The pipeline is also awaiting a national interest verdict from the State Department. Legal setback for Keystone pipeline

A Nebraska state court ruling Wednesday opened up the possibility of even more lengthy delays for the long-postponed Keystone XL pipeline.

The ruling tossed out the state law that gave Gov. Dave Heineman the right to approve the proposed Keystone’s route through the state, saying the law violated the state’s Constitution.


And that throws a cloud of uncertainty over the Obama administration’s long-running review of the Alberta-to-Texas pipeline, which was believed to be in its final few months before the matter could go to President Barack Obama for a final decision.

The pipeline proposed by TransCanada Corp. is awaiting a national interest verdict from the U.S. State Department, and it was not immediately clear whether the Nebraska court ruling would have any impact on that process.

But the State Department had previously said it would not judge the pipeline until officials in Nebraska had approved the project. Now, with Nebraska’s approval process overturned, it could prompt the Obama administration to further postpone its long-awaited verdict on whether to grant TransCanada permission to build the pipeline.

The State Department was aware of Wednesday’s court decision, but said it would not comment on ongoing litigation.

( Also on POLITICO: Full energy and environment policy coverage)

Alternately, the ruling could also force TransCanada to win the permission of every landowner along the route, a difficult task in Nebraska since a small group of property owners have fought to prevent its construction.

In response to a suit brought by three landowners, the Lancaster County District Court granted the request for declaratory judgment and declared the state law, LB 1161 “unconstitutional and void” for usurping the authority to approve the pipeline from its utility regulator, the Nebraska Public Service Commission, and instead vesting it with the governor.

The court also found that because Gov. Heineman’s authority to approve the pipeline route was based on an unconstitutional statute, his approval of a revised route “must be declared null and void.”

“This case was not about the pipeline on its merits,” said David Domina, the lawyer for the landowners. “It’s about the validity of a single statute under the provisions of the Nebraska state constitution. It’s a question of Nebraska state law.”

Within hours of the ruling, Nebraska Attorney General Jon Bruning and Deputy Attorney General Katherine Spohn filed notice with the court saying the state will appeal the decision.

TransCanada, which is seeking the permit to build the segment of the pipeline that would carry crude from the oil sands in Alberta its southern leg of the project in Cushing, Okla., said it was still reviewing the decision Wednesday.

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“We are disappointed and disagree with the decision,” said Shawn Howard, a company spokesman. “We will now analyze the judgment and decide what next steps may be taken. TransCanada continues to believe strongly in Keystone XL and the benefits it would provide to Americans — thousands of jobs and a secure supply of crude oil from a trusted neighbor in Canada.”

Domina said that for his clients, the decision means that TransCanada cannot build a pipeline over their land using eminent domain. But for TransCanada, the decision means that not only is its current route nullified, but that Nebraska law has no avenue for it to seek approval of the route.

“This was the first law to deal with crude pipelines,” Domina said. “Now that that’s been declared void, there is no fallback law.”

The overturned bill had amended two existing Nebraska laws that required that all major oil pipelines seek approval of the PSC Commission, so it created an alternative method for approval of oil pipelines that applied to any projects proposed after November 2011.

But the court said that the law unlawfully took the control of pipeline routing decisions for common carriers away from the utility regulator.

“Whether the PSC’s restriction of power is temporary or permanent is contingent on whether the Governor approves, or disproves, the pipeline route,” the court said. “If the Governor approves the route, the PSC has been divested permanently of authority over the location of that oil pipeline route.”

Beyond usurping PSC’s authority, the law unlawfully gave the governor the power to bestow eminent domain and violated the separation of powers “by permitting action to occur without judicial review.” The judge also ruled the funding mechanism for an environmental study also violated the state Constitution.

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Bold Nebraska, a major opponent of the pipeline, applauded the court’s decision, saying it looked forward to the project being reviewed properly by the PSC.

“Citizens won today,” said Jane Kleeb, director of Bold Nebraska in a statement. “We beat a corrupt bill that Gov. Heinemann and the Nebraska Legislature passed in order to pave the way for foreign corporation to run roughshod over American landowners. … TransCanada learned a hard lesson today, never underestimate the power of family farmers and ranchers protecting their land and water.”

On the Hill, lawmakers said they were still reviewing the decision but Sens. John Hoeven (R-N.D) and Heidi Heitkamp (D-N.D.) said they believed the decision shouldn’t delay the project.

“…We recognize that Nebraska has to work through its process on this very important energy project for America,” Hoeven said in a statement. “We believe, however, that the environmental concerns in Nebraska, and in every other state through which the pipeline will pass, have been addressed.”

Heitkamp said she hoped the state PSC would approve the project.

“This process has gone on way too long,” she said. “I’ll continue to push for this pipeline which is in our national security, energy, and economic interests.”

Nebraska Republican Rep. Lee Terry was also displeased with the court’s decision.

“This is a terrible decision,” he said, adding “I’m confident that this decision will be overturned. However, let me be very clear — this decision does not impede President Obama from doing the right thing after five years of delays and signing the permits to build the Keystone XL Pipeline.”