TransCanada Trojan Horse: Keystone XL Pipeline Will Increase Gas Prices

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TransCanada Keystone XL Pipeline

As we’ve noted repeatedly in our articles on the subject, our primary interest in the Keystone XL pipeline project was the conduct of Nebraska’s elected officials at both the state and federal levels, and serious concerns about property rights. We did not have an overall position on the project and we did not recommend any particular action. Our simple purpose was to expose, as widely as possible, the truth according to all of the information that we had available so that Nebraskans would learn who is representing them (or not) in office.

It was our analysis that Nebraskans’ primary concern is the property rights issue; people are particularly repulsed that a private foreign company has the power under our state laws to invoke eminent domain.

We did not call for a special session of the State Legislature because:

  • Too many legislators who had previous opportunity to act chose not to; they were either deliberately obtuse, at best, or actively worked to bury information about the State of Nebraska’s ability to exert its sovereignty.
  • The eminent domain problems within Nebraska’s statutes have not been mentioned by any legislators expressing concern, or by the Governor, so it was unlikely to be dealt with by them during the special session.
  • We were concerned that legislators would create or expand a state commission with appointed or hired members not accountable to the people of Nebraska, which would result in yet another morass of bureaucracy. In addition to poor stewardship of taxpayers’ money, elected officials would be provided “political cover”. Ultimately, we feared, it would prove ineffective now and in future.

Nebraska’s officials have already placed the State in an intractable position…

  • No action meant no fix for the property rights problem, no exertion of state sovereignty, inadequate reimbursement to counties for expenses caused by project, etc., and continued concerns about the pipeline’s placement through Holt County, which arguably, is a point of vulnerability along the route.
  • Action as proposed still meant no protection for property owners, high potential for running afoul of the Constitution (ex post facto1 An ex post facto law is a retroactive law and is prohibited under the U.S. Constitution, Article I, Section 9a. and “special legislation”2 Special law or legislation is, “a law that applies to a particular place or esp. to a particular member or members of a class of persons or things in the same situation but not to the entire class and that is unconstitutional if the classification made is arbitrary or without a reasonable or legitimate justification or basis ), and delays resulting in a costly lawsuit filed by TransCanada (bad faith3 Because there was an effort by Nebraskas’ officials to “run out the clock” and avoid taking action, there is serious potential for TransCanada to sue for damages based on a “bad faith” argument. This project has been known for some time and lawmakers and the Governor had the opportunity to act much earlier. ) and now, reportedly, potential lawsuits filed by other states in the line of the project.

Prior to this past weekend, at most, we would’ve recommended concerned Nebraskans focus on a “Hail Mary” effort to impact the eminent domain problem during the special session of the Unicameral. But, in researching some questions associated with this, we discovered some very disturbing information. It’s been difficult to absorb.

Our research is ongoing – what we know so far leads us to the following conclusions:

The TransCanada Keystone Xl pipeline project will result in increased gas and diesel prices in 15 Midwestern States – to the detriment of those states’ citizens and economies.

The project, led by TransCanada, was apparently designed by a cartel-like group of interests, essentially, as a market price manipulation tool.

TransCanada’s own documents confirm the purpose of the project; a 2009 permit application submitted to the Canadian National Energy Board lays out the facts. In addition, a group researching questions regarding TransCanada’s claims of “job creation”, allege the company made similar statements in shareholder presentations; but we have not had time to confirm as of this writing.

