Paul Blackburn Presentation

Keystone XL:
Opportunities for
State Regulation
Paul Blackburn, J.D.
Blackcreek Environmental Consulting
[email protected]
Alberta to Texas
Federal Regulatory “Structure”
• Pipeline and Hazardous Materials Safety Administration (PHMSA) –
regulates pipeline safety
• President/Department of State (DOS) – determines whether a border
crossing is in the “national interest” and its size and location
• The Federal Energy Regulatory Commission (FERC) – Approves pipeline
tariffs (cost of using pipelines)
• Other agencies (EPA, Army Corps of Engineers, WAPA, etc.) – lesser roles
The Limits of PHMSA’s Authority
• PHMSA regulates pipeline safety under the Pipeline Safety Act (PSA), but
this does not mean that all regulation related to “safety” is preempted by
the PSA
• The PSA regulates pipeline owners with regard to pipeline design,
materials, fabrication, and inspection of the pipe itself
• Safety areas not regulated by the PSA include:
Emergency response (regulated by federal Clean Water Act)
Control of new development by adjacent landowners
Easement termination conditions such as removal of abandoned pipe
Liability standards to recover economic damages caused by a spill
Routing to increase safety (untested in federal courts)
PHMSA as a Building Inspector
A building inspector regulates the design, construction, modification and use
of buildings to ensure they are built and maintained in a safe condition, and
deals with things such as structural integrity, proper use of materials, wiring,
plumbing, railings, stairwells, location of exits, etc.
Does a building inspector put out fires? NO, the fire department does
Does a building inspector regulate easements or condemn property? NO
Does a building inspector determine if a building is appropriately located, used
and designed to integrate into neighboring land uses? NO, the zoning
department does
Does a building inspector determine liability if there is an accident? NO
As long as state and local governments don’t try to become “building inspectors”
of pipelines, their actions will not be preempted by the PSA
Limits of President’s Authority
• The President’s independent authority over pipelines comes from his
Constitutional power to manage “foreign affairs,” but this power ends at
the borders
• Matters within the borders of the U.S. are domestic affairs regulated by
federal and state statutes and local ordinances
• The National Environmental Policy Act (NEPA) requires only that federal
agencies study environmental impacts and provides no separate legal
authority to require any changes in a project
DOS can’t order mitigation or land reclamation requirements
DOS can’t change the KXL route, except the location of the border crossing
DOS can’t change safety requirements
DOS can’t protect groundwater
• Don’t you think it’s odd that the Department of State is managing an
environmental review process in Nebraska?
Limits of FERC Authority
• FERC determines only the cost to ship oil on a pipeline and the terms of its
commercial use
• If this were an interstate natural gas pipeline, then FERC would determine:
• If there is a need for the pipeline
• The pipeline’s route, size, capacity, and interconnection to other
• Mitigation and reclamation requirements
• Compensation for economic damages caused by construction
• For natural gas pipelines, FERC is a “one stop shop” (with a some
Other Federal Agencies
• EPA – Water pollution permits and regulation of hazardous materials used
during construction; oversees oil spill cleanup
• Army Corps of Engineers – dredge, fill and obstruction of navigable waters
• Bureau of Land Management/Forest Service – easements on certain
federal public lands
• Department of Interior – consultation on endangered species
• Department of Agriculture – various farmland conservation programs
• Western Area Power Administration (WAPA) – Interstate transmission
line system engineering and management
• Complete list in FEIS Section 1
10th Amendment
"The powers not delegated to the United States by the
Constitution, nor prohibited by it to the states, are reserved to
the states respectively, or to the people."
This means that the states have legal authority over anything
not assigned to the federal government or specifically
withheld from the states. Whatever powers aren't claimed by
the federal or state governments are leftover for the people.
Opportunities for State and
Local Regulation
• Generally, state and local governments may not regulate pipeline safety
• State and local governments may regulate:
Siting/Need – permits to protect citizen economic and environmental interests
from adverse construction and operational impacts
Routing – permits to determine the location of a pipeline
Emergency response planning and equipment requirements
Eminent domain process and terms
Easement abandonment
Liability for spills
Regulation of neighboring land uses
• Some states (e.g., SD) don’t determine route but do impose conditions on
pipeline construction to protect the economic, environmental and
aesthetic interests of citizens, such as the following SD examples:
Appointment of a public liaison officer to handle citizen complaints
Adopts FEIS Construction Mitigation and Reclamation Plan as a requirement
Detailed requirements for soil and vegetation reclamation after construction
Limitation on construction activities during wet soil conditions
Limitations on cuts through shelterbelts and compensation for loss of trees
Conditions for construction through wetlands, water bodies and riparian areas
Detailed road protection conditions
Requirement to treat the High Plains Aquifer as a hydrologically sensitive area
Limitations on noise from pump stations
Detailed requirements for protection of paleontological resources
Requirement to repair or replace damaged property
No liability for spills resulting from normal farming practices and for other
than gross negligence or willful misconduct of a landowner or its agents
• Some states (e.g., ND, MN and MT) have laws that authorize a state to
determine a pipeline’s route
• States have full authority to alter a route within their borders for
economic, aesthetic or environmental reasons
• For example, a state or county could require a re-route a pipeline around a
memorial battlefield, a cemetery, a state wilderness area, or away from
homes or businesses if construction would unduly harm business income
or property values
• The federal courts have not ruled on whether or not a state may consider
safety when determining a pipeline’s route, but a strong legal argument
can be made that Congress prohibited PHMSA from determining a
pipeline’s route as a safety measure so that states can use this important
regulatory tool
Emergency Response Planning
• TransCanada’s emergency response plan is required by the Federal Clean Water Act
(CWA), 42 U.S.C. § 1321(j)(5) – not the PSA
• The CWA only regulates spills into “waters of the US” or spills that might flow into these
waters, so it does not address spills only onto land
• § 132 1(o) says:
“Nothing in this section shall be construed as preempting any State or political
subdivision thereof from imposing any requirement or liability with respect to the
discharge of oil or hazardous substance into any waters within such State, or with
respect to any removal activities related to such discharge.”
