity) transmitted over those facilities.

For example, the proposed Keystone XL pipeline from Canada to Texas will require a presidential permit.  In today's news, President Obama is reported as saying that he will be the one to make the final decision on whether TransCanada will obtain its permit.