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January 13th, 2015 — By William G. Blake, CRE — In Articles

“It Ain’t Over ‘Til It’s Over:” Nebraska Supreme Court Rules (or Maybe Not) on the Validity of the TransCanada XL Pipeline Route Approval Through Nebraska

Probably no appeal to the Nebraska Supreme Court has been watched more closely by more people than the challenge to the statutory routing process for the proposed TransCanada XL Pipeline.

On January 9, 2015, the Nebraska Supreme Court issued its decision, or lack thereof, in a sixty-four page opinion.[1] By state constitution, the Nebraska Public Service Commission has plenary power over all common carriers.[2] However, the Legislature adopted a process in 2012 to specifically address the route of the proposed XL Pipeline through Nebraska. The Legislature allowed the Governor, after input from the Nebraska Department of Environmental Quality, to approve the route.[3] The proposed route was studied and the Governor issued approval. A group of citizens then challenged the process, claiming that approval was unconstitutionally taken away from the Public Service Commission and delegated to the Governor. They made their challenge on the basis of their standing as taxpayer citizens, claiming the approval process was an unlawful expenditure of public funds. Their standing was challenged, but the trial court found they had standing as taxpayers, that the XL Pipeline would be a common carrier, and that the statutory approval process was unconstitutional. The decision was immediately appealed to the Nebraska Supreme Court. The Court’s hearing process was expedited, but many weeks went by without a decision being issued. We now know the reason for the delay. Unfortunately, we learn little else from the decision. It raises more substantive and procedural questions than it answers, exhibiting an unprecedented amount of acrimony among our Nebraska Supreme Court Judges.

Pursuant to the Nebraska Constitution, a statutory enactment cannot be declared unconstitutional without five of our seven judges so ruling. However, in the challenge to the XL routing process, four of the judges agreed that the plaintiffs had standing and that the courts therefore had jurisdiction to hear the case. The four also agreed that the statutory approval process was unconstitutional. However, the other three judges dissented on the question of standing and refused to address the merits of the case. While no judge stated a vote in favor of the constitutionality of the process, the four member majority was not enough to declare the process unconstitutional. Therefore, the legislation and the proposed route of the pipeline through Nebraska would appear to be approved by default. The three member dissent accused the other four members of reaching an absurd result, but the four members were quite clear that they thought the dissenting members had shirked their judicial duty and forced an absurd result. The two camps could not even agree on whether to refer to the four members as a majority or a plurality.

For condemnation lawyers, the most important part of the opinion is that the four members fairly clearly ruled that eminent domain cannot be exercised by just any company that owns a pipeline. Prior case law in Nebraska, as well as our statute authorizing eminent domain for pipelines, had made it appear that privately owned pipeline companies could exercise eminent domain for private use pipelines, and in fact case law had approved condemnation proceedings for such pipelines. However, the court carefully considered the history of pipeline regulation in the state and recognized that the prior decisions allowing private pipeline companies to exercise the power had been issued at a time when it was thought that the federal government had preempted state regulation of interstate pipelines. The court, referring to a prior opinion[4], stated that:

“[the] argument that a private carrier could exercise the right of eminent domain in this state for a non-public purpose….is simply wrong….[T]he reason common carriers can exercise the right of eminent domain lies in their quasi-public vocation of transporting passengers or commodities for others. A citizen’s property may not be taken against his or her will, except through the sovereign powers of taxation and eminent domain, both of which must be for a public purpose. Eminent domain is the State’s inherent power to take property for a public use.” (Court’s italics).[5]

The court then clarified what is meant by the term “common carrier”, finding assistance from Texas case law and stating that statutes authorizing use of eminent domain power by common carriers do not include the owner of a pipeline built for that owner’s exclusive use. “Under the Nebraska Constitution’s limitation on the power of eminent domain, pipeline carriers can take private property only for a public use. That minimally means that a pipeline carrier must be providing a public service by offering to transport the commodities of others, who could use its service, even if they are limited in number.”[6]

The Court did not appear to be comfortable with the conclusion that the XL Pipeline would be a common carrier, but the district court had so concluded, and the parties did not contest the issue.

Given the rather perplexing result and the nature of the matter, this will likely not be the end of the litigation. News services were quick to declare Nebraska’s approval of the XL, and proponents urged Congress and/or the President to do the same. However, opponents were just as fast in arguing that they are not ready to give up. TransCanada still needs easements through more than 100 properties in Nebraska, and must file condemnation before its routing permit expires. The permit will expire on January 22, 2015. Any effort to condemn can be expected to be challenged by somebody who has standing as a property owner in the path of the proposed route. Would such challenge gain the fifth court vote to declare the siting unconstitutional? Can the Governor extend the siting permit to avoid the two-year window of opportunity? How will this affect the political battle in Washington, D.C. over Federal approval of the pipeline?

As Yogi said: “It ain’t over ’til it’s over.”

William G. Blake
Baylor, Evnen Law Firm
Lincoln, Nebraska

Endnotes


[1] Thompson v Heineman, 289 Neb. 798 (2015) https://supremecourt.nebraska.gov

[2] Nebraska Constitution, Article IV, Section 20.

[3] Nebraska Unicameral, L.B. 1161 (2012).

[4] City of Bayard v North Central Gas Co., 164 Neb. 819, 83 N.W.2d 861 (1957).

[5] Thompson v Heineman, at 843.

[6] Id. at 845.