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TransCanada Announces Plan to Build OK-TX Link Independently

February 27, 2012

Today, TransCanada issued a press release announcing its intention to re-apply for the Keystone XL Presidential Permit and also to pursue the Oklahoma-Gulf Coast link as an independent project.  According to the release:

The company also informed the DOS that what had been the Cushing to U.S. Gulf Coast portion of the Keystone XL Project has its own independent value to the marketplace and will be constructed as a stand-alone Gulf Coast Project, not part of the Presidential Permit process.  The approximate cost is US$2.3 billion and subject to regulatory approvals, we anticipate the Gulf Coast Project to be in service in mid to late 2013.

If recent advocates’ statements are any guide, this plan will lead in short order to litigation over TransCanada’s apparent attempt to avoid the requirements of the National Environmental Policy Act by segmenting the project, a practice (discussed in an earlier post) that U.S. courts have rejected in the past.

We’re not getting paid around here to do extensive legal analyses, but in a nutshell, the Council on Environmental Quality has rules against segmentation.  “Connected actions” must be considered together in an Environmental Impact Statement, and actions are connected if they:

a. automatically trigger other actions which may require an EIS

b. cannot or will not proceed unless other actions are taken previously or simultaneously, and

c. they are interdependent parts of a larger action and depend on the larger action for their justification

This clearly isn’t a blanket ban on doing any smaller piece of a larger project that would require an EIS were the full scope at issue, but it’s been used, for example, to stop NEPA avoidance by segmentation of a highway project that had already triggered NEPA analysis and was partly constructed (see Named Individual Members of San Antonio Conservation Society v. Texas Highway Dept., 446 F.2d 1013 (1971), cert. denied, 406 U.S. 933 (1972)).  Because NEPA already applies to the full length of Keystone XL in the U.S., opponents will likely argue that this situation resembles the facts of Ross v. Federal Highway Administration, 162 F.3d 1046 (10th Cir. 1998), where the court said:

Kansas and Douglas County’s attempt to withdraw a portion of the trafficway from federal funding, after the project hit an environmental road block, does not relieve FHWA of its statutory obligation to comply with NEPA.

Long story short, once NEPA applies to a project, the law frowns on trying to pull out a piece of it for purposes of avoiding the requirements of NEPA.  The Obama administration has determined that a Supplemental EIS is required and rejected the permit because NEPA review is incomplete.  In the language of the 10th Circuit Court of Appeals in Ross, the highway project “was so imbued with a federal character that the eastern segment of the project could not be ‘defederalized’.  Substitute “southern” for “eastern” and that certainly sounds like Keystone XL to us, especially if it can be shown that the Oklahoma-Gulf Coast link assumes a larger supply flowing into the Oklahoma terminal than currently exists.  If the Gulf Coast link capacity implicitly assumes that Keystone XL will be built, it sure looks like a slam dunk NEPA segmentation case.  Or at least that’s what we’d say if anybody had an opinion around here.

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