The permit application document includes the following points4 Specific passages from “Keystone XL Pipeline Section 52 Application, Section 3: Supply and Markets“. Page 1: “…(B)itumen projects are more economic to develop than upgraded synthetic crude oil…The Keystone XL Pipeline will be in a position to access new markets for crude oil supply, both for increased supply of heavy crude in the short term, and for future supply of light synthetic crude if the economics of upgrading projects in Alberta improve.” Page 2: “TransCanada…concludes that this supply growth will require access to new crude oil markets, underpinning the need for the Keystone XL Pipeline. …“PADD”) III is the largest untapped market for western Canadian crude oil producers.” Page 3: “The target market for the Keystone XL Pipeline is the USGC, located within PADD III, which is the largest refining market in the world.” Page 5: “The Keystone XL Pipeline provides Canadian crude producers and USGC refiners with an opportunity to supply a portion of the total of 470,500 m3/d (2.96 million bbl/d) of heavy and light crude imports into PADD III. Furthermore, shippers on the Keystone XL Pipeline have made binding long term commitments to connect Alberta production to the USGC market.” Page 7: “Existing markets for Canadian heavy crude, principally PADD II, are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. Access to the USGC via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in PADD II by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude. Similarly, if a surplus of light synthetic crude develops in PADD II, the Keystone XL Pipeline would provide an alternate market and therefore help to mitigate a price discount. The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.

  • Bitumen projects (tar sands oil) are cheaper to develop than synthetic crude
  • New export markets are needed to handle increased heavy crude output
  • Keystone XL Pipeline provides a line for getting heavy crude to new markets now – option to move synthetic crude in future
  • PADD III (see map, below) is the largest untapped market for western Canadian crude oil producers
  • The U.S. Gulf Coast (USGC), within the PADD III region is the stated target market for the Keystone XL Pipeline
  • TransCanada has binding long term contracts with shippers in the USGC which are not fully available for public viewing
  • The fifteen state Midwest region, PADD II, is oversupplied with Canadian heavy crude and currently receiving “a discount” (translation: selling for a lower price)
  • Keystone XL will “strengthen” (translation: increase) prices for Canadian producers by removing oversupply
  • Keystone XL provides additional benefit for transport out of any synthetic crude oversupply in Midwest (PADD II) “to mitigate a price discount” (translation: avoid price reductions)
  • All Canadian producers should benefit from resulting price increases (estimated at $2 – $3.9 billion)

Market analyst Philip Verleger projected a $.10 – $.20 increase in cost per gallon as a result of the project, in his editorial entitled, “If gas prices go up further, blame Canada“, in the March 13, 2011, edition of the StarTribune.

Energy Information Administration U.S. Petroleum Administration for Defense District (PADD) – click to view on site

We do not claim to be the first group to point out the purpose of this pipeline, but it’s clear that the most important aspect of this issue has gotten completely lost or was never considered. Our research shows that several national news outlets and a U.S. Senator have attempted to draw attention to the market manipulation issue. See Footnote5 “Keystone link to Gulf finds enough producers“, “Keystone XL may mean higher Canadian crude prices for a couple of examples.

Several groups in Nebraska have included, at one time or another, passing references to the fact that the pipeline will increase gas prices, but we have only seen it included in a general list of concerns, and it is always overwhelmed by a long list of environmental rhetoric.

One story on the subject did appear in the Lincoln Journal Star in February of this year, but for no explicable reason, this information has not appeared in any of the recent articles or editorials we’ve seen. Since the entire project is predicated on the concept of “national interest”, any coherent analysis of the subject should include concerns about negative impact, including negative economic impact.

The pipeline project undermines America’s sovereignty, erodes energy security, and decreases the likelihood we will tap our own oil.

Our federal government is poised to approve the actions of a foreign company whose goal is to install a transport system for the purposes of manipulating gas prices within one region of the country by moving oil into another region of the country to refineries (several of which are foreign-owned) and into major ports in a foreign trade zone.

The U.S. State Department permit standard is “national interest”, yet considerable and important aspects of the information needed to make such a determination are not available. TransCanada is a private company so the full nature of their contracts with refiners and shippers have not been disclosed.

The purpose of federal government’s constitutional duty to regulate trade with foreign nations is to protect the interests of the United States. Federal government, acting properly, would consider the integrity of the nation’s border, provide for defense, and ensure American citizens’ fundamental rights to life, liberty, and property are not infringed.

