Loopholes Speeding Keystone Route Through Nebraska Backfire on Gov., TransCanada

Judge rules that Gov. Heineman’s attempt to approve the pipeline's reroute two years ago was unconstitutional, leaving the whole process under a cloud.

Nebraska Governor Dave Heineman. Credit: Miller Center

Two years ago, impatient advocates of the Keystone XL in Nebraska pushed through a series of hastily conceived laws to fast-track approval of the pipeline's route through that state.

Now it's clear that the legislative maneuvering has produced the exact opposite effect—threatening to delay a presidential decision even further and giving opponents more time to fight on.

On Feb. 19, Judge Stephanie Stacy of the Lancaster County District Court ruled that Gov. Dave Heineman's approval of the pipeline reroute by TransCanada, the project's builder, was executed under an unconstitutional statute he had signed into law in 2012, and "must be declared null and void."

The ruling has been seen as a slap at corporations' use of eminent domain powers to seize access to private land, and as a rejection of bills crafted to favor a single powerful special interest. But Judge Stacy's opinion makes clear that she did not intend it that way—nor as a verdict on the Keystone XL itself.

"The issues before this court have nothing to do with the merits of that pipeline," she wrote in her opening sentence. "Nor will the decision in this case resolve that debate."

Rather, she ruled that Nebraska had bungled badly when it chose to shift some powers of the state's Public Services Commission to oversee pipelines—a role established in the state constitution—to the state environmental agency, and ultimately to its governor.

The narrative of events outlined in her ruling traces what happened starting in late 2011, at a level of detail unfamiliar to all but those most steeped in the issue. It was then that lawmakers in Nebraska's unicameral legislature and in the U.S. Congress passed a series of amendments to grease the skids for the pipeline's approval.

In the end, the only law left standing was the law of unintended consequences.

The ruling is not necessarily a fatal blow to the Keystone XL. But TransCanada and the pipeline's supporters have had better days.

Since the verdict, the State Department, which has authority over approving transboundary pipelines, has not yet announced any change in its Keystone XL review schedule, which was already somewhat open-ended. Having published a final environmental impact statement on the pipeline at the end of January, the federal schedule called for 30 days of public and interagency comment, part of a 90-day consideration of whether the pipeline is in the national interest. Despite continuing pressure from Congress to act, there was no particular deadline for a decision by Secretary of State John Kerry and President Obama, officials have said.

While Nebraska's attorney general said the state would appeal the judge's ruling, that could take months—as could any attempt to rewrite Nebraska's law again. A constitutionally proper review of TransCanada's existing proposal would also take months, and further delays could follow if the company has to mollify its opponents by modifying its proposed route again.

As things stand, it is hard to conceive of Kerry and Obama, both of whom seem ambivalent about the project, granting a permit for the pipeline to cross the Canada-U.S. border carrying tar sands fuel from Alberta to Texas without nailing down the stretch in Nebraska where local opposition is strongest. And that opposition, from landowners and conservationists alarmed by the risks of running a pipeline through delicate sandhills ecosystems and over a vulnerable aquifer, has only seemed to harden over the months and years of infighting.

Judge Stacy had nothing to say about all that.

"Decisions regarding the merits of TransCanada's Keystone XL pipeline are properly left to others," she demurred in her opinion.

Playing Pipeline Politics

Stacy's ruling presents an object lesson in the risks of pipeline politics: a tortuous chronology of how politicians and interested parties have been going about the decision-making for the past few years.

The long-running debate began back in 2008, when TransCanada first applied for a permit for a pipeline.

But the jockeying for position that led to the Nebraska lawsuit, Thompson v. Heineman, began three years later, in November 2011. By then Hillary Clinton's State Department had completed its final environmental impact statement (EIS) on the originally proposed Keystone XL route, which crossed Nebraska from South Dakota to Kansas, passing through twelve counties, across the Sandhills region and the Ogallala aquifer. Following the department's 2011 EIS, the prescribed next step, a determination whether the line was in the national interest, was well under way.

Despite mounting public opposition the pipeline was widely thought to be a shoo-in.

On Oct. 24, 2011, amid rising public protest, Gov. Heineman—who had declared himself against a route through the Sandhills—called a special session of the Nebraska legislature to write new pipeline siting legislation that ostensibly would exert more state leverage over this and any future pipeline routes.

The session began on Nov. 1. On Nov. 10, the State Department, taking notice of the shifting local landscape, announced it would delay its decision on TransCanada's permit application to await developments in Nebraska.

In a three-week session that ended on Nov. 22, Nebraska passed two new pipeline statutes, LB 1 and LB 4. The governor signed them on Nov. 23. They set up a strict new review process for future pipelines, under the state's independent Public Services Commission. But they allowed TransCanada an expedited alternative because its application for a presidential permit was already under review in Washington. Instead of a more rigorous vetting by the PSC, the Keystone XL could get approval from the governor after passing muster with the Nebraska Department of Environmental Quality (NDEQ), which he controlled.

