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Heineman’s Pipeline Victory Shows Red State Environmentalism

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Nov. 22 (Bloomberg) -- Many Americans hadn’t heard of Nebraska Governor Dave Heineman until his sparsely populated state blocked a $7 billion Canadian oil pipeline.

“We’ve certainly been getting a lot of national attention we don’t normally get,” Heineman, a 63-year-old Republican, said in an interview.

Heineman managed to delay construction of the 1,661-mile (2,673-kilometer) Keystone XL pipeline -- and prompted its owner, Calgary-based TransCanada Corp., to reroute the 15 percent that was to cross Nebraska and its environmentally sensitive Sandhills region. Today, lawmakers passed new pipeline rules and an environmental review of alternative routes through the state, which Heineman approved immediately.

“This will be their top priority until this project is complete,” Heineman said, referring to the state’s Department of Environmental Quality, at a signing ceremony in Lincoln.

A conservative stronghold that hasn’t been carried by a Democratic presidential candidate since 1964, Nebraska joined environmentalists, celebrities and scientists in opposing the pipeline. They expressed concern that an oil leak could foul the Sandhills or the Ogallala Aquifer that runs underneath and provides drinking water to 1.5 million people.

Heineman’s campaign against the closely watched project burnished his reputation as a maverick not afraid to embrace nontraditional causes. Wielding a mixture of fiscal conservatism and Prairie populism, the governor is also credited with helping his state emerge from the recession largely unscathed.

Low Unemployment

Nebraska had the nation’s second-lowest unemployment rate in September at 4.2 percent, behind only North Dakota, according the Bureau of Labor Statistics, when the national rate was 9.1 percent. As other states lost jobs, company headquarters and young families during the economic downturn, Heineman’s state retained them. Since he took office, Nebraska has the ninth-strongest state economy, according to Bloomberg Economic Evaluation of States index data.

“The governor has led efforts to pursue moderate growth in state government spending in Nebraska, which has allowed the state to lower taxes,” said Eric Thompson, director of the Bureau of Business Research at the University of Nebraska, in an e-mail. “This is one reason Nebraska budget deficits were not as extreme after the 2008-2009 recession as in other states.”

Special Session

Heineman blocked the pipeline project by calling the Nebraska Legislature into special session as a December deadline approached for the U.S. State Department to issue a decision on a permit. He urged senators to enact a law giving him, or a state agency, control over the pipeline’s path.

Nine days later, federal officials ordered TransCanada to find alternative routes through Nebraska.

“When he called the special session, guess what? Everybody had come to the table to solve the problem,” said former Nebraska Governor Mike Johanns, now one of the state’s two U.S. senators. “I’m not sure that would have happened six months ago. In fact, I’m very confident it would not.”

The delay followed a three-year environmental review process that many, including Heineman, believed would end in the company receiving a permit. Officials in other states, including South Dakota, Montana, Texas and Oklahoma, embraced the project. The pipeline, when completed, would carry 700,000 barrels of oil a day from Alberta’s tar sands to refineries on the Gulf of Mexico.

‘Education Process’

“We were going through an education process in Nebraska,” Heineman said in an interview. “They were having a different fight at the federal level with a Democratic president who had to choose between two of his core constituencies -- labor unions and environmentalists.”

A delay in pipeline construction isn’t politically risky for Heineman, particularly since the number of jobs the project would bring to Nebraska is in dispute, said Michael W. Wagner, a political science professor at the University of Nebraska.

“Unions are not among Governor Heineman’s core supporters, so the risk of some missed job opportunities in a state with low unemployment is not likely to come back to haunt him,” Wagner said by e-mail.

Heineman, who was treasurer for almost seven years and lieutenant governor for about three years, became the state’s 39th chief executive in January 2005 after his predecessor, Johanns, was chosen for U.S. Agriculture Secretary by President George W. Bush.

Economic Crossroads

The state’s economy was at a crossroads. Nebraska ranked 45th in terms of its tax burden, and young skilled workers were leaving in droves. The Cornhusker State, with a population of 1.8 million in 2010, ranks 38th nationally in number of residents and 45th in the number of people per square mile, according to the U.S. Census Bureau.

A West Point graduate who says he enjoys ironing his own shirts, Heineman used his influence in Nebraska’s unicameral legislature -- a single nonpartisan house, the only such body of its kind in the country -- to boost the economy.

“He’s advanced his agenda with quite a bit of skill compared to most governors around the country and in Nebraska history,” Wagner said in a telephone interview.

In 2007, Heineman signed the largest tax-relief bill in the state’s history, reducing income, sales and property taxes and eliminating the so-called marriage penalty in income taxes. The governor credits that measure with reducing the state’s tax burden to 29th from 45th.

