Editor’s Note: This article has become part of a series and has been updated. Click here to see the article list >>> TransCanada Keystone XL Pipeline
As we’ve noted here, more than once, 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 facto 1. and “special legislation” 2), and delays resulting in a costly lawsuit filed by TransCanada (bad faith 3) 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 points 4
- 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.
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 Footnote 5 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 would necessarily include concerns about negative 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 the most important information needed to make such a determination is 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 Canada 6 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 which they have perceived 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 state legislation prohibiting eminent domain use for economic development.
A significant number of Nebraska’s elected officials, at both the State and Federal level, have been negligent, 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 our prior articles which include all of the information below and many 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 foreign 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:
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 to 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 Institute 7. 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 reportedly 8, 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, will 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.
- 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: http://cta.ornl.gov/data/chapter1.shtml
Petroleum Administration for Defense Districts (PADDs) Map: http://www.eia.gov/oil_gas/petroleum/data_publications/wrgp/padd_page.html
Pipeline session headed for uncertain course http://journalstar.com/news/unicameral/article_2ba0081f-a779-5f18-a982-21123aa65f6f.html
Pipeline session headed for uncertain course http://journalstar.com/news/unicameral/article_2ba0081f-a779-5f18-a982-21123aa65f6f.html
- An ex post facto law is a retroactive law and is prohibited under the U.S. Constitution, Article I, Section 9a. ↩
- 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“ ↩
- 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. ↩
- 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.“ ↩
- “Keystone link to Gulf finds enough producers“, “Keystone XL may mean higher Canadian crude prices“ ↩
- 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. ↩
- 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 ↩
- 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. ↩