Dissecting the legislature's intent, Judge Stacy wrote that lawmakers had passed its first bill, LB 1, to put in place tough new mandatory reviews by the PSC of all future pipelines, as part of the agenc''s constitutional mandate. But its second bill, LB 4, was clearly meant to let the Keystone XL be evaluated by NDEQ and the governor using an alternative review process.

In written comments filed with the State Department last year, a coalition of Nebraskan pipeline opponents recounted their reaction to passage of the new laws that left them angry and confused.

"Landowners immediately went to Nebraska Legislature Speaker [Mike] Flood's office to gain clarity on how the Sandhills would be defined," they wrote. "TransCanada Vice President Robert Jones happened to be in Speaker Flood's office as well, and surprisingly everyone was shuffled into a conference room. Speaker Flood suggested the landowners find some common ground with Robert Jones concerning the Sandhills." Flood, a conservative Republican known for brokering compromises, left office under term limits in 2013.

This time, the two sides would not be reconciled.

Instead, intense weeks of jockeying ensued in which Heineman's NDEQ, over the objections of landowners, redefined the formal boundaries of the Sandhills region on the map in a way that would make it seem easier for the pipeline to skirt around the sensitive lands. The proper boundaries of the Sandhills region remain in dispute to this day.

With state officials moving in TransCanada's direction, the outlook for the project was beginning to look rosier.

But then the Keystone XL's proponents in the Congress decided to put their thumbs on the scale.

In a showdown over taxes and spending with President Obama, the House of Representatives on Dec. 13, 2011 and the Senate on Dec. 17 passed a bill extending a popular cut in payroll taxes for another year—and attached a provision demanding that Obama make a final decision on the Keystone line within 60 days. Unwilling to veto a tax bill he so fervently had sought, Obama signed the law.

The next month, on Jan. 18, 2012, Obama said that Congress had demanded that he act before he had enough information—including about fast-moving events in Nebraska, where the expedited review of the Keystone XL reroute was just gearing up. Obama denied the Keystone XL permit.

That changed the picture in a significant way, Judge Stacy explained in her opinion.

When the president denied the permit, "the practical impact was that if TransCanada reapplied for a presidential permit seeking approval of its Keystone XL pipeline route thorough Nebraska, the route would be subject to the PSC review process," she wrote.

Immediately recognizing the threat, the pipeline's supporters moved to rewrite the state's laws once again.

The day after Obama's rejection, on Jan. 19, 2012, State Sen. Jim Smith introduced yet another pipeline bill, LB 1161. "Unfortunately, we could not have anticipated the circumstances and the actions that occurred at the federal level that now jeopardize the agreements we reached last year," he said.

The new bill amended the previous two, LB 1 and LB 4. It eliminated the narrow loophole that let any pipeline avoid PCS review if it already had a permit pending. Written to cover TransCanada's pending case and no other, that provision was suddenly moot, because TransCanada's permit application had been nixed by Obama. But the new bill also widened the loophole by making it possible for any new pipeline application to skirt PCS and go through NDEQ instead. That would suit TransCanada's new circumstances.

Heineman signed LB 1161 into law on Apr. 17, 2012.

Post-LB 1161, All Is Under a Cloud

On the law's first day in force, Apr. 18, TransCanada submitted its initial documents for a rerouting through Nebraska. It handed the paperwork not to the PCS, but to NDEQ for evaluation. Now, both the pipeline and its path through the Nebraska bureaucracy would follow the traces on a new map.

On May 4, 2012, TransCanada applied once again for a presidential permit for the Keystone XL system's northern half, including the new Nebraska route. (The southern half, needing no presidential permit and blessed by Obama in a campaign photo-op that year, started delivering tar sands oil from Cushing, Okla. to the Gulf Coast this year.)

Three weeks later, following the instructions in Nebraska's new law, the State Department and the NDEQ signed a memorandum of understanding agreeing to jointly conduct "a collaborative environmental analysis" of the new route's impacts, and to "ensure that the environmental review is thorough, efficient and adequate."

NDEQ published its draft environmental report in October 2012, and although it was criticized by pipeline opponents in the state, the draft remained little changed in its final version.

On Jan. 22, 2013, Governor Heineman wrote Obama and Clinton, who was closing out her term as Secretary of State, to say that he had accepted the NDEQ evaluation and approved the new route through Nebraska. The State Department, in turn, would lean on the Nebraska analysis in its own draft supplemental environmental impact statement on the new route, which was published in draft form in March 2013 and in final form in January 2014.

Like everything that Nebraska did since passage of LB 1161, these environmental assessments may now be under something of a cloud.

In striking down the governor's approval of the rerouted pipeline route, Stacy wrote, she was not issuing an "indictment of the work done by NDEQ" in its environmental evaluation. However, she went on, any work done in obedience to an unconstitutional law, "no matter how carefully performed, cannot stand."

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