Any foreign trade agreement should put America’s security before the interests of another nation or a foreign company. IF a foreign company is to be allowed access to American soil for the laying of an oil pipeline, that company should be contractually obligated to prove the lion’s share of the oil will benefit American markets generally, not bring harm to any of the country’s markets, that the country is not being used as a pass-through for export, and finally, that adequate protections exist in the event of national emergencies.

TransCanada’s public communications about the project in the U.S. have been different from those in Canada6 The information TransCanada submitted on their Presidential Permit application for the Keystone XL project omits the particular information provided to the Canadian NEB about PADD II price increases and only mentions PADD III market increases. UPDATED May 6, 2012: Note that the original link provided in this footnote – directly to the TransCanada website’s posting of the documents submitted – no longer works. TransCanada has apparently removed the document from its website. The Internet Archive’s WayBack Machine, however, did archive the link, and I have also downloaded a copy of the document “just in case”. Click HERE to visit the archived link and download / view the document. and the company has shown an ability to influence policymakers. This company’s further entrenchment in American markets creates concerns about the prospects for policy changes in the United States regarding a return to accessing its own oil resources. With the Keystone XL project, TransCanada wishes to expand the influence of Canadian oil into a region of the country that has traditionally been an oil drilling region, but whose production is increasingly limited by constricting American laws. The company, as companies do, will want to retain its spot in this market once established.

Eminent domain by a private, foreign company is being used in an unconstitutional manner because the project is not only not for a “public purpose”, it would actually be harmful to both the property owners and their neighbors through increased fuel costs.

Nebraska’s statutes are written so as to presume that any pipeline is for a public purpose – there is no procedure available in Nebraska law, that we can find, which provides protection for property owners in an instance where it goes against the interests of citizens.

Even before obtaining a permit from the U.S. State Department, TransCanada has sent letters to property owners, and some have perceived them as threatening the invocation of the available eminent domain law.

The definition of “public purpose”, overtime, has become so broad as to have lost its limited purpose under our Constitution according to its original meaning. Unfortunately, this has come to include everything from “job creation” to tax revenues. Tax revenues are incidental to free market activity. When we start going down the road of government’s “right” to predicate policy decisions based on tax revenue outcomes, we get results like the Kelo v. New London U.S. Supreme Court decision, which rightfully outraged a large number of Americans and resulted in a number of state legislatures’ enactment of prohibiting eminent domain use for economic development.

Unfortunately, Nebraska’s “Kelo law” appears very weak and specifically exempts pipelines.

A significant number of Nebraska’s elected officials, at both the State and Federal level, have been weak, at best, in protecting the interests of Nebraskans, or, they were deliberately deceptive and hoped to run out the clock to the benefit of a private, foreign company, against the interests of Nebraska citizens.

This subject has been amply covered in our prior articles. Here is a list of key points, followed by a list of links to our prior articles which include all of the information below and the links to primary source materials.

A number of Nebraska’s elected officials in State government (a number of State Senators and the Governor) and two of Nebraska’s Congressman repeatedly told Nebraskans that the pipeline was a federal issue and the state had no authority over the Keystone XL Pipeline.

A Congressional Research Service (CRS) report in September, 2010, and a Nebraska State Legislative Interim Study report in December, 2010, clearly laid out:

  • States have siting and regulating authority over oil pipelines whether intrastate or interstate if there are appropriate laws in place, if a federal permit is granted, and if the project complies with federal environmental regulations.
  • Nebraska had no such provisions in law.
  • Nebraska does have an eminent domain law for pipelines.

Despite information revealed by the reports, Nebraska’s officials continued to say the state had no authority over oil pipelines, that it was a federal issue.

Senators in the Unicameral who received both reports and who introduced pipeline legislation did not include eminent domain or siting and regulatory authority in their bills.

Nebraska’s Governor and Attorney General each received $1,500 campaign donations from TransCanada, each with incorrect or incomplete address information. Under Nebraska law, foreign contributions are illegal; once discovered the donations were returned with an explanation that address errors were oversights or omissions.

