State Legal Issues Impact the Keystone Pipeline

Despite filing for a construction permit nearly eight years ago, the TransCanada Company’s production of the Keystone XL pipeline remains in the headlines[i]. The proposed pipeline route stretches from the tar sands in Alberta, Canada to the Gulf of Mexico off the Texas coast[ii]. The pipe is designed to transport 830,000 barrels of crude oil to Texas refineries each day[iii]. Industry, energy and environmental enthusiasts continue to lobby adamantly in favor of and against the construction of the pipeline[iv]. Thus far, the majority of the debate focuses on the national scale and President Obama’s decision to approve or deny the pipeline permit. Soon, the State Department will issue an Environmental Impact Statement (EIS) to advise the President’s decision[v]. Under the National Environmental Policy Act, any major federal action that will significantly affect the quality of the human environment, such as an international oil pipeline, must include a detailed report on the environmental impact of the proposed action and alternatives to the action[vi]. The public comment period for the State Department’s draft of an EIS closed March 7, 2014 and President Obama’s decision is expected in the next several months[vii]. As TransCanada makes progress on the project at the federal level, complex legal issues continue to arise at the state level that may delay or halt the pipeline construction even if President Obama approves its permit.

Property owners in both Nebraska and Texas have raised legal claims in an attempt to fight the construction of the pipeline. In Texas, The Crawford Family Farm Partnership v. Transcanada Keystone Pipeline centers on arguments regarding eminent domain and private property rights while in Nebraska, Thompson v. Heineman focuses on separation of powers claims[viii]. Both cases are based on claims related to state constitutions and involve interesting legal strategies aimed at protesting the approval and construction of the Keystone XL pipeline at the state level.

In January, local landowner and plaintiff Julia Crawford advanced her legal claim against the Keystone XL pipeline when the Supreme Court of Texas forced TransCanada to respond to her petition for review[ix]. A portion of the southern half of the Keystone XL pipeline runs through Crawford’s property and after Crawford refused to sell her land or negotiate an easement, TransCanada seized that portion of Crawford’s property through claims of eminent domain. TransCanada derived its eminent domain authority from an exemption in the Texas Constitution that allows common carriers the power of eminent domain after registering with the Texas Railroad Commission[x].

However, when TransCanada applied for a common carrier permit, the Railroad Commission informed TransCanada that the Commission lacks jurisdiction to grant approval or issue a common carrier determination and it believes that federal law should govern[xi]. The Commission’s position is that it only issues a registration through its T-4 permits, not a determination regarding common carrier status[xii]. The Commission’s jurisdictional confusion developed after the Texas Supreme Court’s recent ruling in Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC[xiii]. The Court in Texas Rice Land Partners ruled that the Railroad Commission’s permit process was insufficient to establish whether or not a company meets the constitutional requirement of common carrier[xiv]. Crawford argues that since the Texas Constitution still requires approval by the Texas legislature or a Texas agency, namely the Commission, TransCanada cannot proceed because it has not established the necessary common carrier status required for eminent domain condemnation under Texas law.

Crawford also argues that regardless, the pipeline is not a common carrier[xv]. Common carriers must transport crude petroleum for public hire, but since the pipeline is intended to carry foreign crude oil for a private company, it cannot be labeled as a public good, and thus does not qualify as a common carrier[xvi]. The Texas Court of Appeals did not find Crawford’s arguments compelling and ruled that the pipeline did serve a public use as a common carrier due to the third-party shipping customers it would serve[xvii]. When Crawford requested review of the lower Court’s decision against her, TransCanada failed to provide a formal answer to Crawford’s request. During the Texas Supreme Court’s consideration of Crawford’s petition for review, it issued an order requiring TransCanada to file a formal response with the Court[xviii].

Crawford believes the order is a positive sign that the Court may accept her petition for review and hear the case on appeal. If Crawford’s claims are successful, they will give leverage to many other landowners fighting to keep their property rights.  In such an event, TransCanada may need to re-route the Keystone XL pipeline to avoid traveling through the property of any landowner with whom the company is unable to negotiate a sale or easement. Alternatively, TransCanada could carry some Texan oil in the pipeline in order to meet the constitutional definition of a common carrier. Although, Texas should be the least of TransCanada’s concerns because other states, like Nebraska, do not automatically grant common carriers eminent domain power; companies face additional agency procedural hurdles beyond proving their common carrier status. In fact, the February ruling in Thompson by the Nebraska Third District Court denied political attempts to remove such procedural measures.

The Thompson Court deemed LB 1161 unconstitutional[xix]. The LB 1161 law was designed to expedite the approval of a new route for the Keystone XL pipeline through Nebraska, and granted Nebraskan Governor Heineman significant authority over the pipeline route decision[xx]. LB 1161 sought to amend Nebraska’s Major Oil Pipeline Citing Act to allow the governor to circumvent the Public Service Commission’s (PSC) constitutional authority to regulate common carriers. LB 1161 allows the governor, using state funds in conjunction with the National Department of Environmental Quality, to assess and approve pipeline decisions and grant eminent domain authority to carriers without the PSC’s participation.

Plaintiffs, Nebraskan land owners whose property is located in the path of the proposed Keystone XL Pipeline, brought suit against the governor claiming that the under Article II §1 and V § 1 of the Nebraskan Constitution, the legislature possesses authority over the power of eminent domain and therefore, LB 1161 is an unlawful delegation of authority to the executive branch and a violation of the separation of powers. The Plaintiff’s also contended that Article IV §20 of the Nebraskan Constitution gives PSC exclusive authority over the regulation of common carriers and the legislature cannot divest PSC of its authority without a constitutional amendment. Plaintiffs were able to establish tax payer standing through challenging the illegal expenditure of public funds raised for government purposes.

