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South Dakota Could Trump Obama in Blocking Keystone

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South Dakota Could Trump Obama in Blocking Keystone

December 30, 2014

Much has been told about Nebraska's lengthy approval process for the Keystone XL pipeline, which would bring crude oil from Canada to be processed at refineries in Texas, Louisiana, and Alabama. Far less has been written about the role of South Dakota, population 845,000, which might hammer the final nail in the pipeline's coffin. 

South Dakota approved the pipeline in 2010, but the construction permit expired in June 2014. Getting a new one is neither automatic nor easy.

TransCanada, the potential builder of the pipeline, has applied to South Dakota to renew the permit. But over 40 groups and individuals have filed petitions with South Dakota's Public Utility Commission to broaden the approval process to matters that were not considered in 2010. The goal of most groups is to stall the Mount Rushmore State's approval of Keystone XL so that even if the new Congress were to pass a bill authorizing construction, and President Obama or a future president were to sign it, the pipeline could not be built.

These groups include the Standing Rock Sioux Indian Tribe, the Rosebud Sioux Tribe, Boettcher Organics, and the Sierra Club, as well as a number of independent individuals. At a December 9 meeting of the PUC, they were granted "party status" in TransCanada's application for approval of the pipeline's construction. "Party status" means that an entity, such as a municipality, governmental agency, nonprofit organization or person can cross-examine witnesses and request documents from TransCanada.

RoxAnn Boettcher of Boettcher Organics wrote in October, "I am an [sic] Certified Grassfed Beef landowner-rancher. This project brings great risks to our natural resources. Our business is totally dependent on our natural resources. There is proof that transporting tarsands oil by pipeline has risks water supplies [sic]."

And in a December filing the Rosebud Sioux Tribe stated, "A comprehensive review of the 2009 SD PUC requirements is required to determine if the pipeline meets any or all of the regulations promulgated wince [sic] the original permit was issued. In contrast to the conditions by which the South Dakota PUC granted the 2009 permit, the Enbridge project in Michigan was subject to over 200 requirements, which the granting authorities began to rethink after the ensuing Talbridge/Kalamazoo spill."

Needless to say, TransCanada disagrees. In a filing on December 4, TransCanada states that according to the law, the company should only have to show that conditions have not materially changed since 2009, rather than produce new documents and answer another set of questions.

Specifically, "Some...contend the legislature intended the PUC review conditions across the entire spectrum of the human endeavor---social, political, climatic, economic-whether extant in Canada, South Dakota, Montana, or Nebraska. The original permit proceedings did not require that type of review. Accordingly, it is specious to contend post-permit certification should be broader than the original permit proceedings."

In its meeting on December 9, the PUC decided to grant TransCanada's petition to limit the requests for discovery, when one side can seek information from the other, including documents, interviews, and witnesses. People will not be able to go beyond issues considered in 2010. But all those who requested it were granted "party status" and will be able to bring forward their objections.

The PUC is anticipating months of debate. It will meet next January 6 to consider requests for discovery, and then will hold another five hearings in February, March, and April to consider who will be allowed to file and what testimony will be permitted. The evidence will be presented at hearings on May 5 through May 8. Kristen Edwards, staff attorney at the PUC, told me on Monday in a phone conversation, "We'll consider more meetings as necessary."

Over the border in the Cornhusker State, Keystone XL faces problems of a different nature. The Nebraska Supreme Court could rule that the state's Public Service Commission has the authority to review, and to possible deny, TransCanada's application before Keystone XL can be built through the state. The Nebraska Supreme Court did not release its ruling last Friday, so the decision will not be announced until 2015.

A year ago, a Nebraska judge invalidated a state law that would have given Gov. David Heineman (R) the authority to allow TransCanada to sidestep regulations and to use eminent domain while building the pipeline through Nebraska, bypassing the state's PUC. The ruling came from a lawsuit filed by three landowners who felt that their objections were being ignored by the state's accelerated approval process.

In addition, the Nebraska PUC could consider whether Keystone XL would pose a threat to the state's Ogallala aquifer. Although many pipelines already span the aquifer, and Keystone would be closely monitored by the latest technology, including satellite imagery, some in Nebraska are concerned about water contamination.

The construction of Keystone XL would bring substantial benefits to the U.S. economy, not because it would affect the price of oil, which is set in world markets, but because it would enable the United States to refine Canadian heavy crude and blend it with light oil from North Dakota. The Canadian crude would replace the declining amounts of heavy crude that are coming from Mexico and Venezuela.

Those objecting to Keystone XL appear to believe that if the Canadian oil does not come to America through a pipeline, it will stay in the ground. But Canada will not leave a valuable resource untouched just because America does not want to approve the pipeline.

Canada's oil is being transported by rail, and may be sent to Asia for refining. Canada is planning to send oil through the Yukon to Alaska, and by tanker or the Alaska pipeline back to the United States. These alternatives are more costly, and less environmentally friendly, than the Keystone pipeline.

Pipelines are safer than road and rail, according to the State Department, which issued a report earlier this year stating that petroleum-related fatalities and deaths would be lower if oil were transported by pipeline rather than rail.

With pipelines, the shipping container, namely the pipe, is stationary while the oil moves. The container is buried under several feet of earth. In contrast, with road, rail, and barge, both the container and the commodity are moving over the surface, sometimes in close proximity to cities, people, and other traffic, as well as to other large containers moving in different directions.

The new 114th Congress may pass a bill authorizing the construction of Keystone XL. But federal power has its limits. Even if the president were to approve the pipeline tomorrow, South Dakota, as well as Nebraska, still stand in the way of its construction.

Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.
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