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Folks, the issue concerns the Nebraska STATE Constitution:

“Three landowners sued Governor Heineman and the State of Nebraska in 2012 arguing LB 1161 violated the Nebraska State Constitution that makes it clear common carriers are regulated by the Public Service Commission. LB 1161 took that authority away from the PSC and instead gave the Department of Environmental Quality, an arm of the Governor’s office, authority to review the route...”

http://www.boldnebraska.org/kxlroute

If the state constitution gives the PSC responsibility to regulate X, then a law passed by the legislature cannot overturn the Constitution.

The ruling can be found here:

http://www.dominalaw.com/documents/LB-1161-Court-Order-Feb-19-2014.pdf

“It is clear that “legislation which directs that the PSC cannot exercise its constitutionally granted power over a particular common carrier or a class of common carriers” violates NEB. CONST. art. IV, § 20.241 As such, “NEB. CONST. art. IV, §20, requires that the power to regulate common carriers exist either in the PSC or the Legislature.,,242 Because LB1161 has the effect of either temporarily or permanently divesting the PSC of control over the routing decisions of oil pipelines subject to the act, and because LB1161 vests such regulatory control over common carriers not in the Legislature but in NDEQ and the Governor, the evidence before this court clearly establishes LB1161 violates NEB. CONST. art. IV, § 20, and therefore is unconstitutional.

Furthermore, the court finds there is no set of circumstances under which such provisions could be constitutional.”

The court threw out most of the objections to LB1161, but found that the Nebraska Constitution does not allow the Gov to take over authority given to the PSC.