Paul Blackburn, J.D. Blackcreek Environmental Consulting Keystone XL: Opportunities for State Regulation

Keystone Pipeline “System” 2 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 3

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) 4

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 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 regulate easements or condemn property? NO 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 5

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? 6

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 pipelines Mitigation and reclamation requirements Compensation for economic damages caused by construction For natural gas pipelines, FERC is a “one stop shop” (with a some exceptions) 7

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 8

10 th 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. 9

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 Taxation 10

Siting/Need 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 11

Routing 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 12

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 13

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) 14

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 15

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 16

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 pipelines 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 documents 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 17

Summary 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 improvements Nebraska should protect its citizens where it can: – Construction permitting – Routing – Emergency response – Eminent domain process – Pipeline abandonment – Liability – Limiting development near major pipelines Otherwise, the State government should just admit that it trusts itself less than a self-interested multinational oil company 18

Additional Issues 19

Taxation 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 states 20 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? 21

Are the Industry Development Forecasts Reasonable? 22

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. 23

Oil Field Price Comparison 24

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? 25

Thank you for your caring and action 26

Paul Blackburn Blackcreek Environmental Consulting PO Box Minneapolis, MN