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Keystone XL opponents gain victory in Nebraska ruling

WASHINGTON -- A Nebraska judge ruled Wednesday that the state's Public Service Commission, rather than Gov. Dave Heineman, R-Neb., has the authority to approve an alternative route through his state for the Keystone XL pipeline project.

Lancaster County Judge Stephanie Stacy issued a ruling essentially invalidating Heineman's approval of the pipeline route through Nebraska. Stacy's ruling agreed with opponents of the project, who argued that a law passed in 2011 improperly allowed the governor to give TransCanada eminent powers with the state.

The decision is considered a blow to Keystone XL's proponents, including Sen. John Hoeven, R-N.D., who issued a statement following the ruling.

"We have not yet reviewed today's court ruling, but we recognize that Nebraska has to work through its process on this very important energy project for America," Hoeven stated. "We believe, however, that the environmental concerns in Nebraska, and in every other state through which the pipeline will pass, have been addressed."

The Keystone XL pipeline, which would skirt North Dakota, is expected to transport Canadian oil sands crude through the U.S. and also provide a link to pipelines that transport Bakken crude.

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.

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."

"Because the state of Nebraska made a thorough review of the alternative route, we would expect the Nebraska Public Service Commission to make the same decision as the governor in approving the new route and to do so in a timely manner," Hoeven said.

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. 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.

Reuters contributed to this report.