Nebraska’s District 2 Congressman, Lee Terry introduced a bill in the U.S. House of Representatives, entitled “NORTH AMERICAN-MADE ENERGY SECURITY ACT” to expedite the permit approval, citing “energy and economic benefits”, and the following (newly discovered) statement:

“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.

An examination of Congressman Terry’s FEC reports revealed many contributions from individuals and PACs with interest in the pipeline.

List of GiN’s previous TransCanada articles:

1) Transcending the Typical TransCanada Talking Points

2) Terribly Troubling Truths About TransCanada Pipeline – Nebraska: We Have A Problem

3) #1 Question for Lee Terry: What DID You Do With That 2010 CRS Report About Pipeline Authority?

4) NE Unicameral on TransCanada Pipeline: Torturing Words, Logic & State Sovereignty

Very left-leaning environmental groups have led the charge in opposition to the pipeline project causing a natural recoil by conservative Nebraskans, although too many have allowed their own focus to be shifted to this issue in their desire to stop the project or at least re-route it. Using the “spaghetti trick” approach, these groups have thrown out so many arguments. Those arguments have been overwhelmed by doomsday environmental scenarios which reduces their credibility. It is time to question the true motivations and allegiances of these groups – by putting concerns about the environment above Nebraskans’ property rights and the effects of market manipulation, they have managed to focus legislators’ attentions on environmental concerns, but there has been little mention of anything else.

Strange political bedfellows, explained:

For anyone wondering why an organization calling itself “conservative” would be in league with labor unions, the market manipulation factor provides the explanation. Americans for Prosperity of Nebraska (AFP-NE) has spent no small amount of money, resources, and political capital in advocating for the Keystone XL Pipeline, as has related entity, the Platte Institute7 As we have previously noted, we have received multiple, independent reports that J. Peter Ricketts is a key local benefactor for AFP-NE; in addition, Ricketts is the Founder, Director, and funder of Platte Institute . Platte, for instance, published a pro-pipeline editorial written by the leader of Omaha Laborers’ Local #1140. AFP-NE paid for buses to the Atkinson State Dept. hearings, provided free meals, and lodging, with reportedly8 An individual who went on the AFP-NE bus trip reported to me that he had a change of heart upon arriving in Atkinson and decided not to testify in support of the project; although there were no explicit statements by AFP-NE regarding testimony, the fellow who had changed his mind was aggressively pressured by the State Director throughout his time in Atkinson. , the expectation that each bus rider would testify in support of the project.

The key funding source for AFP on the national level is the Koch Foundation through Americans For Prosperity Foundation, which is in turn, funded by Koch Industries’ David and Charles Koch. Koch Industries’ primary businesses are oil, gas, and pipelines. Among their many interests, Koch Industries’ subsidiary Flint Hills Resources, LLP, conducts tar sands oil extraction in Canada and has a distribution point at the same Hardisty, Alberta, Canada hub where the Keystone XL pipeline starts. As noted in TransCanada’s Canadian permit application:

“The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.

All Canadian producers will benefit from the increased prices. Canadian producers, including Koch Industries, will, according to TransCanada’s documents, use the Keystone XL pipeline to ship oil, either heavy crude or synthetic depending upon availability and price.

The Keystone XL Pipeline project has been in motion for at least two years; the time to examine all of the necessary questions, make determinations, and take appropriate actions have long since passed.

Recommended Action:

  • Please share this article with anyone who you think is concerned about the subject in the following states; Nebraska, North Dakota, South Dakota, Kansas, Oklahoma, Minnesota, Iowa, Missouri, Wisconsin, Illinois, Michigan, Indiana, Ohio, Kentucky, and Tennessee. (Find the sharing tools at the bottom of this article; they are small icons for various tools including printing, emailing, and a number of Social Media.)
  • In order to get a handle on how many people are actually interested in this issue and determine next steps, we really need to hear back from people regarding whether or not they have shared the information and regarding feedback.

