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Keystone XL Day of Reckoning Comes to Nebraska After 9-Year Pipeline Fight

Updated on
  • Ruling due to come on heels of major TransCanada spill
  • Decision could be a death knell, or just a spur for more suits

TransCanada Wins Keystone XL Approval in Nebraska

After nine years, two presidential decisions, multiple lawsuits and environmental protests, TransCanada Corp. is about to learn whether it will receive the final state permit needed to build the Keystone XL oil pipeline.

The company will find out today if its Keystone XL pipeline is finally, after months of indecision, able to traverse Nebraska when state regulators give a final thumbs up or down on whether the project is in the state’s interest. If it’s a yes, the decision could spur new legal action by foes; if no, the company may appeal in the courts. A third option, approval but with an adjusted route, could open further complications.

Meanwhile, a spill in TransCanada’s existing Keystone line in South Dakota on Thursday sparked new attacks by environmentalists who pointed to the event as something the state could expect if the project is approved. While the officials can’t factor pipeline safety or possible leaks into the decision under state law, it’s an awkward time for a perception problem to crop up.

"The timing of this outage is not very good from TransCanada’s standpoint,” said John Auers, executive vice president at energy consultant Turner Mason & Co. in Dallas, by telephone. “Theoretically, it should not have an impact in Nebraska. I think TransCanada will handle this spill very well, and get it up and running quickly. It could be a good indication that pipes are safe, and they can handle incidents.”

The spill occurred in Marshall County, the company said in a statement. The existing pipeline, which can carry about 600,000 barrels of crude a day from Alberta’s oil sands to the U.S. Midwest, is expected to remain shut while the company responds. TransCanada tentatively plans to restart the line Nov. 23, a person familiar with the matter said Friday.

The 1,179-mile, $8 billion XL extension now before the Nebraska public service commission is intended to carry crude oil from Hardisty, Alberta, through Montana and South Dakota to a Steele City, Nebraska, junction where it would connect to pipelines leading to refineries near the Gulf of Mexico, the beating heart for the nation’s energy wealth.

President Barack Obama’s administration rejected TransCanada’s bid for permission to build across the U.S. border in 2015. President Donald Trump vowed to reverse that determination and, in January, invited the company to reapply. Approval was quickly granted. The final step was state approvals, and Nebraska was a bar to construction, which would take about two years, the company has said.

In Nebraska, the XL project has the support of the state’s governor, Republican Pete Ricketts, its chamber of commerce, trade unions and the petroleum industry.

With a positive ruling from Nebraska in hand, TransCanada would still have to formally decide to proceed with construction on the line. The company’s open season for gauging producers’ interest closed late last month, and TransCanada executives have indicated that they’ve secured enough shipping commitments to make the project commercially worthwhile.

‘Quite Encouraged’

“We’re quite encouraged by the results we have seen,” Paul Miller, head of TransCanada’s liquids pipeline business, said on the company’s third-quarter earnings call.

If the project is denied, the company could challenge the decision in court, opening yet another battleground for a pipeline that’s been on TransCanada’s agenda since 2008. and in the sights of environmentalists. On Thursday, the project’s foes didn’t hesitate to link the spill in South Dakota and the Nebraska decision.

The third option -- approval, but through an alternative route -- could throw more uncertainty into the mix for Keystone XL.

In its post-hearing brief, TransCanada told the panel its "preferred route was the product of literally years of study, analysis and refinement by Keystone, federal agencies and Nebraska agencies," and that no alternate route, even one paralleling the Keystone mainline, was truly comparable.

XL’s route flexibility is also limited by where the pipeline exits South Dakota and enters Nebraska. Any "material" change to that path would require the approval of South Dakota’s Public Utilities Commission, according to the company’s PSC filing.

Continuing the Fight

On Thursday, environmentalists vowed to continued their fight against XL.

"This is exactly the kind of disaster we can expect more of if Keystone XL is approved," May Boeve, executive director at the environmental activist group 350.org, said in a statement. "Whatever Nebraska commissioners decide on Monday, we’ll be ready for the work ahead to stop this and all new fossil fuel projects that threaten our communities and climate."

Michael Barsa, a professor of practice at Northwestern Pritzker School of Law, says the question of whether the pipeline serves the state’s public interest is tied irrevocably to safety issues.

“Pipelines leak. That’s just a fact of life,” Barsa said in a statement. “The real question is: Knowing that pipelines leak, does the public interest still support building one through Nebraska?”

Perhaps, he said, “it’s time for states like Nebraska to take a long-term view of what ‘public interest’ means.”

Deb Collins, a Nebraska state spokeswoman, said that under Nebraska law the regulators’ decision must be based on the evidence in the record. “There were more than 500,000 comments received for the record," she said.

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