Keystone Backers Find Nebraska Judge Not Only Hurdle

Just when it looked like the Keystone XL pipeline cleared a key U.S. State Department hurdle, a Nebraska judge showed this week that obstacles remain.

There may be others, too. The Environmental Protection Agency might protest conclusions in a U.S. report. A legal challenge tied to endangered species such as the interior least tern may trip up the project. Secretary of State John Kerry may emerge as an ally in making the case against the project.

“We remain optimistic that it’s going to get rejected,” Tiernan Sittenfeld, a lobbyist for the League of Conservation Voters in Washington, said at a news conference this week.

Pipeline foes are reviving legal and political arguments to block backhoes from digging a trench across Montana, South Dakota and Nebraska, where Keystone would connect to a pipeline that ends along the Gulf Coast, delivering tar sands crude from Canada to U.S. refineries.

The final decision will be made by President Barack Obama, who must determine whether TransCanada Corp.’s pipeline is in the nation’s interest as environmentalists in his own party urge him to reject it.

“The biggest energy geopolitical decision is in one man’s lap,” Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin, said in an interview. “That’s Obama.”

The $5.4 billion project may be slowed by this week’s ruling of a Nebraska judge invalidating a law that let Republican Governor Dave Heineman approve the route. The judge said only the state Public Service Commission had that power.

Appeal Vowed

Nebraska Attorney General Jon Bruning said he will appeal. David Domina, the Omaha-based lawyer who sued the state and is a Democratic candidate for U.S. Senate in Nebraska, said it may take at least 10 months to rule on the appeal.

If the landowners prevail, the Nebraska Public Service Commission would have to review and approve Keystone. That process may take at least seven months.

“I think it’s hard to argue this isn’t going to have any effect on Washington’s process,” said Anthony Swift, an international attorney of the Natural Resources Defense Council.

In Washington, a State Department report released Jan. 31 found the pipeline wouldn’t have a major impact on greenhouse-gas emissions, a victory for oil executives and Canadian officials who back Keystone to develop Alberta’s energy-rich resources. Obama has said that the project would only be in the U.S. interest if it doesn’t add to emissions that scientists say are at the heart of climate change.

2,000 Pages

The department is now weighing Keystone’s environmental, diplomatic and economic impacts. As part of that process, eight federal agencies will weigh in on the 2,000-page report assembled over almost two years. Any of those agencies has the right to object, adding to a 90-day process. A year ago, the EPA said a draft environmental review was insufficient.

Swift said he hoped the EPA would challenge assumptions in the report.

Kerry will send Obama a recommendation on Keystone and the national interest. As secretary and former Democratic senator from Massachusetts, Kerry has spoken about threats greenhouse gases pose to the climate. In a speech in Jakarta, Kerry called climate change a “weapon of mass destruction.”

He hasn’t said publicly what he thinks of the pipeline.

Opponents also will use courts to delay Keystone.

Jim Murphy, a senior counsel at the National Wildlife Federation, an environmental group in Reston, Virginia, said groups probably will seek to show that the impact statement prepared by the State Department failed to satisfy requirements of federal environmental laws.

Terns, Cranes

One issue would be Keystone’s impact on endangered species like the whooping crane and interior least tern, Murphy said.

Workers might disturb the habitat of the tern, a small shorebird that hovers and dives into water, along the Yellowstone River in Montana or the Platte, Loup and Niobara rivers in Nebraska. Dams and reservoirs have already eliminated most of the bird’s habitat.

The crane, the tallest bird in North America whose population once fell as low as 20, draws visitors to Nebraska when it stops along the Platte during its migration in the U.S. spring and fall.

The environmental review said that Keystone wouldn’t have an adverse impact on endangered species along its route.

“We feel the conclusions were wrong,” Murphy said.

Environmental Cases

Federal courts may block TransCanada from starting construction until environmental cases are decided, said Lowell Rothschild, a Washington-based environmental attorney at Bracewell & Giuliani LLP. Such delays are unusual in these types of cases, he said.

The pipeline’s already built southern leg faces court challenges, too, from a handful of Texas farmers fighting the use of eminent domain. So far, the courts have ruled for TransCanada, and a portion connecting Cushing, Oklahoma, with Texas coastal refineries went into service in January.

A 11th-hour appeal by the National Wildlife Federation, the Sierra Club in San Francisco and 14 other environmental organizations also may slow a final decision.

The groups say the State Department shouldn’t consider Keystone in a vacuum. They argue that the project’s environmental impact should be viewed along with a proposed expansion of Enbridge Inc.’s Alberta Clipper, because producers want both pipelines to expand development of the oil sands.

Contractor Conflicts

Keystone would be delayed if the State Department accepted the group’s formal request for additional environmental review. Ethan Strell, associate director of Center for Climate Change Law at Columbia University in New York, said a petition may be the foundation for a legal challenge.

Shawn Howard, a spokesman for TransCanada, called the petition a baseless effort to block the pipeline.

Environmental groups including the Sierra Club and Friends of the Earth also are pushing the State Department to toss out its review over conflict-of-interest concerns about the contractor that wrote the report.

Environmental Resources Management didn’t disclose that a subsidiary worked on a project jointly owned by TransCanada and Exxon Mobil Corp. until after it had landed the contract. The company said it didn’t receive any money from TransCanada.

Kerri-Ann Jones, the assistant secretary of state whose office oversaw development of the review, said officials followed “rigorous guidelines” in selecting ERM.

“We are confident that we have used them appropriately and that we have made sure that there were no conflict of interests at play,” she said at a Jan. 31 press conference.

In Texas, landowners’ cases are pending in state and federal courts, including one before the Texas Supreme Court. The state high court showed interest in farmer Julia Trigg Crawford’s challenge when it ordered TransCanada to respond to her petition for a hearing last month.

Crawford claims that TransCanada, as a foreign company transporting oil produced out of state, isn’t entitled to condemn her land for private use.

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