Nebraska Ruling Throws Keystone XL Decision Back to State Department

The court case that the Obama administration cited last April in putting off a decision on the Keystone XL pipeline has concluded, lifting a key obstacle for a project that’s been in limbo for more than six years.

The Nebraska Supreme Court, overturning a lower court’s ruling, allowed the pipeline’s route through that state to stand. Landowners in Nebraska challenged Gov. Dave Heineman’s 2012 approval of the project. Four of the court’s seven judges sided with the landowners, agreeing that the state’s Keystone legislation was unconstitutional. (See an interactive map of the Keystone XL route.)

That number wasn’t enough: The state requires a supermajority of five judges to concur in order to strike down legislation. That means the State Department should now be clear to either approve or reject the controversial $8 billion project, which would carry crude from Canada’s oil sands in Alberta, along with some from North Dakota’s Bakken shale, down to refineries on the Gulf Coast.

While the southern leg of the project has already been built, the northern side awaits U.S. approval because it crosses the boundary with Canada. Proponents say the project will create jobs and boost North American energy security; detractors say it furthers dependence on fossil fuels and hinders progress in addressing climate change.

“The decision is now in Pres. Obama’s hands,” said a statement from Bold Nebraska, and activist group that opposes the pipeline. “This is a bad day for property rights in Nebraska.”

The American Petroleum Institute welcomed the decision. “President Obama has no more excuses left to delay or deny the Keystone XL pipeline,” said API President and CEO Jack Gerard.

The development comes in the midst of another Congressional attempt to secure approval of the 1,179-mile (1,897-kilometer) pipeline. The House votes Friday on a bill that would greenlight Keystone’s northern leg, and the Senate will begin debate on its version of the bill next week.

Passage of a bill in the now GOP-controlled Congress seems assured, but then so is a presidential veto that the White House promised this week, criticizing lawmakers’ attempt to circumvent the existing process. (See related post: “Keystone XL Veto Threat: Does ‘No’ Really Mean No?“)

The State Department said last year it would resume the permit process for Keystone “once factors that have a significant impact on determining the national interest of the proposed project have been evaluated.”

Energy analysts Clearview Partners said in a research note that the Nebraska decision could open the way for the State Department to act “rather quickly.”

“Although the President has recently made comments that appear more skeptical of the pipeline’s economic benefits, we still do not believe he has closed the door to an affirmative [National Interest Determination],” Clearview said. “He has consistently said that advocates have overstated the benefits, not that the project is wholly devoid of them.”

The recent plunge in oil prices offers a double-edged sword when it comes to evaluating those benefits. On one hand, low prices would seem to undercut the benefits of a project meant to boost supply for Gulf Coast refineries that are built to handle the heavier crude that comes from Alberta. However, the expanded capacity from Keystone could help oil companies ramp up production even at lower prices, because it would offer a lower delivery cost than rail or trucks. (See related story: “Do Plummeting Oil Prices Weaken Case for Keystone XL Pipeline?“)

Then, too, Clearview noted that the State Department “quietly signed off” last year on another southbound pipeline project, Enbridge’s Alberta Clipper expansion.

“Right now this is not a debate between Canada and the US, it’s a debate between the President and the American people, who are overwhelmingly supportive of the project,” the Government of Canada, which supports Keystone XL, said in a statement Friday. “We will not comment on the American political process.”

On Twitter: Follow Christina Nunez and get more environment and energy coverage at NatGeoGreen.