The Extra Large Loophole


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By Julie Myers

Nebraska’s Eminent Domain Bonanza

Until 2011, oil pipeline companies developing big projects through Nebraska had the same right as the state itself to declare eminent domain and take private property from individuals. The only question was how much they had to pay for the land, not whether they could have it. They received this right from a Nebraska law.1

This law (by itself) was a wholesale grant of power, because whether it was in the public interest—the crucial justification for the government’s right to seize an individual’s private property—did not have to be proved. Instead, the law presumed that oil pipelines carrying hazardous materials are desirable, no matter where they might impinge on prior land uses; for example, Nebraska’s groundwater-dependent agriculture.

When TransCanada proposed to route its second pipeline through Nebraska’s permeable Sandhills, this government giveaway of land rights put private landowners in the intolerable position of supplicants trying to talk sense to a major corporation with over 4,000 employees and annual earnings of $4.8 billion, which is more than half the $7.1 billion budget for the State of Nebraska.2

Public outcry exploded and Nebraskans demanded that their elected officials wake up and protect a vast array of assets: productive land, an eye-popping amount of surface water and a huge share of our nation’s unpolluted groundwater.3

As a result, Governor Dave Heineman called a special session of the state legislature, and its Natural Resources Committee held packed hearings.

At these hearings Nebraskans spoke eloquently and intelligently about the path of the proposed Keystone XL through land and water they live and depend on.

Tim Taylor, veterinarian and fifth-generation rancher, testified, “I have come up with no way to incorporate the Keystone XL pipeline into my ranching business and at the same time be a good steward of our delicate land and the state’s precious water. Ranching in the Sandhills is a chess game where moves take years to plan and results may not be seen for a generation. In this game, the ground and its water are kings and no success can ever come from putting those pieces in peril.”4

Nebraskans had done their research and testified to a number of abuses from TransCanada’s use of unrestricted power during the pipeline’s development. Susan Dunavan, landowner of pastureland and native prairie, was one of many who testified: “I don’t think any landowner should have to go through what the landowners have for the Keystone XL pipeline.”5

TransCanada’s Unwritten Promise

During these public hearings TransCanada fought to prevent Nebraska regulation of oil pipelines.

First, the company aggressively promoted the view that regulation of oil pipelines was a federal matter, where states had no right to legislate. But when existing regulation in other states came to light, the company had to concede that Nebraska, like other states, could regulate oil pipeline routes.

The company then argued that the opportunity to legislate was long gone; that although Nebraska could have legislated the route of the KXL before it was proposed, a law passed now—in the final stages of the U.S. State Department’s review—might kill the project. Instead of backing down, Nebraska lawmakers took these concerns into account and bent over backward to propose efficient and rea- sonable processes.

Finally, in a last-ditch effort to exempt the KXL from impending legislation that would apply uniformly to all oil pipelines, TransCanada dropped a bombshell. It publically “promised” that it would reroute this particular project around the Sandhills, saying now there was no need for the kind of routing scrutiny that future projects would undergo. It is worth noting that this announcement came shortly after the U.S. State Department ordered TransCanada to work with Nebraska to explore a route that wouldn’t go through the Sand Hills and over the Ogallala Aquifer.6

The effect of TransCanada’s promise is hard to gauge, but soon after Nebraska’s legislature passed two pipeline bills, divided by a date. LB 4 was intended to have limited effect, applying to any project proposed before Nov. 23, 2011 (the “group” containing the KXL), while LB 1 applied to all future pipeline proposals.7

These laws placed the first Nebraska limits on oil pipeline developers and their use of eminent domain. But each law contained very different processes from the public’s point of view.

LB 4 gave the governor unbridled authority to approve or deny the KXL reroute within a month of receiving a report by Nebraska’s Department of Environmental Quality.8 There was no requirement that the governor even read the report.

LB 1 by contrast, was a stronger more balanced law.9 It gave future decisions to the Public Service Commission (PSC) and created detailed criteria for determining public interest, including compliance with state and local laws, impact from intrusion on natural resources, irreversible and irretrievable commitments of land areas (and connected natural resources), depletion of beneficial uses of the natural resources, impact on nearby orderly development and methods to minimize or mitigate any impacts.10 Under LB 1, future oil pipeline companies were applicants, not overseers, and did not acquire the right to condemn land unless, according to the above criteria, they had proved the project was in the public interest. Individual landowners could bring their own knowledge of their land and water to bear, and the public had a right to examine company evidence and dispute it. To further assist in making its decision the PSC was empowered to solicit Nebraska reports by Nebraska agencies, and the views of city and county government around the route.

