H.R. 1938: North American-Made Energy Security Act

H.R. 1938

North American-Made Energy Security Act

Sponsor
Rep. Lee Terry

Date
July 27, 2011 (112th Congress, 1st Session)

Staff Contact
Sarah Makin

Floor Situation

On Tuesday, July 26, 2011, the House is scheduled to consider H.R. 1938, the North American-Made Energy Security Act, under a rule.  The rule (H.Res. 370) provides for one hour of general debate, equally divided and controlled by the chair and ranking minority member of the Committee on Energy and Commerce, 40 minutes equally divided and controlled by the chair and ranking minority member of the Committee on Transportation and Infrastructure, and 20 minutes equally divided and controlled by the chair and ranking minority member of the Committee on Natural Resources.  The rule makes in order 11 amendments, each debatable for ten minutes, and provides for one motion to recommit with or without instructions.    

The bill was introduced by Rep. Lee Terry (R-NE) on May 23, 2011, and referred to the Committees on Energy and Commerce, Transportation and Infrastructure, and Natural Resources.  A mark-up session of the Committee on Energy and Commerce was held on June 23, 2011, and the bill was reported (as amended) by a vote of 33-13.

Bill Summary

H.R. 1938 would direct the President, acting through the Secretary of Energy, to coordinate with all federal agencies responsible for an aspect of the President's National Interest Determination and Presidential Permit decision regarding construction and operation of Keystone XL, to ensure that all necessary actions are taken on an expedited schedule.  The bill would require the President to issue a final order granting or denying the Presidential Permit for Keystone XL 30 days after the issuance of the final environmental impact statement, but in no event later than November 1, 2011.  H.R. 1938 would also make clear that no action made by the Secretary of Energy pursuant to this section shall affect any duty or responsibility to comply with any requirement to conduct environmental review.

The bill lists the following findings:

  1. The United States currently imports more than half of the oil it consumes, often from countries hostile to United States interests or with political and economic instability that compromises supply security;
  2. While a significant portion of imports are derived from allies such as Canada and Mexico, the United States remains vulnerable to substantial supply disruptions created by geopolitical tumult in major producing nations;
  3. Strong increases in oil consumption in the developing world outpace growth in conventional oil supplies, bringing tight market conditions and higher oil prices in periods of global economic expansion or when supplies are threatened;
  4. The development and delivery of oil and gas from Canada to the United States is in the national interest of the United States in order to secure oil supplies to fill needs that are projected to otherwise be filled by increases in other foreign supplies, notably from the Middle East;
  5. Continued development of North American energy resources, including Canadian oil, increases domestic refiners' access to stable and reliable sources of crude and improves certainty of fuel supply for the Department of Defense, the largest consumer of petroleum in the United States;
  6. Canada and the United States have the world's largest two-way trading relationship. Therefore, for every United States dollar spent on products from Canada, including oil, 90 cents is returned to the United States economy. When the same metrics are applied to trading relationships with some other major sources of United States crude oil imports, returns are much lower;
  7. The principal choice for Canadian oil exporters is between moving increasing crude oil volumes to the United States or Asia, led by China. Increased Canadian oil exports to China will result in increased United States crude oil imports from other foreign sources, especially the Middle East;
  8. Increased Canadian crude oil imports into the United States correspondingly reduce the scale of ‘wealth transfers’ to other more distant foreign sources resulting from the greater cost of importing crude oil from those sources;
  9. Not only are United States companies major investors in Canadian oil sands, but many United States businesses throughout the country benefit from supplying goods and services required for ongoing Canadian oil sands operations and expansion;
  10. There has been more than 2 years of consideration and a coordinated review by more than a dozen Federal agencies of the technical aspects and of the environmental, social, and economic impacts of the proposed pipeline project known as the Keystone XL from Hardisty, Alberta, to Steele City, Nebraska, and then on to the United States Gulf Coast through Cushing, Oklahoma;
  11. Keystone XL represents a high capacity pipeline supply option that could meet early as well as long-term market demand for crude oil to United States refineries, and could also potentially bring over 100,000 barrels per day of United States Bakken crudes to market;
  12. Completion of the Keystone XL pipeline would increase total Keystone pipeline capacity by 700,000 barrels per day to 1,290,000 barrels per day;
  13. The Keystone XL pipeline would provide short-term and long-term employment opportunities and related labor income benefits, as well as government revenues associated with sales and payroll taxes;
  14. The earliest possible construction of the Keystone XL pipeline will make the extensive proven and potential reserves of Canadian oil available for United States use and increase United States jobs and will therefore serve the national interest;
  15. Analysis using the Environmental Protection Agency models shows that the Keystone XL pipeline will result in no significant change in total United States or global greenhouse gas emissions;
  16. The Keystone XL pipeline would be state-of-the-art and have a degree of safety higher than any other typically constructed domestic oil pipeline system; and
  17. Because of the extensive governmental studies already made with respect to the Keystone XL project and the national interest in early delivery of Canadian oil to United States markets, a decision with respect to a Presidential Permit for the Keystone XL pipeline should be promptly issued without further administrative delay or impediment.

