October 19, 2011 / 5:44 PM / 6 years ago

Nebraska backs away from Keystone XL route law

3 Min Read

(Reuters) - Legislation proposed in Nebraska to force TransCanada Corp (TRP.TO) to move the route of its $7 billion Keystone XL oil pipeline would not likely hold up in court, so lawmakers should scrap plans for a special session to pass it, the state's top senator said on Wednesday.

That assessment appears to end one worry for TransCanada, which has said it is too late in the federal approval process to move the proposed right-of-way for the controversial pipeline to Texas from the oil sands of northern Alberta.

Senator Mike Flood, who is also speaker of the state legislature, said he would like nothing more than to force TransCanada to move the pipeline away from the environmentally-sensitive Sandhills area, which sits atop an aquifer that is a source of water for a large part of the central United States.

But he released a legal analysis on Wednesday that he said raises concerns that passing such a law in a special session would be unconstitutional.

"After careful analysis, it would be both reckless and disingenuous for me to suggest that siting legislation, if enacted in special session, would redirect the proposed route and be vindicated in court," Flood, a lawyer, said in a statement.

Nebraska should still consider passing such legislation for pipelines next year, although it would be too late to affect the Keystone XL route, he said.

The Keystone XL project, which would move 700,000 barrels of oil sands-derived crude a day to Gulf Coast refineries, is expected to receive a final decision from the U.S. State Department by the end of this year. It is already about one year behind TransCanada's original schedule

Supporters say it will create thousands of U.S. jobs and improve energy security. Detractors charge it will raise the risks of oil spills in numerous states and make the country more dependent on the carbon-intensive Canadian tar sands.

Among states along the right-of-way, opposition to the project has been among the highest in Nebraska.

To allay some of the worries about potential oil spills contaminating the aquifer, TransCanada wrote to Flood on Tuesday to offer a number of safety concessions in lieu of moving the line.

They include making a $100 million performance bond available to the state if the company does not clean up a spill in the Sandhills area.

TransCanada offered to build a concrete containment structure at a pump station to stop any oil from mixing with surface water, as well as install a pipe coating made of concrete or other materials in areas where the water table is close to ground level.

Flood said on Wednesday that these and other measures should be expected as a minimum and that he has encouraged Nebraska Governor Dave Heineman to make sure that they are stipulated to by the state.

Writing by Jeffrey Jones in Calgary, additional reporting by Timothy Gardner in Washington; Editing by Bob Burgdorfer

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