Although the weaker of the two laws would apply to the KXL, the Sandhills seemed protected, even under LB 4, by TransCanada’s unwritten promise.

TransCanada Federal Lobbying Becomes Nebraska’s Problem

Then in December 2011, before the Nebraska Department of Environmental Quality could review the reroute and issue its report, Congress passed a federal law that TransCanada had lobbied for. It required the president to make a decision on TransCanada’s federal permit within 60 days, using the original route through the Sandhills. The president denied the permit, citing more time needed to explore a Nebraska reroute. TransCanada was free to reapply, but now, having missed its Nebraska legislative window for LB 4, the project would likely fall under Nebraska’s LB 1.

At this juncture, TransCanada could have submitted to Nebraska’s Public Service Commission process and reapplied for its federal permit. If it had, the State Department would have picked up where it left off to incorporate a Nebraska reroute. But instead of reapplying for its federal permit TransCanada delayed the reapplication for three months, lobbying to revise Nebraska law in order to remain under LB 4.

In April 2012 Nebraska’s lawmakers passed LB 1161, which not only gave TransCanada what it wanted, but also roped in all future pipeline applicants.11 Now everybody could have their project route decided by the governor. LB 1161 also explicitly added that the governor’s approval gives the pipeline company the immediate right to eminent domain.

If it’s any consolation, this sidelining of LB 1 may have been unintentional. Upon introduction by Sen. Smith, the stated intention of LB 1161 was simply to preserve the LB 4 process for the KXL and hold up its end of the deal, so Nebraska would not risk losing TransCanada’s promise to reroute the pipeline around the Sandhills. But in the final days of the session, after a blizzard of amendments, the text of LB 1161 changed—completely sub- ordinating LB 1 to LB 4, probably to avoid the appearance of special legislation passed for the benefit of one company.

In Sen. Langemeier’s words, “So with [this amendment]12 we stack LB 4 on top of LB 1. So anybody in the future that wants to build a pipeline, you’re going to come apply and you’re going to apply through LB 4. It’s going to go through DEQ. DEQ is going to do their review. And then upon completion of that review, it’s going to go to the Governor, and then the Governor has an option. He can say yes: off on your merry way to build a pipeline. He can say no: it continues down through LB 1, which is the major pipeline siting authority. So now that’s the simple process; it’s pretty clear, pretty simple. You’ve stacked them on top of each other.13

The practical effect of this “stacking” is that under LB 1161, it is now the governor who will decide all future pipelines, not just the KXL.14 The only time the PSC might be used is if the governor denies a route and the oil pipeline company wants another bite at the apple. This makes the likelihood future pipelines will have to prove they’re in the public interest pretty much zero.

For Nebraskans it is tragic that five months after fierce citizen demand leading to a unanimous vote for its passage, LB 1, the law intended for future pipelines, is now dead and on life support, with LB 4—once intended for time-limited application—stacked on top of it.

It is also cause for alarm, since future pipelines, will not have “promised” to go around the Sandhills.

The Case for Energy Corridors and Exclusion Zones

Nebraska can debate the size of the risk to it natural resources, and wait for time to tell, as others did for the Kalamazoo River and the Gulf Coast.

Or, it can lock in gains and limit losses with an energy corridor and exclusion zone strategy.

Until the science exists to support more accurate risk assessments for Nebraska’s complex hydrogeology15, and especially with future decisions now fully in the hands of the governor, Nebraska must create an intelligent and legally-preferred energy corridor through clay soils, where water tables are far below the surface and where as few streams as possible are crossed.

Then it must place the rest of the state off limits.

Knowing which areas to avoid would simplify routing for companies seeking to build oil pipelines through Nebraska. The industry may object to routing around exclusion zones, but the alternative is to simply shift the costs of degraded land and water onto state economies, landowners and the public.

Exclusion zones are likely to survive legal scrutiny, falling neatly into the realm of what states traditionally can do—make local land-use plans for the management and protection of their natural resources. This is an area where states’ expertise often exceeds that at the federal level, and Nebraska is particularly well positioned to manage its water with the boundaries of its Natural Resources Districts following (rather than cutting across) the watersheds of its major river basins.

Sen. Haar’s 2011 proposed bill, LB 5 (as of now “indefinitely postponed”), defined exclusion zone as (1) the Sandhills as shown by the EPA EcoRegions map, (2) watersheds of a cold-water class A stream or (3) where the groundwater depth is 10 feet or less below the earth’s surface for a distance of 10 miles or more.16

In retrospect, Sen. Haar’s proposed bill on exclusion zones is a good one, and it received heavy public support during public hearing.17 It is a straightforward 30-day process to certify that an oil pipeline route does not fall into an exclusion zone.