Background

According to House Report 112-140, a Canadian pipeline company, TransCanada, has long sought to increase the capacity of its Keystone pipeline system in order to bring more Canadian crude oil to American refineries.  A permit application for its proposed expansion project, Keystone XL, was submitted to the State Department in September of 2008.

In the 33 months since—an unusually long period for such permits—the nation has faced high gasoline prices as well as soaring rate of unemployment.  Approval of Keystone XL would help address both of these concerns, but the Obama administration has yet to make a final decision about whether to allow the project to move forward.  Most recently, the Environmental Protection Agency raised several objections that may further delay a final decision.

In addition to being a very stable country, as well as a strong ally and our largest trading partner, Canada is America's single largest source of oil imports.  Further, Canadian oil production is on the rise, especially oil sands production from the province of Alberta.  The untapped potential is vast—an estimated 175 billion barrels of recoverable oil places Alberta second only to Saudi Arabia in proven reserves.  Canada currently produces more than enough oil for its own needs and sends most of the rest South, via pipelines, to American refineries.

Thus, Alberta oil sands production represents a nearly ideal source of supply for the American market that will likely increase in the years ahead.  However, the existing pipeline system between the two nations is unable to keep up with the growing volumes, necessitating the need for a major expansion project such as Keystone XL.

Once completed, the Keystone XL project would add another 700,000 barrels per day to the capacity of 591,000 barrels per day in the existing pipeline, more than enough to make a difference in the price at the pump.  It can do so for the long term, as output from Alberta is expected to provide this additional oil for decades to come. In addition to the energy benefits, the construction of Keystone XL will create tens of thousands of American jobs.

Keystone XL permitting timeline

Ordinarily, the U.S. government does not have permit authority for oil pipelines, even interstate pipelines. Generally, the primary siting authority for oil pipelines would be established under applicable state law. However, the construction, connection, operation and maintenance of a pipeline that connects the United States with a foreign country has historically required executive permission conveyed through a Presidential Permit. Executive Order 13337 delegates to the Secretary of State the President's authority to receive applications for Presidential Permits.

TransCanada submitted an application for a Presidential Permit with the U.S. Department of State (DOS) in September 2008.  In November of 2008, TransCanada submitted a comprehensive environmental report to DOS, thereby initiating the National Environmental Policy Act review process.

On January 28, 2009, DOS issued its Notice of Intent to Prepare an Environmental Impact Statement, which commenced a public scoping period to identify significant environmental issues.  Among other things, this included public meetings held in more than twenty impacted communities.  On April 16th, DOS issued a Draft Environmental Impact Statement (DEIS) and extended the public comment period to 77 days.

On July 2, 2010, DOS closed the comment period on the DEIS.  The Environmental Protection Agency (EPA) determined that the DEIS was inadequate, requiring DOS to perform additional review in a Supplemental Draft Environmental Impact Statement (SDEIS).  The SDEIS was issued on April 29, 2011 and initiated an additional 45-day comment period. DOS ultimately concluded that “the information in this SDEIS does not alter the conclusions reached in the [DEIS] regarding the need for and the potential impacts of the proposed Project.”

On June 6, 2011, EPA again informed DOS that the SDEIS contains insufficient information and requested additional analysis be performed for the Final Environmental Impact Statement (FEIS).

Assuming no further delays—an optimistic assumption—DOS should release its FEIS in August, likely initiating an additional 30-day public comment period.  In addition, the comment period will begin on the National Interest Determination to solicit views from the Secretaries of Defense, Commerce, Transportation, Energy, and Homeland Security, as well as the Attorney General, Administrator of the EPA, and others that the Secretary of State deems appropriate.

The ongoing permitting process for Keystone XL has thus far taken 33 months, and has included multiple opportunities for public input.  By comparison, the original Keystone pipeline project was permitted in less than 24 months.  H.R. 1938 would set November 1, 2011 as the date by which the administration must act, more than three years after the application was originally submitted.

