Keystone XL's Path Up for Grabs as Nebraska Commission Weighs In

(Bloomberg) -- The future of TransCanada Corp.'s Keystone XL pipeline could hinge on whether a Nebraska commission believes the project is in the public's interest or a private land grab as property owners claim.

More than 90 percent of TransCanada's preferred 270 mile route through the state would cut across privately owned land, as would an alternate route, company project manager Paul Fuhrer testified Monday during the first day of a hearing in Lincoln, Nebraska.

To gain approval for one of its proposed paths, Keystone lawyers will need to convince the Public Service Commission, made up of four Republicans and one Democrat, and overcome vehement opposition from dozens of landowners, environmental conservation groups and Native American tribes.

The elected commission, created under the state's constitution, began hearing testimony in what's scheduled to be a week-long hearing.  Much of Monday's hearing was dominated by testimony from company executives on the pipeline's maintenance details, including responsibility for cleanup, restoration and removal once the conduit reaches its life expectancy.

A ruling from the panel is due no later than Nov. 23. Whether the pipeline gets built, however, may ultimately rest upon what the state's seven-member Supreme Court decides as the loser is likely to appeal.

“The pipeline is not in the public interest,” activist Jane Kleeb, president of the environmental advocacy group Bold Alliance who was elected last year as the state's Democratic Party chair, said in an interview prior to Monday's hearing. “This will be a private, foreign corporation that would be using eminent domain for private gain.”

$8 Billion Project

Keystone XL has been in the planning stages for nearly 10 years. The conduit would carry heavy crude from Canada's oil sands region in Alberta to a terminal more than 1,100 miles away in Steele City, Nebraska, where it would connect with an already existing network leading to Gulf Coast refineries.

Labor unions are backing the $8 billion project for its promise of jobs.

TransCanada and President Donald Trump have promoted the project as one that will provide employment and boost the state's economy. Nebraska will benefit from as many as 4,500 jobs during the two-year construction period, and $12 million in property tax revenues, according to the Calgary-based company.

Environmental groups sued over its original path through the state because it would have traversed Nebraska's environmentally sensitive Sand Hills region. That route was soon abandoned for one charted by the state's now-former governor, Dave Heineman, and TransCanada, provoking lawsuits contending only the commission could approve its path.

While the pipeline company ultimately agreed to apply to the Public Service Commission, the Obama administration rejected TransCanada's request for permission to cross the U.S.-Canada boarder, effectively killing the project until Trump revived it earlier this year.

Despite the delays, during which crude oil prices have tumbled, TransCanada maintains that the pipeline still has commercial support.

Eminent Domain

Some landowners who fought the previous pipeline battle have returned for this one. The commission allowed 94 landowners to intervene in the hearing without limitations, ruling in March that they “have real property interests that will be directly impacted” by the pipeline's route.

Kleeb, alongside groups such as the Sierra Club and 350.org, have been working with landowners, highlighting the issue of eminent domain. They argue that its unnecessary and unfair to take private property for the pipeline using eminent domain, particularly given certain liability provisions the company is putting into landowner easements. TransCanada says 91 percent of landowners in the state have agreed to allow the project on their land.

David Domina, a lawyer for landowners, questioned TransCanada executive Tony Palmer during Monday's hearing about the pipeline's complex corporate ownership structure. Palmer said he's the president of an intermediate entity called TransCanada Keystone General Partner LLC, which holds less than 1 percent of the company seeking the permit. Domina also questioned Palmer on who bears responsibility for maintenance or removal should the conduit become obsolete.

TransCanada still hasn't made a final decision on whether to push ahead with the Keystone XL project. Domina asked Palmer whether that meant the company would use the commission's ruling to “make better investment decisions?”

“No sir,” Palmer replied. Asked if selling the route was an option if the commission approves the application but TransCanada scraps the project, he said, “I don't think that I could fulsomely respond with a yes or no answer.”

The case is In re Application of TransCanada Keystone Pipeline LP, Application No. OP-0003, Nebraska Public Service Commission (Lincoln).

--With assistance from Meenal Vamburkar and Kevin Orland

To contact the reporter on this story: Andrew Harris in Washington at aharris16@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Sophia Pearson, Andrew Martin