The future of the controversial Keystone XL oil pipeline is now in the hands of the Nebraska Supreme Court. The state’s attorney general faced off today against the landowners challenging the legality of the project.

An overflow crowd fills the hallway outside the Nebraska Supreme Court Chambers. (Photo by Bill Kelly, NET News)

Every seat was filled in the Nebraska Supreme Court’s chambers. Representatives of both sides of the issue and reporters from around the country were on hand for the arguments.

It was an unusually lively discussion for the state’s highest appellate court. During the 30-minute hearing every one of the seven justices had questions for the attorneys representing the state of Nebraska and the landowners opposing the Keystone XL pipeline.

The case has become a crucial test for TransCanada Corp's $5.4 billion pipeline. The project, if completed, would connect Western Canada's tar sands region with Texas oil refineries. The law suit was filed by landowners Randy Thompson, Susan Luebbe and Susan Duvavan against Governor Dave Heineman and The Nebraska Department of Environmental Quality.

A decision supporting the landowners would cause a significant delay in the progress of the pipeline. A win for the governor and TransCanada would allow President Obama to have a final say on whether the project should proceed and be permitted to cross the border out of Canada.

Deputy Attorney General Katherine Spohn attempted to quickly make her argument the landowners did not have legal standing to challenge the state’s process for approving the pipeline. Before she was able to proceed to her second point she was interrupted.

“Well just a minute, Justice William Connolly said.

Connolly started what was to become a barrage of questions about the state’s contention that people living on or along the route did not have the right to challenge the project.

“Who is better suited to bring this lawsuit?” Chief Justice Mike Heavican asked.

Spohn offered a valid challenge could come from“one the pipeline carriers who are actually subject to the regulations” laid out in state law.

“Why would a pipeline company challenge this legislation?” challenged Justice Kenneth Stephan, indicating the rules created by the Legislature seemed to benefit the oil transporters.

Even though there was no indication of any plans for pipelines in the works, Spohn said it was possible a company would challenge the new state law because it added new restrictions on how a private business could proceed obtaining land for the site using state-sanctioned powers of eminent domain.

Pipeline supporters from business and labor make statements prior to the Supreme Court hearing. (Photo by Bill Kelly, NET News)

The landowner’s legal challenge cites the use of eminent domain as a major point in their opposition to the project. Previously the elected Public Service Commission had the authority to give utilities or other ‘common carriers’ like railroads to use eminent domain to construct projects that benefited the community.

The attorney general argues the federal government has the lead in regulating and setting the location for the Keystone pipeline since it crosses state boundaries. The Nebraska Public Service Commission only regulates intrastate oil carriers; those that operate within the state’s boundaries.

Dave Domina, the attorney for the landowners, told the court the issue of choosing a path for the pipeline fell squarely within the state’s responsibility.

“I think it is entirely a site location case, your honor,” Domina said. “I think the site location aspect of major oil pipeline law leaves those decisions to the states.”

Attorney Dave Domina addresses pipeline supporters after the court hearing. (Photo by Bill Kelly, NET News)

Turning to what he called his ‘favorite’ issue, Domina argued it was unconstitutional for the state Legislature to shift responsibility for the pipeline’s route to Governor Heineman and away from the elected Public Service Commission. The 2012 law passed by the state Legislature allowed the governor to choose the pipelines route.

“The gubernatorial avenue here is clearly designed to preclude any citizen input in any judicial setting and any judicial review,” Domina said.

Oral arguments lasted 30 minutes before the court moved on to the other cases of the day.

Attorneys for both sides agree the justices may closely examine one seven-word phrase in the Nebraska Constitution. It says the powers of the Public Service Commission are determined “as the Legislature may provide by law.” Whether the authority granted the governor for major oil pipeline meets or exceeds what’s allowed by the constitution may be the tipping point for the opinion.

The court is expected to take until at least the end of the year to prepare and release its opinion on the pipeline case.