In 2008, an out-migration trend reversed itself, with more people coming to Nebraska than leaving for the first time since 1995, figures from the Tax Foundation show.

Keeping Young People

“We’re keeping our young people in our state for the first time ever,” Heineman said. “We’re seeing middle-class families come to Nebraska because we have jobs.”

A tax-credit program Heineman designed in 2005 encouraged businesses to invest $5.9 billion in Nebraska, creating almost 20,000 jobs, said Patty Wood, marketing director for the Economic Development Department.

Heineman also won praise from farmers for signing trade agreements with Taiwan and Cuba for Nebraska wheat, soybeans, bio-plastics made from corn and other products.

Growth brought challenges. In 2010, Heineman opposed legislation to allow continued funding of prenatal care to illegal immigrants. The Hispanic population grew to 9.2 percent in 2010, from 5.5 percent in 2000, according to the Census Bureau.

Governors’ Chairman

Taking notice of Heineman’s economic successes, his peers at the National Governors Association tapped him to become the organization’s chair in July, where he introduced his signature initiative, “Growing State Economies.”

“Economic growth is the most important initiative every governor faces,” Heineman said in Nashville on Nov. 14 at the second of four economic summits he’s leading.

Heineman’s fiscal credentials helped him upset one of Nebraska’s most revered figures, former University of Nebraska football coach Tom Osborne -- a sitting congressman at the time -- in the Republican primary for governor in 2006. Heineman went on to win his first full term with 74 percent of the vote.

Heineman’s constituents stop him in airports to air their grievances. He said he stays up at night to read letters and e-mails.

‘Here’s My Number’

“I’ll get a three-page letter and the last paragraph says ‘I know you’ll never read this, but here’s my number,’” Heineman recalled in an interview. “I love to call those people because the first thing they say is, ‘Governor, I didn’t mean everything I said in the letter about you.’”

In January, about two-thirds of Nebraska voters approved of his performance and 23 percent disapproved, according to a poll conducted by Raleigh, North Carolina-based Public Policy Polling. The poll had a margin for error of plus or minus 3.1 percentage points. In results released Oct. 12, the approval rating fell to 57 percent, with disapproval rising to 29 percent; the margin for error was plus or minus 3.6 percentage points.

“But in a land of unpopular politicians, that still makes him the second-best-liked of the 37 governors polled this year,” pollsters said in a statement, behind only Colorado’s John Hickenlooper.

Not everyone’s happy with how Heineman handled the three-year debate over the Canadian pipeline proposal.

Meeting With TransCanada

“We understand he began meeting with TransCanada in 2008,” said Jane Kleeb, executive director of Bold Nebraska, a group that opposes the pipeline. “As our top elected official, he should have said we need some regulations in place to make sure we have a say in where these pipelines go.”

In October 2010, Heineman sent a letter to Secretary of State Hillary Clinton expressing concern that the pipeline could contaminate the aquifer.

Laws in other states where the pipeline is proposed, including Montana and South Dakota, allow officials to review the route. South Dakota gave the go-ahead to Keystone XL last year, while Montana is withholding its decision until federal officials decide whether to issue a permit.

Heineman, who won election to a second term last November, didn’t mention the pipeline in his inaugural address. He is limited to two terms under Nebraska law.

The pipeline bills approved today include a measure that directs the state’s Environmental Quality Department to conduct an environmental review of alternative routes and a bill that sets up a review process for future oil pipelines. The State Department must still issue a permit for the pipeline to be built.

Heineman said he’s looking forward to sitting next to President Barack Obama at a black-tie dinner the president will host in February during the governors association’s winter meeting.

“We’re going to have a lot of interesting things to talk about,” Heineman said. “The pipeline will be one of them.”

David Heineman at a Glance

Birthdate: May 12, 1948, in Falls City

Spouse: Sally Ganem

Residence: Lincoln

Family: Sam Heineman, 27

Religion: Methodist

Education: Wahoo High School (where he served as student council president), U.S. Military Academy at West Point, 1970.

Career: Chief of staff to U.S. Representative Hal Daub, 1983-1988; Fremont City Council 1990-1994; state treasurer, 1994-2001; appointed lieutenant governor in October, 2001, and elected to the post in 2002; replaced his predecessor, Mike Johanns, as governor in January, 2005, when Johanns became U.S. Agriculture Secretary. Heineman was elected to his first full term in 2006 and won re-election in 2010.

Military service: U.S. Army 1970-1975.

To contact the reporter on this story: Jennifer Oldham in Denver at joldham1@bloomberg.net

To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net