The energy benefits of Keystone XL

Once completed, the Keystone XL project would add another 700,000 barrels per day of pipeline capacity to the system's existing 591,000 barrels per day, bringing this oil to refineries in the Midwest and Gulf Coast.  Subsequent upgrades could boost additional throughput to over 800,000 barrels per day.  According to the DOE KXL Report, Keystone XL holds `the potential to very substantially reduce U.S. dependency on non-Canadian foreign oil, including from the Middle East.'

Rapidly-growing production from Alberta's oil sands is the reason the pipeline expansion is needed. America currently imports approximately 2 million barrels per day (mbd) from Canada, of which 1.1 mbd is from oil sands.  However, oil sands production is relatively new and its potential has only begun to be realized.  According to testimony at the May 23 hearing from James Burkhard, Managing Director of IHS CERA, “the oil sands make Canada one of the very few countries in the world that could substantially increase oil production for the next several decades.”  He added that “over the past decade production growth picked up rapidly and supply more than doubled to about 1.5 mbd in 2010. This is greater than the 1.2 mbd that Libya exported to the global market in 2010, before the civil war.”

President Obama recently authorized the release of 30 million barrels of oil from the Strategic Petroleum Reserve (SPR) for a period of 30 days—an additional million barrels per day.  Keystone XL has the potential to add 70 percent as much oil per day as this recent SPR release. 

The economic benefits of Keystone XL

In addition to the benefits of a secure supply of additional oil from a strong ally, approval of Keystone XL is also projected to create a substantial number of jobs.  According to estimates cited during Committee hearings, the project is `expected to create approximately 13,000 high-quality, good-paying construction jobs.'  

The benefits will go well beyond the direct jobs building the pipeline.  For example, most of the construction equipment, pipe, and other supplies used to build Keystone XL would be U.S.-sourced, as well as much of the technical expertise associated with the project.  Indirect jobs “include 7,000 manufacturing jobs associated with the production of materials and components for the pipeline, and over 118,000 spin-off jobs in various sectors related to the design, construction and operation of the pipeline.”

Even after the construction phase is complete, Keystone XL would provide employment associated with its operation.  Along with Canadian oil, the pipeline would also alleviate potential oil bottlenecks that might otherwise limit growing oil production in North Dakota and Montana, ensuring continued job growth there.  In addition, Canadian oil can take the place of declining Mexican and Venezuelan supplies reaching Gulf Coast refineries, helping to maintain or expand jobs at those facilities.  Further, given the well-established inverse relationship between energy costs and employment, the reduction in oil and gasoline prices as a consequence of Keystone XL would yield additional jobs throughout the economy.

The Trans-Alaska Pipeline precedent

There are many historical parallels between Keystone XL and the debate over the Trans-Alaska Pipeline in the early 1970s.  Back then, a major discovery of oil on the North Slope of Alaska in Prudhoe Bay—the largest on the continent prior to development of the Alberta oil sands—necessitated a pipeline to transport this oil to American refineries, hence the proposed 700-mile Trans-Alaska Pipeline.  The project was thoroughly studied for several years during which all legitimate environmental and safety concerns were addressed.  Nonetheless, federal approval became bogged down by NEPA-related delays similar to those currently impeding Keystone XL.

However, Middle East turmoil and rising oil prices finally sparked Congressional action.  In 1973, Congress passed and President Nixon signed the Trans-Alaska Pipeline Authorization Act, which removed all federal roadblocks to the project.  Construction on the pipeline began in 1974 and was completed in 1977.  It has been in operation ever since.

Since that time, the pipeline has delivered 16 billion barrels of oil to the American market, and has contributed substantially to the health of Alaska's economy while creating jobs throughout the nation. And, notwithstanding the many dire predictions at the time from anti-pipeline activist groups (several of whom now oppose Keystone XL), the pipeline has amassed an excellent environmental and safety record and did so using technology far less sophisticated than what would be required for Keystone XL.

The main difference between the Trans-Alaska Authorization Act and the North American-Made Energy Security Act is that the latter does not automatically approve the project, but merely requires the President to make a decision on Keystone XL by a date certain.

Cost

According to the Congressional Budget Office (CBO), enacting H.R. 1938 would have no significant impact on the federal budget.  According to the Department of State and the Department of Energy, the regulatory activities related to the proposed Keystone XL pipeline are already underway, and CBO expects that, under current law, a final decision will be made during fiscal year 2012.  Based on information from those agencies, CBO estimates that any change in federal costs to comply with the accelerated timeframe specified by H.R. 1938 would be insignificant.