The Court rejected the Plaintiff’s first argument, explaining that eminent domain is inherently a delegatory power and the legislature may assign it at its will. However, the Court ruled that the Nebraska Constitution does grant PSC exclusive control over the regulation of common carriers[xxi]. The Court noted that the legislature may provide guidance for the PSC, but it cannot divest the PSC of its authority over any given class of carriers entirely, without a constitutional amendment[xxii]. The governor plans to appeal the decision[xxiii].

Prior to Thompson, TransCanada re-routed the northern half of the pipeline in Nebraska to accommodate concerns of the Environmental Protection Agency and President Obama. The original route traveled over a larger portion of the Ogallala Aquifer, the largest underground freshwater reserve in the United States[xxiv]. The new route is designed to lessen the impact of a potential spill on the fresh water resource. If Nebraska fails to approve the pipeline, TransCanada may be forced to re-route it again[xxv].

Both Thompson and Crawford Family demonstrate that the Keystone XL pipeline is far from free of political and legal hurdles despite the President’s impending permit decision. The northern half of the pipeline requires review by the State Department and a presidential permit under Executive Order 13337 because the pipeline passes through an international border, but this approval does not exempt the project from state requirements or legal contentions[xxvi]. The Thompson and Crawford Family cases are evidence that state constitutional provisions will play a role in the future of the Keystone decision. As the Thompson appeal moves forward in the coming months and the Texas Supreme Court decides whether or not to grant an appeal in Crawford Family, TransCanada will find out if it underestimated the role of state legal claims when planning for the Keystone XL pipeline. Meanwhile, threatened landowners and environmentalist cling to the states for new support in light of the President’s potential approval of the federal permit.

 

– Amanda Urban is a General Member on MJEAL. She can be reached at ajurban@umich.edu.

 


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[i] Stop the Keystone XL Pipeline. 350.org. http://350.org/campaigns/stop-keystone-xl/.

[ii] Sarah Wheaton. Nebraska: Judge blocks pipeline route. New York Times, (Feb. 20, 2014) http://www.nytimes.com/2014/02/20/us/nebraska-judge-blocks-pipeline-route.html?_r=0.

[iii] Keystone XL Project. TransCanada. (Nov. 27, 2013). http://www.transcanada.com/keystone.html; Lenny Bernstein. Nebraska Judge strikes down legislature’s move allowing keystone XL route. Washington Post. (Feb. 19, 2014). http://www.washingtonpost.com/national/health-science/nebraska-judge-strikes-down-legislatures-move-allowing-keystone-xl-route/2014/02/19/5601e916-99a7-11e3-b88d-f36c07223d88_story.html.

[iv] TransCanada. (2013). supra note 3; 350.org. (2014). supra note 1.

[v] New Keystone XL Pipeline Application. U.S. Department of State http://www.keystonepipeline-xl.state.gov/.

[vi] 42 U.S.C.A §4332 (C).

[vii] U.S. Dept. of State. supra note 5.

[viii] Thompson et. al. v. Heineman, CI 12-2060 (Dist. Ct. NE. Feb. 19, 2014); The Crawford Family Farm Partnership v. Transcanada Keystone Pipeline, Order pertaining to No. 13-0886. (Tex. Jan. 7, 2014).

[ix] Crawford. (2014). supra note 8.

[xi] Saul Elbein. Judge upholds eminent domain for pipeline in Texas. New York Times. (Aug. 12, 2013). http://www.nytimes.com/2012/08/24/us/texas-judge-rules-transcanada-can-seize-pasture-for-keystone-xl.html.

[xiii] 363 S.W.3d 192 reh’g denied, 381 S.W.3d 465 (Tex. 2012).

[xiv] Id.

[xv] Laurel Brubaker Calkins. Transcanada asks Texas Supreme Court to skip keystone review. (Feb. 7, 2014). http://www.bloomberg.com/news/2014-02-07/transcanada-asks-texas-supreme-Court-to-skip-keystone-review-1-.html.

[xvi] Texas Natural Resources Code § 111.002 (2). http://law.onecle.com/texas/natural-resources/111.002.00.html.

[xvii] Crawford Family Farm P’ship v. TransCanada Keystone Pipeline, L.P., 409 S.W.3d 908 (Tex. App. 2013), reh’g overruled (Sept. 17, 2013).

[xviii] Crawford. (2014). supra note 8.

[xix] Thompson. (2014). supra note 8.

[xx] Brad Plumer. Five take-aways from State Department’s review of Keystone XL pipeline. Washington Post. (Jan. 31, 2014). http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/31/four-takeaways-from-the-state-departments-review-of-the-keystone-xl-pipeline/.

[xxi] Neb. Const. Art. IV, § 20.

[xxii] Thompson. (2014). supra note 8.

[xxiii] Elbein. New York Times. (2013). supra note 11.

[xxiv] Steven Mufson. Keystone’s southern leg to begin transporting oil to U.S. Gulf coast. Washington Post. (Jan. 21, 2014). http://www.washingtonpost.com/business/economy/oil-to-begin-flowing-in-southern-leg-of-keystone-pipeline/2014/01/21/ffe35abc-82bb-11e3-bbe5-6a2a3141e3a9_story.html.

[xxv] Bernstein. Washington Post. (2014). supra note 3.

[xxvi] U.S. Dept. of State. supra note 5.

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