The future of the Keystone XL oil pipeline may turn on a century-old measure to curb the influence of railroad barons.
If Nebraska’s Supreme Court decides Keystone has the same legal status as a rail line, it could trigger a review by the state’s Public Service Commission. That would push a decision on a project first proposed in 2008 into the second half of 2015 at the earliest, and may force pipeline builder TransCanada Corp. to alter the route for a second time.
“I don’t think it’s a sure thing by any means that the PSC will say, ‘yeah, we’re done,’ ” and approve the existing path, said Sandra Zellmer, a University of Nebraska law professor who has testified before the state legislature on regulatory authority.
The Obama administration announced April 18 that it was suspending its review of Keystone until the legal questions are cleared up. This enraged backers of the $5.4 billion project, which is designed to pump 830,000 barrels a day of Canadian oil sands to refineries on the U.S. Gulf Coast and has been the subject of intense lobbying from Ottawa to Washington.
Nebraska Gov. Dave Heineman is asking the state’s top court to reverse a trial judge’s February decision that declared the Calgary-based TransCanada a common carrier like a railroad. As such, a 2012 state law giving the governor authority over Keystone’s route violated a provision of the state’s constitution that gave that power to the Public Service Commission.
The lower court “got it right,” in finding that a state law granting Heineman the authority to approve Keystone’s path in Nebraska was unconstitutional, Zellmer said.
Anthony Schutz, an associate professor of law at the University of Nebraska, said that the lower court’s ruling “stands a decent chance of being upheld.”
Because the state’s constitution doesn’t explicitly say that the Public Service Commission has authority over oil pipelines, however, there may be enough legal leeway for the court to overturn and cite deference to the legislative process, Schutz said.
“We didn’t have pipeline companies digging across the state,” when the commission was added to the state constitution in 1906, he said.
The commission’s origins date to the wave of progressive reforms in the late 1800s and early 1900s that were designed to ensure people weren’t trampled in the name of progress. Legislatures established the boards to regulate industries deemed particularly important to the public good, and tried to insulate regulators from the lobbying of businesses that had grown into behemoths.
Initially called the Railway Commission, the five-member panel’s jurisdiction has expanded to include telecommunications carriers, natural gas utilities, furniture movers and taxi cab companies, and operators of grain warehouses.
“The whole idea was to give the power back to the people and to resist the political influence that large, important and well-heeled companies could have on decision making,” Zellmer said.
Landowners opposed to Keystone argue the same philosophy applies, more than a century later, and that the ability to exercise eminent domain over private property needs to be granted by regulators, not the governor.
Nebraska trial judge Stephanie Stacy ruled in February that TransCanada was a common carrier like railroads because it transported people or goods for a fee. As such, Keystone XL is subject to oversight by the Public Service Commission exclusively, including approval of the route, Stacy said.
Attorney General Jon Bruning, a Republican running to replace Heineman, has argued that the law isn’t unconstitutional because it retains a role for the commission by letting companies apply to it or the governor. The court isn’t expected to hear the case until at least September. An opinion could take months.
The U.S. State Department cited the possibility that the Nebraska court case could result in a new route as a reason to suspend its review. The agency is charged with determining if the pipeline is in the national interest because it would cross an international boundary. The delay probably will enable President Barack Obama to avoid deciding a contentious issue before the November midterm elections to determine control of Congress.
Nebraska’s Public Service Commission’s first iteration was created by legislation in 1885. Such was the importance of its role, that the Legislature added its authorities to the state constitution in 1906.