November 14, 2011

TransCanada Says Nebraska Bill on Pipeline Rerouting Is Unconstitutional. Here's Why They're Wrong.

The Nebraska Legislature is in a special session currently to consider five bills concerning the proposed Keystone XL pipeline. The situation was shaken up by Thursday’s announcement from the Obama Administration that it was pushing back its decision on federal approval of the pipeline. This news may take away some urgency for the Nebraska Legislature, but considering that no options (including the original proposed route) have been taken off the table, the bills remain firmly relevant. Nebraska—and any other states that lack regulations for protecting state interests from the effects of oil pipelines—should move forward despite measures that may (or may not) be undertaken by the federal government on the Keystone XL pipeline.

This afternoon the full Nebraska legislature will begin debate on one of the bills currently under consideration, LB4, which would provide state authority to approve or reject pipeline routes within Nebraska. Specifically, a panel appointed by the Governor—to include the DEQ, the Public Service Commission, the Department of Natural Resources, and representatives from landowner groups and others—would determine whether the proposed pipeline route imposes unacceptable risks on the state’s natural resources, based on six statutory criteria designed to ensure that pipeline routes comply with the state’s Ground Water Management and Protection Act, its Nongame and Endangered Species Conservation Act, and other conservation oriented objectives (the criteria are specified in Section 7 of the bill).

TransCanada has made a number of arguments against the bill and others like it, including saying it is preempted by federal law, that it violates the dormant commerce clause of the Constitution, and that requiring pipeline rerouting would be a “taking” in violation of the Fifth Amendment.

Last week I testified before the legislature’s Natural Resources Committee, arguing that a similar bill, LB1, passes Constitutional muster. (The primary difference between LB1 and the bill currently pending before the full legislature, LB4, is that LB1 gave authority to the Public Service Commission rather than a gubernatorial panel.) I believe that these bills are not just Constitutionally sound, but good policy: the exercise of state sovereignty over land use, soil and water conservation, and aesthetics is an important element of a viable federal-state partnership. Here are some of my responses to the critics:

The state has well-established authority over natural resources and water. It is firmly within the state’s traditional police powers to regulate land use, protect property values and conserve resources – such as topsoil, vegetation, groundwater, and floodplains. For a state like Nebraska that relies so heavily on agricultural production, conservation of natural resources could not be more essential. The state’s interest in protecting wildlife habitat is equally compelling. In Missouri v. Holland (1920) and Maine v. Taylor (1986), the U.S. Supreme Court explicitly recognized that states have sovereign authority to regulate activities that affect birds and fish. 

The bills are a fair expression and exercise of the public trust doctrine. The state has not only the authority but also the duty to hold certain natural resources—including water and wildlife—in trust for the benefit of the people, pursuant to the public trust doctrine. This doctrine originates from old English law that predates the founding of the United States and has been upheld by the Supreme Court in Illinois Central Railroad v. Illinois (1892). The doctrine is also part of Article 15, sections 4 and 5, of Nebraska’s Constitution, which provides that Nebraska has an affirmative duty to protect the state’s waters for the use, benefit, and enjoyment of present and future generations.

State authority is not expressly or implicitly preempted by federal laws. When individual states legislate to protect their citizens from harms that the federal government has not adequately addressed, companies like TransCanada often claim that the Constitution’s Supremacy Clause “preempts” state action. But the federal courts operate under a presumption against preemption, preserving individual states’ roles in protecting their citizens’ welfare. There are three ways that preemption can happen, but none is applicable here. 

First, Congress can expressly preempt state action through federal legislation. The applicable federal statute is the Pipeline Safety Act (PSA), in which Congress adopted the principles of “cooperative Federalism” that undergird many public health and environmental laws. Cooperative Federalism means that federal regulators and state actors share responsibility for managing risks. In the PSA, the federal government has the responsibility for regulating pipeline safety, while the states retain the authority to regulate routing of pipelines to achieve economic, land use, and environmental objectives.

The pending bills are not safety regulations in disguise. By addressing the location of the pipeline (not construction or operational safety standards), they effectuate the state’s paramount concern for conservation of resources, topsoil, habitat, and appropriate land use within the state. Thus, LB4 is not expressly preempted by the PSA’s assignment of safety issues to the federal government. 

The second and third forms of preemption both fall under the broad category of “implied preemption,” applicable to instances where a state action would conflict with or undermine a federal regulation. Again, neither is applicable in the case of LB4. 

The Supreme Court, in rejecting challenges to Arizona’s alien employment law in Chamber of Commerce v. Whiting (2011), affirmed that “a high threshold must be met to find conflict preemption” – the first type of implied preemption. LB4 is a pipeline siting regulation that would protect property rights, aesthetic values, agriculture, economic interests, and wildlife, none of which conflicts with or undermines the federal DOT’s regulation of safety issues.

Congress can also impliedly preempt state regulation by “occupying the field,” but it consciously avoided that outcome in the PSA. Indeed, §60104(e) of the PSA states quite clearly: “This chapter does not authorize the Secretary to prescribe the location or routing of a pipeline facility.” Congress clearly meant for routing decisions to be left to the states. Both the Congressional Research Service (see page 6) and the State Department acknowledge this relationship.   The absence of effective state or local law would leave a dangerous regulatory vacuum.

Delay doesn't result in a Taking. TransCanada asserts that the EIS process took three years, so if the pipeline were to be re-routed, the existing EIS would have to be completely overhauled, delaying the project another three years and interfering with existing contracts in Texas. Even if Nebraska required a new route, thus imposing a significant new condition and/or raising significant new information about environmental effects, only a Supplemental EIS would be required, and the data and findings from the existing EIS could be utilized and updated. It appears that the State Department is now poised to conduct a Supplemental EIS regardless of whether Nebraska exercises its sovereign authority, but the state-specific information gathered during Nebraska’s decisionmaking processes under LB4 would complement the federal process. Moreover, governmental delay pending additional analysis of development alternatives and environmental impacts does not result in a Fifth Amendment taking (see Suitum v. Tahoe Regional Planning Agency (1997)).

The bills do not violate the Dormant Commerce Clause. The last, and most arcane, challenge that TransCanada has put forward is that state legislation would violate the so-called “Dormant Commerce Clause” of the federal Constitution. Where a state statute discriminates against interstate commerce either on its face or in practical effect, the state must show two things: (1) the statute must serve an important local purpose; and (2) this purpose cannot be served as well by another available nondiscriminatory means. LB4 does not discriminate, facially or otherwise, against out-of-state businesses. Although no in-state businesses currently operate major oil pipelines, they certainly could in the future. Re-routing the XL pipeline would result in some delay and additional expense for TransCanada, but that is by no means “clearly excessive”, nor is it even a burden on interstate commerce—it’s a burden on one corporation that happens to be engaged in interstate commerce. Furthermore, Nebraska has a compelling interest in regulating land use and protecting the economic, ecological, and aesthetic values of our land and natural resources. This interest outweighs any incidental burden that may be placed on interstate commerce. To the extent that there could arguably be some burden on interstate commerce, LB1 would still be upheld unless that burden is “clearly excessive” compared to the state/local benefits of the regulation (see Pike v. Bruce Church, Inc. (1970)). And lastly, Sporhase v. Nebraska (1982) suggests that, absent overt, facial discrimination, conservation purposes, such as those at the heart of LB4, effectuated by reasonable means, such as siting requirements, will be upheld.

Sandra Zellmer, CPR Member Scholar; Robert Daugherty Prof. of Law, University of Nebraska College of Law. Bio.

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1 The latest news--Transcanada has agreed to re-route the pipeline around the sandhills, and Nebraska has agreed to contribute to the supplemental EIS: Pipeline deal was 'Hail Mary pass',
-- Sandi Zellmer

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