Keystone’s Nebraska Review Seen at Agency Faulted Over Donations

Feb 24, 2014 12:00 am ET

Feb. 24 (Bloomberg) -- A Nebraska agency faulted over campaign donations from regulated companies may soon decide the fate of Keystone XL, its first review of an oil pipeline.

The Public Service Commission, which sets rules for phone companies and grain storage, gained oversight for oil pipelines about two years ago. Its five elected members were criticized by a watchdog group for accepting campaign donations from companies. They now may become targets for Keystone supporters and foes counting on getting the panel to rule in their favor.

“They’re an elected body,” said Jane Kleeb, the head of Bold Nebraska, a local group fighting the pipeline. “So they hopefully will be listening to their constituents.”

The commission emerged to rule on the fate of TransCanada Corp.’s $5.4 billion pipeline after a Nebraska district court judge last week voided the approval issued a year ago by Republican Governor Dave Heineman. The judge, Stephanie Stacy, invalidated a law that let Heineman approve the route, saying in her Feb. 19 ruling that only the commission had that authority.

The Heineman administration is appealing Stacy’s ruling. The commission, which gained authority over major oil pipelines in 2011 and issued rules a year later, has yet to receive an application from TransCanada, and has no position on whether it will proceed during the appeal, said Laura Demman, director of the agency’s natural gas department.

The agency regulated natural gas pipelines for years before gaining oversight for oil pipelines. The commission has never reviewed an oil pipeline application.

Sensitive Aquifer

TransCanada applied in 2008 to the U.S. State Department for a permit to build Keystone across an international border. The agency issued a final environmental impact staement on Jan. 31. The pipeline will carry oil-sands crude from western Canada to U.S. refineries along the Gulf Coast. President Barack Obama has said he will make the final decision on the project.

Nebraska residents and Heineman objected in 2011 to the pipeline’s proposed route, saying it crossed an aquifer and threatened drinking-water supplies. Obama rejected TransCanada’s application, citing those concerns, and forced the Calgary-based company to design a new path.

The revised route still crosses part of the ecologically sensitive Sandhills region, Kleeb said in an interview. Giving the route decision to the commission makes it more likely that local concerns will be considered, she said.

‘Very Transparent’

“They went through a very extensive and very transparent rule-making process about how they would route a pipeline,” she said in an interview last week.

Shifting the route from the Sandhills may require the State Department to revise the Jan. 31 assessment, which found the pipeline’s impact on climate would be minimal.

The state commission is required to schedule a public hearing within two months after getting an application and issue a decision within seven months, according to the agency’s rules.

The commission will determine if a pipeline is in the public’s interest and “shall not evaluate” safety issues, such as a risk of leaks, that are covered by federal standards, according to the rule. The examination will consider a project’s impact on the environment, wildlife and groundwater, according to the rule.

Environmental groups oppose Keystone, saying it will worsen climate change, while labor unions and Republicans in Congress say that building and running the pipeline will create jobs and expand the economy. Obama has said Keystone wouldn’t be in the nation’s interest if it significantly worsened climate change.

Spending Pledge

Opponents such as billionaire investor Tom Steyer, who has pledged to spend at least $100 million making climate change an election issue, may take an interest in the commission’s review, said Kevin Book, managing director at ClearView Energy Partners LLC, a financial research group in Washington.

“The question I think nobody can answer for sure is where will Mr. Steyer spend his $100 million,” Book said in an interview. “Keystone has become the focal point of climate activism. People who have gotten used to fighting it are going to keep fighting.”

Mike Casey, a spokesman for Steyer, didn’t return a call seeking comment.

Not everyone is enthusiastic about the board’s role. Nebraska is one of 10 states that elects public service commissioners, said Jack Gould, issues chairman for Nebraska Common Cause, an advocacy group. Members of the state panel often run unopposed and get most of their donations from the companies they regulate, Gould said.

Company Donations

From 2000 to 2012, three quarters of all reported donations to incumbent Nebraska commissioners were from regulated companies or people connected to them, according to a report from the group.

Concern that donations influenced policy decisions emerged when the state Legislature considered banning regulated entities such as power companies from providing broadband Internet service in the state.

The bill, which passed in 2005 and was backed by commission members, benefited existing Internet service providers such as telephone and cable-television companies, Gould said.

“Here they were out campaigning for the cable companies and the phone companies,” Gould said in an interview. “Their record in the past just isn’t that good.”

Telecommunications companies accounted for $70,261 in campaign contributions to commission members from 2000 to 2012, according to the report from Common Cause.

Unopposed Candidates

In 2012, Frank Landis, who was elected in 1988 and is now the chairman, and Tim Schram, elected in 2006, ran unopposed. Commissioner Anne Boyle, in office since 1996, is retiring and her seat will be contested in November. Two other members’ terms expire in 2016.

Landis, Schram and Boyle didn’t respond to telephone calls seeking comment.

Labor unions that favor Keystone are sounding out possible candidates for Boyle’s seat, Kleeb said, and outside funding from both sides for the campaign is “a very real possibility.”

For Kleeb, the best outcome would be a decision to run Keystone along an existing TransCanada pipeline in the eastern part of the state.

“The PSC is considering information from county boards and natural resource districts which are kind of unique bodies in our state that deal with water,” she said. “Fortunately for those who oppose the pipeline, several of those groups have actually passed resolutions against the pipeline and against the route.”

--Editors: Steve Geimann, Michael Shepard