Nebraska court invalidates state's Keystone pipeline approval

WASHINGTON Wed Feb 19, 2014 6:11pm EST

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WASHINGTON (Reuters) - A Nebraska court on Wednesday invalidated the governor's decision to allow the Keystone XL pipeline to pass through the Midwestern state, casting new uncertainty over the controversial project to link Alberta's oil sands with refineries in Texas.

Nebraska Governor Dave Heineman last year supported legislation that cleared the way for TransCanada Corp's $5.4 billion pipeline to cross parts of his state.

But some landowners objected to the legislation, saying it sidestepped their rights.

On Wednesday, the District Court of Lancaster County, Nebraska, sided with landowners, a move that makes additional months of delay to the project, already more than five years in the planning, seem inevitable.

Judge Stephanie Stacy ruled that the recent law passed by the state's legislature, which gave Heineman the decision on the route instead of the Nebraska Public Service Commission, was "unconstitutional" and "void."

TransCanada has been counting on President Barack Obama to approve its pipeline plan, but Keystone backers had anticipated the support of states and landowners as well.

Republican lawmakers have urged Obama for years to approve the pipeline, and the president is also under pressure from several vulnerable Democratic senators who favor the pipeline and face re-election at a time when their party is scrambling to maintain control of the U.S. Senate in November's elections. The project looms over Obama's economic and environmental legacy.

Responding to the decision on Wednesday, TransCanada said it was disappointed and would examine its legal options.

"We will now analyze the judgment and decide what next steps may be taken," company spokesman Shawn Howard said.

A decision from the White House had not been expected before May, given a number of steps that must still be taken after the recent release of an environmental impact report by the State Department.

Some Keystone foes said the Nebraska court's decision guaranteed several more months of legal wrangling and uncertainty.

"This court decision provides more uncertainty for pipeline proponents, and more time to organize for pipeline opponents," said Dan Weiss, a senior fellow with the Center for American Progress, which opposes the plan.

Keystone was expected to be discussed by Obama and Canadian Prime Minister Stephen Harper at a one-day North American leaders' meeting on Wednesday in Toluca, Mexico.

(Additional reporting by Timothy Gardner in Washington, and Scott Haggett in Calgary; Editing by Ros Krasny and Peter Cooney)

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