TransCanada Pipeline Threatened by Proposed Nebraska Re-Routing

Nebraska Governor Calls for Session on Keystone Pipeline
Construction of the Keystone XL Pipeline in Stittsville, Ontario. Alex Pourbaix, president of energy and oil pipelines at TransCanada Corp., told Nebraska lawmakers in an Oct. 18 letter that moving the route at this state would be “impossible.” Photo: TransCanada Corp.

TransCanada Corp.’s Keystone XL pipeline may be threatened by legislation in Nebraska that would re-route the $7 billion project designed to bring Canadian crude to refineries on the Gulf of Mexico.

At a special session on Nov. 1, Nebraskan lawmakers will consider a bill aimed at forcing Calgary-based TransCanada to move the pipeline to the state’s eastern edge, a step that company officials said may put the project in jeopardy.

Ranchers in Nebraska and environmentalists have raised concerns that the pipeline’s path in the state across a freshwater aquifer and marshy terrain pose unacceptable risks in the event of an oil spill. The state’s governor and both U.S. senators oppose the project’s route.

“There will be a greater-than-normal pressure from the public to do something that moves the pipeline,” Chris Langemeier, a senator who heads the committee that will weigh any bills proposed in the session, said in an interview yesterday.

A move to change the route may not withstand a court challenge, Speaker of the Legislature Mike Flood said in an Oct. 19 letter to colleagues. Flood also cast doubt on whether a law giving the state authority over pipeline routes would be able to force TransCanada to change the path of the Keystone XL.

Flood said in the letter that he doesn’t support the move because it could delay the project by 16 months.

An interruption of that length could kill the 1,661-mile (2,673-kilometer) pipeline, said Mark Lewis, a specialist in pipeline law at Bracewell & Giuliani LLP in Washington.

‘Delayed to Death’

“Sometimes, these projects just get delayed to death,” Lewis said in an interview. “If the legislation is eventually reversed by a court, it may be a hollow victory for TransCanada. The risk of delay from the legislation is very serious.”

A delay could put the pipeline project in doubt, Shawn Howard, a TransCanada spokesman, said. The company can’t move the route legally, he said.

“You can’t ask us to change the route and act like it’s just changing an order on a menu,” Howard said in a telephone interview yesterday. “A new route would start the entire process right from the beginning. This is what professional activists who have been opposing Keystone want. They want to delay, to tie it up through legal means.”

Pipeline Protested

More than 1,200 activists were arrested in protests against the pipeline at the White House. Many of the protesters criticized the process of Canadian crude extraction, which causes greater greenhouse-gas emissions than most other types of oil production.

The U.S. State Department, which has authority over the pipeline because it crosses an international border, found in an environmental impact study in August that the line would cause “no significant impacts to most resources.” The State Department has indicated it expects to decide on whether to grant a permit for the pipeline by the end of the year, although a final decision could revert to President Barack Obama.

The other five states the pipeline would traverse -- Montana, South Dakota, Kansas, Oklahoma and Texas -- have either approved the route or have leaders who have expressed support for it.

The current route of the pipeline through Nebraska is opposed by Republican Governor Dave Heineman, Democrat U.S. Senator Ben Nelson and Republican U.S. Senator Mike Johanns.

More Authority Sought

Heineman said Oct. 24 that he will call the special session to “have a thoughtful and thorough public discussion about alternative solutions that could impact the route of the pipeline in a legal and constitutional manner.”

State Senator Annette Dubas, who has met with TransCanada officials and sought for two months to gain legislative support for a special session, said she has crafted a bill that would give Nebraska’s Public Service Commission authority to approve crude-oil pipelines, which it presently lacks.

A legal analysis completed for the senator yesterday concluded that it could withstand a court challenge, she said in a telephone interview.

“It’s very important that we have a state agency that is able to interact with these kinds of projects on behalf of the citizens in Nebraska,” she said.

‘Impossible’ Move

Alex Pourbaix, president of energy and oil pipelines at TransCanada, told Nebraska lawmakers in an Oct. 18 letter that moving the route at this stage would be “impossible.”

TransCanada offered in the letter to put up a $100 million performance bond that it would make available to the state if it fails to clean up a spill adequately. The company also offered to encase a pump station and sections of the pipeline in concrete or other protective materials in Nebraska’s Sand Hills region, an area filled with grass-covered, dune-like sand where the water table is near the surface.

Pourbaix and Robert Jones, TransCanada’s vice president for Keystone, told Dubas, Langemeier and Flood in an Oct. 11 meeting that re-routing the pipeline would lead to a delay of several years due to new environmental studies, according to the Associated Press.

TransCanada fell 1.1 percent to C$43.46 at the Oct. 25 close yesterday in Toronto. The company’s shares have risen 14.4 percent this year.

Votes Needed

For a bill to reach the legislature, it would first have to pass through the eight-member Natural Resources Committee, headed by Langemeier, who said he supports the pipeline yet believes most Nebraskans find its route unacceptable.

The legislature would take up any proposal that emerges from the committee, and 25 of 49 lawmakers would have to approve it for it to pass. If the bill has an emergency clause, meaning it would take effect immediately, it would require 33 votes, Senator Ken Haar, a pipeline opponent, said in an interview.

One impediment to the session may be a lack of focus on a solution, Curt Bromm, who served as the legislature’s speaker from 2002 to 2004, said in a telephone interview.

“From what I’ve read and seen, it doesn’t sound like there has been a clear path that has been agreed-upon,” Bromm said. “There doesn’t seem to be a huge consensus on what to do, or whether it’s too late at this point.”

The complexity of the laws being considered and the emotions of pipeline supporters and opponents make it difficult to know what the session will accomplish, Kermit Brashear, a former speaker for the legislature, said in a telephone interview yesterday.

To predict the outcome, Brashear said, “would take a prophet.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE