Confusion Surrounds Federal Review of Southern Leg of Keystone XL

TransCanada's decision last week to build the southern half of the rejected Keystone XL has raised a tricky question about who will regulate the project review.

The $2.3 billion dollar pipeline would run from Cushing, Okla. to refineries near Houston, Texas. Dubbed the Gulf Coast Project, it follows the same route as the southern segment of the Keystone XL, a longer pipeline designed to move heavy crude oil from Alberta, Canada to the Texas Gulf Coast. The Obama administration denied the Keystone XL pipeline permit in mid-January.

TransCanada spokesman Shawn Howard said the company already has many of the required state permits for the southern section. Most of the remaining permissions "relate to construction permits ... the day-to-day type of permits that you would get at the local level," he said.

The process could be stickier at the federal level. The U.S. State Department was the lead agency on the original Keystone XL because it crossed an international boundary. But so far, no agency has stepped forward to take responsibility for the Gulf Coast Project.

The Pipeline and Hazardous Materials Safety Administration, or PHMSA—a section of the federal Department of Transportation that regulates interstate pipeline safety—will definitely play a role in the review process. But when InsideClimate News asked if PHMSA would lead the project review, we didn't get a direct answer.

"All pipelines must be designed and constructed to meet federal, state and local safety standards," Jeannie Layson, PHMSA's public affairs director, said in a statement. "DOT will help coordinate with federal partners and among state agencies to streamline the process and ensure a safe start to the new pipeline."

Howard said that one of TransCanada's regulatory lawyers has identified the U.S. Army Corps of Engineers as the lead agency.

But Army Corps spokesman Doug Garman said it's too early to speculate on the agency's role. The Army Corps has a responsibility under the Clean Water Act to regulate water permits for pipelines that cross streams and rivers, he said. "[Our] jurisdiction is just for work [concerning] waters of the U.S. and not for the entire pipeline route."

"At the moment, no permit applications have been provided and there have not been conversations with any other federal agencies," Garman told InsideClimate News.

Howard said TransCanada is trying to arrange meetings with the Army Corps to discuss what's needed for the pipeline permits. "It's our hope that we can begin construction this summer, and we're building our plans on that kind of timeframe. But obviously the actual timing depends on certain approvals being in place at certain times."

Some Keystone XL opponents say TransCanada is trying to circumvent the environmental review process by breaking the original project into two segments. In its announcement last week, TransCanada said it will reapply for a federal permit to build the northern segment, from Canada to Steele City, Neb. It would connect to the Gulf Coast Project via an existing pipeline that runs from Steele City to Cushing.

"It's no secret that TransCanada wants to build the entire pipeline" from Alberta to Texas, said Danielle Droitsch, Canada project director at the Natural Resources Defense Council.

But TransCanada's Howard said the Gulf Coast Project is a stand-alone pipeline with "its own independent commercial value." The pipeline would help relieve the current glut of oil at Cushing by moving excess crude oil to Texas, where it will be refined.

"We have sufficient contracts in place regardless of what happens" to the northern segment of Keystone XL, Howard said.

Droitsch argues that the Gulf Coast Project needs a comprehensive environmental impact statement, and that it's important to have a lead agency to coordinate the review process.