Enacting H.R. 1938 would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply.

Amendments

Under the rule, the following 11 amendments are made in order.  Each amendment is debatable for ten minutes.

Amendment No. 1—Reps. Welch (D-VT), Cohen (D-TN):  The amendment would insert the following language: “The proposed Keystone XL pipeline would run through the Ogallala aquifer, risking an oil spill into one of the world’s largest freshwater aquifers that provides 30 percent of the groundwater used for irrigation in the United States and drinking water for millions of Americans.  Even a small, undetected leak from an underground rupture of the pipeline in the Nebraska Sandhills could pollute almost 5,000,000,000 gallons of groundwater—enough oil to pose serious health threats to anyone using the underlying Ogallala Aquifer for drinking water or agriculture.”

Amendment No. 2—Rep. Rush (D-IL):  The amendment would strike the finding in the bill that states that analysis using the Environmental Protection Agency models shows that the Keystone XL pipeline will result in no significant change in total United States or global greenhouse gas emissions.

Amendment No. 3—Rep. Eshoo (D-CA):  The amendment would include an additional finding quoting testimony from the US Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) Administrator regarding the potential risks associated with transporting diluted bitumen.  The amendment would require PHMSA to complete a review of the risks associated with transporting diluted bitumen, and whether current pipeline regulations are sufficient.

Amendment No. 4—Rep. Christensen (D-VI):  The amendment would insert an additional finding to read, “The Supplemental Draft Environmental Impact Statement estimates that the Keystone XL pipeline would increase carbon pollution associated with United States fuel use by up to 23,000,000 metric tons of carbon dioxide equivalent per year, which is equivalent to the annual emissions from an extra 4,500,000 passenger vehicles.”

Amendment No. 5—Rep. Cohen (D-TN):  The amendment would strike finding 16 and replace it with the following language:  “TransCanada Corporation’s first wholly owned oil pipeline in the United States is the recently built Keystone I, which spilled 12 times in the United States and 21 times in Canada in less than one year of operation. Despite claims that it is ‘the safest pipeline ever built’, Keystone was recently shut down by the United States Government because it was deemed a ‘threat to life, property, and the environment.”

Amendment No. 6—Reps. Murphy (D-CT), Cohen (D-TN), Welch (D-VT):  The amendment would include an additional finding to read “Consultants employed by Canadian tar sands companies have publicly stated that without the Keystone XL pipeline, Canada’s tar sands will be ‘landlocked’ and unable to be exported overseas.  There are significant barriers to construction of a pipeline to ports on the West Coast of Canada.  The Keystone XL pipeline, which would service Port Arthur and the Port of Houston, would allow tar sands crude to be exported. Permitting the pipeline would provide an export route to China where none now exists.”

Amendment No. 7—Rep. Rush (D-IL):  The amendment would extend the deadline for permit decision to 120 days after final environmental impact statement or until January 1, 2012.

Amendment No. 8—Rep. Hanabusa (D-HI):  The amendment would require “worst-case discharge scenario certification” prohibiting a presidential permit to be issued approving the construction and operation of the Keystone XL pipeline unless the Secretary of Energy, in consultation with the PHMSA, certifies that the applicant has calculated a worst-case oil spill scenario for the proposed pipeline; and has demonstrated to the satisfaction of the Secretary and the PHMSA that the applicant possesses the capability and technology to respond immediately and effectively to such worst-case oil spill scenario. 

The amendment would allow the Secretary of Energy, in consultation with the PHMSA, to waive the requirement for such a certification if the applicant has already completed a worst-case discharge scenario analysis and established that it possesses the capability and technology to respond immediately and effectively to such worst-case oil spill scenario.

Amendment No. 9—Rep. Johnson (D-GA):  The amendment would prohibit construction on the Pipeline until the president has determined that the appropriate federal agency has completed a study of the health impacts of increased air pollution in communities near refineries, including an assessment of the cumulative air pollution impacts on these communities.

Amendment No. 10—Rep. Jackson Lee (D-TX):  The amendment would insert a sense of Congress stating that “the United States must decrease its dependence on oil from countries which are hostile to the interests of the United States.  Canada has long been a strong trading partner, and increased access to their energy resources will create jobs in the United States.”

Amendment No. 11—Rep. Kucinich (D-OH):  The amendment would prohibit any final orders from the president until the Secretary of Energy, in consultation with the Federal Trade Commission, has certified that permitting the pipeline would not lead to manipulation of the United States oil market that would be detrimental to United States consumers.