Additional links of interest:

Transportation Energy Data Book:

Petroleum Administration for Defense Districts (PADDs) Map:

Pipeline session headed for uncertain course

Pipeline session headed for uncertain course


  1. says


    This information is very disturbing. What can our leaders be thinking?

    We need to protect our national security, increase our energy independence, and encourage production of our own energy via the free market! How can we even be considering giving eminent domain powers to some other country — any other country?

    I will let people in Oklahoma know about this information with every possible communication venue that I have! Thank you for all of the research this article encompasses!


  2. says

    Shelli, you raise important issues, which I was not aware of, thank you. I obviously have a lot of research to do.

    What impresses me here is your obvious hard work in this. Yes, the use of eminent domain is very troubling.

    Thanks, again.

  3. Jim Mason says

    Shelli, Linda and the rest at GiN, thank you for doing the research for the state once again. BTW, if you get the opportunity, be sure to mention that the Tea Party does not officially endorse the pipeline. I do not know where Keystone got the impression of Tea Party support, but I think we can all guess and they are NOT the Tea Party. The Tea Party and the majority of its chapters and membership maintain a position of neither for or against the pipeline at this time. What we would like to see is the Obama administration weigh in on this issue and see if he can placate both the unions on one side of the fence and the enviromentalists on the other side and see what direction he would take.

    • Shelli Dawdy says

      While I appreciate your thanks for the research work, I do not have anything like the time right now to fully deal with your comment.

      In lieu of doing that, I just have one question I’d like for you to answer for our readers’ information:

      Why do you think you are empowered to speak for “the Tea Party”?

      Inquiring minds really do want to know.

  4. Drew says

    This article is substantially flawed. Any oversupply is on the Canada side. If this oil does not come by pipeline it will be transported by train which costs more and keeps prices up.

    • Shelli Dawdy says

      We appreciate you stopping by, but you clearly did not take the time to check into the resources within the article, which confirm, and were in fact THE PRIMARY SOURCES for the statements made. You clearly misunderstand the fundamental issues. It is, in fact, statements made by TransCanada and the findings of the Canadian Energy Board regarding the nature of the “oversupply”, the potential effects on the market, etc.

      YES, there IS increased production of oil in Canada and increasingly, more being sent to Midwestern refineries. TransCanada, in its application for this project’s approval in Canadian states that their increased production being sent to the Midwestern refineries is resulting in “discounted prices”.

      The first purpose of the pipeline is to provide an additional form of transport **AWAY** from the Midwestern region to a NEW market in the Gulf Coast, to be refined and a) sold in the Gulf Cost market region and/or b) exported. The second purpose of the pipeline is to enable product to be shipped through the pipeline – whether it be tar sands or traditional crude produced in Canada – the selection of which is to be varied based on – quoting from the permit application and Canadian NEB findings – “market conditions”.

      In other words, if prices received for products, whatever their exact type, are not at levels desired by producers, they can opt to change / redirect where they are sending that product so as to maximize the price received. Nowhere in any of our articles to date do we directly cast aspersions on TransCanada or the oil producers for their desire to maximize their prices, we are simply pointing out that the price issue – the primary purpose for the project AS STATED BY TRANSCANADA and, largely, the rationale for it’s approval by the Canadian NEB, is NOT widely known. TransCanada and pipeline advocates are NOT revealing this information to the public; the project has been marketed as having the opposite effect on prices, as a matter of fact, AND as a way to “create jobs”, and provide a supply of “friendly oil”.

      If you would have taken the time to examine the documentation before alleging that our article is flawed, you would see that TransCanada filed two permit applications with two sovereign nation’s governments – Canada and the U.S. You would see that these two permit applications read very differently.

      NOWHERE in the documentation, as you assert, is train transport suggested as an alternative should the project have been rejected by either government. It is simply not an option. The only alternative suggested – only in statements made to media – is to ship the increasing supply to China.

      Where is YOUR source of information for your statement?


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