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Keystone XL permit legislation rejected by Senate committee

PIERRE--A panel of state senators decided Tuesday the South Dakota Public Utilities Commission should be able to continue to grant permits for international projects, such as the Keystone XL oil pipeline, before the projects have federal approval...

PIERRE-A panel of state senators decided Tuesday the South Dakota Public Utilities Commission should be able to continue to grant permits for international projects, such as the Keystone XL oil pipeline, before the projects have federal approval from the U.S. president.

Sen. Troy Heinert, D-Mission, told the Senate Commerce and Energy Committee that the PUC still certified the South Dakota permit for Keystone XL, even after President Barack Obama refused to allow TransCanada's pipeline to pierce the U.S. border.

The committee killed SB 134 on a party-line vote of 5-2.

TransCanada wants the pipeline to carry oil from tar-sands areas of Alberta to Steele City, Neb., where it would connect with the existing network. The pipeline would cross from Alberta into Montana and continue through western South Dakota into Nebraska.

The project became a major point of political division at the national level. TransCanada plans to build it if a presidential permit can be secured from Obama's successor next year.

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Several landowners whose properties would be crossed by the pipeline told the senators they didn't want the project and they've been burdened unnecessarily if the presidential permit isn't granted.

"This would have avoided headaches for all concerned," said Paul Seamans, whose land is near Draper.

John Harter, a rancher from the Winner area, said the legislation should have been in place to protect South Dakotans' rights. "Now, if you take our rape laws, no means no," Harter said. "But they have an ability to take it from bad eminent domain laws."

Heinert's legislation sought to prohibit the PUC from issuing a state permit before a project receives a presidential permit.

Drew Duncan, a lobbyist for TransCanada, spoke against the proposal. He said it would apply to cross-border transmission lines and gas pipelines, too, and would create unnecessary delays.

Duncan said the PUC exercised its authority to prohibit construction of the Keystone XL pipeline until the project received federal permission.

PUC Chairman Chris Nelson opposed the bill. He said Heinert let him review the draft and they couldn't find common ground.

Nelson said the yearlong review is complex and intense. He said the commission issued 90 orders during the recertification process for Keystone XL.

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The project originally received its state permit in 2010, but it couldn't be built without the president's permission. State law requires that a project's sponsor certify the permit conditions can still be met if construction hasn't started after four years. Keystone XL went through certification last year.

Nelson said that under Heinert's legislation, the commission would still hold its review and hearing, but then "hit the pause button" until the federal permit was issued. He said there could be different commissioners and different PUC staff at the point of decision years later.

"It would essentially force the PUC to move at the speed of the federal government, and I don't think that serves any of us very well," Nelson said.

Heinert, in rebuttal, called the PUC's decision to certify the Keystone XL permit after the president's denial "a slap in the face" to the people who opposed the project.

All of the supporting testimony came from South Dakota landowners, while the opposition came from corporations, Heinert said.

"We have completed our state process. There is nothing more for us to do. Final orders have been issued," Nelson said. One of the conditions is TransCanada obtain a presidential permit. "That's out of our hands," Nelson said.

Senate Democratic leader Billie Sutton, of Burke, asked whether the state permit would remain valid if the federal permit was issued in 10 years. Nelson said it would, provided the other state permit conditions were met.

Sen. Blake Curd, R-Sioux Falls, asked whether there has to be a second recertification. Nelson said state law calls for certification only once.

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Curd asked next whether the commission is prohibited from taking a third look. Nelson said the commission could look at the conditions if there was a belief they couldn't be met.

Nelson said the original Keystone proceeding cost the PUC more than $230,000 and the certification was more than $292,000.

"How much of that amount did TransCanada pay?" Sutton asked.

"All of it," Nelson replied.

Sen. Bill Shorma, R-Dakota Dunes, asked Nelson whether there is any way for TransCanada to recover costs paid to the PUC. Nelson said state law requires the company to reimburse the PUC.

"So they took the financial risk? That is my question," Shorma said.

"That is correct," Nelson said.

Curd asked TransCanada lobbyist Duncan to explain why the company wouldn't want to wait for the PUC to begin its permitting process until after receiving the federal permit.

Duncan said it was "unprecedented" that a presidential permit wasn't granted. "Those procedures complement one another," Duncan said.

The company operated under the premise that the two permitting processes would move forward simultaneously, according to Duncan.

Duncan said there would be regulatory uncertainty by waiting to start the state permitting process.

Sen. David Novstrup, R-Aberdeen, said Heinert's bill wouldn't save time and money. For Heinert to achieve his goal, Novstrup said, the legislation would have to require the PUC delay its permitting process until the federal permit has been granted.

"Then, the process never even starts," Novstrup said. "If you really want to avoid the aggravation, this bill doesn't do that."

Sen. Brock Greenfield, R-Clark, said the Obama administration sat on the matter for seven years. He agreed with Novstrup's point. "Passage of this bill won't alleviate your concerns," Greenfield said.

Sutton said it's a political issue in South Dakota because it's about property rights versus a foreign corporation.

Curd said "the proverbial cow has left the barn" regarding Keystone XL. Curd said the legislation doesn't address the root problem.

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