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LINCOLN — The nearly six-year odyssey of the Keystone XL pipeline could turn this week in 30 minutes.
The Nebraska Supreme Court will hear oral arguments Friday morning on a constitutional challenge involving one of the most bitterly fought environmental battles in a generation. President Barack Obama is awaiting a ruling from Nebraska before moving closer to deciding the fate of the massive oil pipeline.
At stake for pipeline supporters are construction jobs, new property tax revenue and a gusher of 830,000 barrels of crude oil flowing daily from a friendly trade partner. Opponents see the project as a foregone disaster that will worsen global warming while threatening public water supplies and private land for the next half-century.
Three landowners whose lawsuit halted the national permitting process enjoy a marginal advantage heading into Friday’s hearing. Earlier this year they persuaded Lancaster County District Court Judge Stephanie Stacy to strike down the 2012 Nebraska law used to approve the pipeline route in the state.
Now lawyers for the state must try to get the Supreme Court to overturn that decision.
If the state’s appeal fails, the project would not be dead. But TransCanada Corp. would have to try for a third time to obtain a route in the state where opposition to the project first emerged and remains strongest.
As a measure of the company’s desire to avoid further delay and expense in a project that has already cost close to $2.5 billion, TransCanada has filed a friend-of-the-court brief in the case. The company’s lawyers, however, will not participate in the oral arguments.
As neutral fact-finders, the judges are to set aside political and personal views and decide cases based on the rule of law. Observers of the Nebraska court say the judges do not fall into conservative or liberal alliances.
That said, the pipeline case will be decided by two Republicans, three Democrats and an independent. One of the high court judges, a Democrat, recused himself from the case and has been replaced by a lower court judge appointed by the current Republican governor.
Attorneys for the sides typically get 15 minutes each to make their case, an allotment that includes questions from the judges. But the court could decide to extend the time for each side.
The case involves a 1,179-mile, 36-inch underground pipeline that would carry mostly heavy crude from western Canada’s oil sands region to refineries on the U.S. Gulf Coast. At the time TransCanada applied for a federal permit in 2008, Nebraska had no regulations on the siting of oil pipelines. So the company chose a route through Nebraska and other states and proceeded to seek private land easements to build it.
The project hit a snag in 2011 after Gov. Dave Heineman called a special session to address environmental concerns over the pipeline route. The Legislature created a pipeline siting law during the special session that required companies to apply through the Nebraska Public Service Commission.
In 2012 the Legislature passed a new pipeline law that created an alternate approval process. The law, which included input from lobbyists employed by TransCanada, allowed applicants to bypass the Public Service Commission and instead seek approval directly from the governor after a state environmental review was completed.
On April 18, 2012, the day the law took effect, the company applied to reroute the pipeline to avoid the network of shallow aquifers in the Nebraska Sand Hills. The landowners — Randy Thompson, Susan Dunavan and Susan Straka — filed their lawsuit months later and prevailed in February.
The state quickly appealed the lower court’s decision in Thompson v. Heineman.
The Supreme Court has since been presented with multiple legal arguments by both the landowners and the state, but the court’s decision could turn on two key arguments.
The first is whether the landowners have legal standing to bring the lawsuit. Judge Stacy ruled they do, but the state will argue that her decision was in error. If the high court agrees, the state wins.
Standing can most directly be established when parties show they would be injured by a law. But the high court also has allowed a limited exception to the standing rule for Nebraska taxpayers seeking to stop the illegal expenditure of public funds.
The landowners convinced the lower court that they had standing based upon the taxpayer exception.
The pipeline law passed by the Legislature in 2012 appropriated $2 million for the Nebraska Department of Environmental Quality to conduct a review of the project. The landowners argued that expenditure was illegal.
The state countered that the money was not really an expenditure because TransCanada paid it back. In fact, the environmental review cost more than $5 million, which was fully reimbursed by the company. Judge Stacy, who devoted six pages of her 50-page order to an analysis of standing, was unconvinced by the state’s argument.
“Simply put, while private reimbursement of public expenditures may be good fiscal policy, it should not be used as a legislative tool to insulate allegedly unconstitutional laws from taxpayer challenge,” she wrote.
The Supreme Court has held in a previous ruling that taxpayer standing must be granted carefully to “prevent the exceptions from swallowing the rule,” Deputy Attorney General Katherine Spohn argued in the state’s brief.
If the Supreme Court agrees the landowners have standing, it would likely then take up the part of the ruling that found the law unconstitutional.
Judge Stacy’s decision focused on the regulation of common carriers in the state. “Common carriers” refers to businesses that include transportation for hire, such as railroads, buses and taxicabs.
Nebraska law has long defined crude oil pipelines as common carriers, a standing bolstered by the Legislature granting pipeline companies the power to use eminent domain to acquire land, the judge said. The Nebraska Constitution allows only the Legislature or the Public Service Commission to regulate common carriers.
So the 2012 law violated the Constitution by illegally giving the governor regulatory authority over a common carrier, Judge Stacy ruled
The state’s brief contended the judge was wrong because the Keystone XL pipeline is not a common carrier.
The TransCanada brief argues that under the Nebraska Constitution, only businesses operating within Nebraska’s borders are considered common carriers. The Keystone XL pipeline would cross multiple states.
If the high court upholds the judge’s decision on the constitutional issue, the landowners win.
The landowners also filed additional claims, which raise constitutional challenges they failed to win in the lower court. If the Supreme Court overturns Judge Stacy’s ruling, it would then consider the other arguments.
A factor in the state’s favor is a longstanding principle of the Supreme Court that presumes a law is legally constructed and all “reasonable doubts are to be resolved in favor of its constitutionality.”
Anthony Schutz, associate professor at the University of Nebraska College of Law, said there is a lack of previous decisions to help define the scope of the Public Service Commission’s authority. Thompson v. Heineman provides the Supreme Court with an opportunity to provide needed clarity.
“It’s hard to say which side has a better argument because there’s so little case law out there,” Schutz said.
While the Supreme Court sets its own schedule for issuing opinions, a ruling in the pipeline case probably won’t come for months — perhaps not until early next year. The decision will be eagerly anticipated outside of legal circles as well.
If the state loses the appeal, TransCanada would be left to submit a new route to the Public Service Commission.
Chris Peterson, spokesman for Nebraskans for Jobs and Energy Independence, said the court will decide if work on the pipeline starts sooner or later.
“More delay means thousands of construction jobs that could be filled today ... will be pushed out even further,” he said.
Jane Kleeb, director of Bold Nebraska, a pipeline opponent, said the landowners didn’t sue to simply delay the pipeline.
“This lawsuit is not about whether the pipeline is good or bad,” she said. “This lawsuit is about protecting our constitution and landowner rights.”
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