The Northern Gateway and Keystone XL Pipelines: A Framework for Analyzing Interjurisdictional Pipeline Disputes

Abstract

The purpose of this capstone report is to establish a framework for analyzing interjurisdictional pipeline disputes. This is an important issue to examine because pipeline transportation has become of key importance in the oil and gas industry, given its cost-­‐effectiveness and ability to reach difficult to access, unconventional sources of oil. However, when pipelines cross multiple jurisdictions disputes may arise, and these disputes may be of an economic, legal or political nature. This report sets up the framework by using the Northern Gateway pipeline and Keystone XL pipeline disputes as examples. The economic importance of both projects is discussed, followed by discussion on how feasible it is to substitute the pipeline projects with alternative means of transportation. It becomes evident that the economics of pipelines boils down to netbacks, which is essentially revenue going to producers minus all costs associated with getting a barrel of oil to market. Then, the legal issues concerning the pipeline approval process are considered, as well as how these issues may halt the approval of interjurisdictional pipelines. This is followed by a discussion on how the politics of pipelines affect the approval process. It becomes evident that pipeline disputes arise because of a lack of coordination of laws, regulations, and both economic and political interests.