If the Nebraska legislature would also restore LB 1 to its rightful place for future pipelines, it would bring further coherence to this legislative framework, allowing the public to fine-tune routes in areas outside exclusion zones. For example, organic farms or ranches might use the process to support tweaking pipelines around their living soils.18 Or cities might use it to direct them away from wellhead protection areas, which are established to protect municipal groundwater sources. This would avoid a situation like Bonnie Kruse describes, “…the first Keystone pipeline is now built through [Seward’s] wellhead protection area underneath four of our city water mains.”19 Alternatively, wellhead protection areas might be added as exclusion zones.

Next session is the time for exclusion zones to be calmly revisited, perhaps with the help of Nebraska’s world famous Water Center—in advance of future pipeline proposals. Otherwise, Nebraska faces a draining future of fighting powerful interests.

Nebraska’s Sandhills have not moved. They still stand in a path between Canada’s tar sands mines and Houston’s starving oil refineries, and from there, in spite of a decade of declining U.S. demand, to the insatiable world market. Without exclusion zones, future pipelines by any number of companies could pass directly across the Sandhills, even though a groundswell of opposition might have forced one pipeline around them.

Without a Sandhills exclusion zone, even the KXL might one day revert to its original path using its old easements.

For example, if its border crossing is denied a second time, TransCanada could decide to build the KXL starting from Baker, Mont., and the U.S. Bakken oil fields, which would remove the requirement for a presidential permit and any leverage that the State Department would have to force TransCanada to adhere to the Nebraska Sandhills reroute. According to Bloomberg news, TransCanada considered this option at the time its first permit was denied.20 It’s hard to see how TransCanada’s voluntary “promise” to build on the reroute might be enforced should they decide to back out.

One thing is clear: if nothing more is done to direct the routing of future pipelines, the Sandhills and the deepest part of the Ogallala Aquifer remain at great risk. For after Keystone XL there will be no more promises on which to rely. Yet Nebraska will be stuck with a law that only made sense when such a promise existed.



1. Neb. Rev. Stat. §57-1101 (2010).

2. (accessed March 7, 2013). (accessed March 16, 2013).

3. The state owns the groundwater for the benefit of its citizens. Nebraska Ground Water Management and Protection Act, Neb. Rev. Stat. 46-702.

4. Transcript, Natural Resources Committee, Nov. 7, 2011; Tim Taylor p. 675–71.

5. Transcript, Natural Resources Committee, Nov. 7, 2011; Susan Dunavan p. 50–58.

6. “TransCanada Agrees to Avoid Sand Hills,” Lincoln Journal Star, Nov. 14, 2011.

7. Amendment to LB 1.

8. LB 4, 102nd Legislature, First Special Session (Nebraska 2011).

9. LB 1, 102nd Legislature, First Special Session (Nebraska 2011).

10. LB 1, Section 8(4)(a–h).

11. LB 1161, 102nd Legislature, Second Special Session (Nebraska 2012).

12. This 10-page amendment was filed and adopted the same day.

13. Transcript, Floor Debate, April 5, 2012, p. 47.

14. For a quick review of the current framework, see Neb. Rev. Stat. 57-1405 (stacking),; Neb. Rev. Stat. 57-1503 (primary process—governor/NDEQ),; Neb. Rev. Stat. 57-1407 (secondary process—PSC with public interest criteria),

15. Nebraska’s surface and groundwater are intimately connected.

16. More work might be done on these categories. For example, many objected to the EPA EcoREgions map of the Sandhills as too small to protect the sandy soil and high water tables found outside its borders. The KXL reroute used this map, and according to the Final Evaluation Report by the Nebraska Department of Environmental Quality, “The Nebraska Reroute crosses approximately 13 miles of areas where the groundwater is less than 10 feet bgs.” Chapter 6, page 34. A hydrogeological map might be better suited.

17. LB 5, 102nd Legislature, First Special Session.

18. For a compelling review of how a Minnesota family farmer made the case for routing a gas pipeline around their organic land, see Atina Diffley, “Turn Here, Sweet Corn,” University of Minnesota Press, 2012, pgs. 271–335.

19. Testimony of Bonnie Kruse, Transcript, Natural Resources Committee, Nov. 9, 2011, p. 11.

20. “TransCanada May Shorten Keystone XL,” Jan. 19, 2012. (accessed March 7, 2013).

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