December 18, 2014 / 5:49 PM / 3 years ago

CORRECTED-Legal standing may be key to Nebraska court's Keystone XL case

(Corrects dateline to Dec 18 from Sept 18)

By Ayesha Rascoe

WASHINGTON, Dec 18 (Reuters) - The controversial Keystone XL pipeline has a major hurdle to cross in the Nebraska State Supreme Court, which may rule as soon as Friday, and one aspect of the case there has been somewhat overlooked.

A question of legal standing, or who has the right to bring a court challenge, could turn out to be pivotal to the Nebraska case and the overall future of the pipeline, which would connect Canada's oil sands to U.S. Gulf Coast refineries.

A ruling in Keystone's favor would clear the way for the White House to approve or reject the pipeline, which proponents say would create thousands of jobs. A ruling against would send the TransCanada Corp plan into a logistical tailspin.

The Nebraska case, which dates back to 2012, centers on who in the state government should decide the pipeline's path.

Earlier this year, a Nebraska district court ruled in favor of three landowners who challenged a 2012 law empowering Nebraska's governor to make that decision.

The court reasoned that the law violated the state's constitution by usurping authority from the state's Public Service Commission.

The state government then appealed to Nebraska's highest court, arguing the district court erred on the constitutional issue. The state also said the landowners lacked standing.

While the high court is likely to base its ruling on the constitutional question, prior rulings suggest that standing could also be key, said Anthony Schutz, associate law professor at the University of Nebraska-Lincoln.

Standing involves whether a litigant is the proper party to bring a lawsuit. If the court were to rule that the landowners lacked standing, the lawsuit would essentially be tossed out without considering its substance. That would leave the door open for future challenges from different plaintiffs.

In recent years, the Nebraska supreme court has been fairly strict on standing issues in unrelated cases, said Stephen Mossman of Mattson Ricketts in Nebraska, who has successfully challenged plaintiffs' standing in water rights application cases.

The standing issue in those cases differed from the Keystone case, in which the landowners used Nebraska's "taxpayer exception." It allows taxpayers to challenge government actions where there has been an illegal expenditure of public funds - which the landowners claim happened when the state allocated $2 million for an environmental review.

The state argues that since the pipeline owner reimbursed it for the cost of the revew, there was no illegal expenditure.

Editing by Christian Plumb

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