• Therefore, state or local governments may impose emergency spill response standards
that are better than federal standards
• The State of Washington has a particularly strong program:
Spills Program Home - Washington State Department of Ecology
Eminent Domain
• Interstate oil pipelines must acquire easements through state law
• What a state gives it can also condition
• Generally, state easement laws allow only determination of the value of
land taken, but states may also allow for broader economic damages and
judicial determination of need or that a taking has a public benefit
• A state may treat takings for publicly owned projects (roads, sewers)
differently from takings for privately owned projects (oil pipelines)
• States may also impose sanctions on companies that misuse right-of-way
process (e.g., ND)
Easement and Pipeline Abandonment
Abandoned pipelines hurt property values and safety because they may interfere
with new construction, impact drainage, cause sinkholes, and present a hazard to
vehicles, farm equipment and livestock
Federal pipeline safety law regulates only operating pipelines; PHMSA’s operation
manual requires only that a pipeline withdrawn from service be:
• Disconnected from other pipelines,
• Purged of combustibles, and
• Sealed
Once these steps are taken, federal law no longer regulates what happens to an
abandoned pipe
A number of state and local governments have laws that regulate pipeline
abandonment or easements, including MN and MI and Santa Barbara County, CA
Many states have laws related to abandonment of utility and railroad easements
Federal agencies regulate pipeline abandonment on federal property
Canada has established a national financial mechanism to pay for remediation of
abandoned pipelines
Liability for Damages
• The CWA states:
“Nothing in this section shall affect or modify in any way the obligations of . . . any
owner or operator of any onshore facility . . . to any person or agency under any
provision of law for damages to any publicly owned or privately owned property
resulting from a discharge of any oil or hazardous substance or from the removal of any
such oil or hazardous substance.” 42 U.S.C. § 1321(o)(1)
• Therefore, Nebraska may modify state law to make recovery of damages
for oil spills less burdensome for private citizens
Regulation of Neighboring Land Uses
State and local governments may limit the use of land near existing oil and gas
pipelines to increase safety, for example by:
Prohibiting construction of new schools, hospitals, nursing homes, fire
stations, stadiums, explosive factories, etc. within a set distance of large
Prohibiting certain new activities in existing structures near pipelines, such as
daycare centers, health clinics, or businesses with large number of employees
Requiring all new development within a set distance of a large pipeline to
consult with the pipeline’s owner
Requiring that notice of a large pipeline be included in land transaction
The key distinction here is that the state or local government is not attempting
to regulate the pipeline owner or to change the design or operations of the
pipeline itself
The federal/industry voluntary Pipeline and Informed Planning Alliance (PIPA)
has more information on local options
• The fed’s role in pipeline regulation is limited
• The fed’s primary role is to be a building inspector
• The EIS process only studies impacts and cannot by itself require
• Nebraska should protect its citizens where it can:
Construction permitting
Emergency response
Eminent domain process
Pipeline abandonment
Limiting development near major pipelines
• Otherwise, the State government should just admit that it trusts
itself less than a self-interested multinational oil company
Additional Issues
According to TransCanada’s FERC
2010 year end Form 6 filing for
the K1 Pipeline, it paid far less
per mile and far less in total in
taxes in Nebraska than in other
It is not clear why TransCanada
appears to be paying very low
taxes in Nebraska relative to
other states, but citizens should
ask their elected officials to
investigate this data
Is the KXL North Pipeline
Needed Now?
Are the Industry Development
Forecasts Reasonable?
CAPP High Growth Scenarios 2007-2011
2006 Average Syn & Dil Cases
2007 High Grow Supply Case
R² = 0.9753
2008 High Growth Supply Case
2009 High Growth Supply Case
2010 High Growth Supply Case
2011 High Growth Supply Case
Actual Supply Produced
Linear (Actual Supply Produced)
Why Is Tar Sands Development
in Canada Not Faster?
• Very expensive operations produces the most expensive oil in the world
• Marginal economic viability so faster growth happens only when oil prices
are high (but high prices cause recessions leading to lower prices . . .)
Cheaper imports from other countries will be used first
Remote location creates logistical challenges
Complex technology that doesn’t always work as well as claimed
The historical annual average increase in supply of tar sands oil has been
112,000 bpd per year since 2001, with no indication that this average rate of
growth is increasing. To meet the industry forecast that justifies KXL, the
average yearly rate of increase would need to be 185,000 bpd per year.
Oil Field Price Comparison
Is It Really Necessary to Burden
Nebraskans with the KXL Pipeline?
• KXL was planned, designed and scheduled
during the boom years of 2006 to 2008,
before the crash. Everything has changed –
except TransCanada’s plans.
• Should Americans trust the forecasts of a
foreign trade association whose job it is to
boost its industry?
Thank you for your caring
and action
Paul Blackburn
Blackcreek Environmental Consulting
PO Box 17234
Minneapolis, MN 55417
[email protected]

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