The Keystone Pipeline, Nebraska Supreme Court, Standing, and Constitutional Law

The Keystone Pipeline is again in the news as Congress gets ready to approve the pipeline route through Nebraska. The pipeline, which has already been completed in several states, is a 36-inch pipe that would carry 830,000 barrels of crude oil per day, mostly originating in Canadian tar sands, to be refined on the Gulf Coast, in Texas.

Proponents of the pipeline are optimistic they have sufficient votes in the House and Senate to overturn a threatened Presidential veto. They note the pipeline would provide $55 million annually in property tax payments, including $11.8 million for Nebraska; allow for Canadian oil to replaced Venezuelan oil; and that pipelines are the safest and most efficient means to transport oil.

The pipeline was delayed for several years due, in part, to the actions of former Governor Dave Heineman, who, in response to special interests, called for a special session of the legislature in November 2012 to review the proposed route of the pipeline.

In response to the special session, the Legislature passed Legislative Bill (LB) 1161 in 2012. The bill allowed major oil pipeline carriers to bypass regulatory procedures of the Public Service Commission (PSC) – a Nebraska constitutional regulatory body charged with regulating, inter alia, common carriers – and submit a proposed pipeline route directly to the Governor for approval in order to receive power of eminent domain for the route. The Nebraska Governor then approved an amended route.

Clearing the way for the Congressional vote to approve the amended pipeline route through Nebraska, today the Nebraska Supreme Court decided Thompson, et. al., v. Heineman, et. al., 289 Neb. 798 (2015). In this case, the landowners (plaintiffs) asserted LB 1161 had unconstitutionally assigned the powers of the PSC in regulating pipeline routes to the Governor.

In an unusual ruling, the Nebraska Supreme Court held, while a majority of the justices found LB 1161 unconstitutional and that the landowners had standing to challenge the constitutionality of LB 1161, the Nebraska Constitution, Art. V., § 2, requires no legislative act shall be found unconstitutional without a supermajority (5 of the 7 justices). Because 3 judges of the court concluded the landowners lacked standing to bring suit and declined to exercise their option to address the constitutional issues, the Court never got to the merits of the case, i.e., whether LB 1161 was constitutional. By not addressing the merits, LB 1161 is, by default, allowed to remain the law of the land.

In reaching its holding the Court explored a number of important propositions of law. For example, the Court noted “standing” is a jurisdictional component of a party’s case and only a party that has standing – a legal or equitable right, title, or interest in the subject matter of the controversy – may invoke the jurisdiction of a court.

Further, in reviewing whether the landowners had standing to sue, the Court noted, under common-law, standing usually required a litigant to demonstrate an injury in fact that is actual or imminent to the litigant, but there are some exceptions. For example, taxpayer standing is a recognized exception to the injury-in-fact requirement for standing. A resident taxpayer, without showing any interest or injury peculiar to itself, may bring an action to enjoin the illegal expenditure of public funds raised for governmental purposes on a matter of great public concern. The majority stated, in these cases, there is no requirement that the taxpayer show the alleged unlawful act would otherwise go unchallenged because no other potential party is better suited to bring the action.

The majority also noted, unless the Legislature enacts legislation to specifically restrict the authority of the PSC and retains control over that class of common carriers, it cannot constitutionally deprive the PSC of its regulatory powers. Further, an oil pipeline carrier, such as TransCanada, is a common carrier if it holds itself out as willing to transport oil products for a consideration to all oil producers in the area where it offers its transportation services; however, in its historical context, it is unclear the Legislature intended only to ensure only intrastate carriers are regulated by the PSC.

Further, the Court explained eminent domain. In general, a citizen’s property may not be taken against his will; however, through the sovereign power of eminent domain, property may be taken for a public purpose. Only the Legislature can authorize an entity, whether public or private, to take property by eminent domain. The reason common carriers were allocated the right of eminent domain by the Legislature lies in their quasi-public vocation of transporting passengers or commodities for others; however, if taken by eminent domain, just compensation must be paid.

Although the majority did not have the supermajority required by the Nebraska Constitution to overturn LB 1161, it did support the decision of the district court that the Legislature’s silence on regulation of interstate oil pipeline carriers allowed for the PSC to have jurisdiction over interstate, as well as intrastate carriers, to the extent state regulation was not pre-empted by federal law. In short, the delegation of power under LB 1161 was an unconstitutional delegation of the PSC’s constitutional jurisdiction to the Governor.

In contrast, writing for the minority, Chief Justice Heavican and Judges Stephan and Cassell never reached the determination LB 1161 was constitutional; the minority of the Court concluded the landowners did not have standing to challenge the constitutionality of the legislation, so the Court lacked the jurisdiction to address the issue.

In support of their finding, they noted courts have an obligation not to decide cases that are not properly before the Court. The district court that tried the case had been unable to determine whether the landowners who filed suit were situated along the current pipeline route and thus actual parties to a controversy. Further, the landowners never asserted they had standing based on a matter of great public concern or sought mandamus, but that they were taxpayers with interests in unlawful expenditure of state funds as required by LB 1161. The minority noted the Governor or the PSC chose the pipeline route was not a matter of great public concern and the landowners failed to establish, under the resident taxpayer exception, no one was better suited to maintain the action challenging the classification.

In sum, the minority disagreed with the majority the landowners had standing to sue and the district court erred by failing to dismiss for lack of jurisdiction. Due to the Nebraska constitutional requirement for a supermajority to find a statute unconstitutional, the minority on the Court carried the day.

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