TransCanada Corp. (TRP, TRP.T) faces a legal challenge from a group of Oklahoma landowners to its planned expansion of its oil sands pipeline to the U.S. Gulf Coast.

The owners of a family farm in Oklahoma have filed a legal challenge in an Oklahoma state district court to TransCanada's plans to build an extension of the Keystone pipeline system through their land.

In the legal filing, the family is asking the state to cancel condemnation of their property on the grounds that Calgary-based TransCanada is a foreign-owned, Canadian company and that the U.S. government has no right to transfer the power of "eminent domain"--or the right to appropriate private property for public projects--to a project that allegedly doesn't serve the interests of the American public.

A TransCanada spokesman didn't comment on the Oklahoma case, but said that TransCanada offers above market rates for easements on landowner properties that allow the inhabitants to keep using the land.

"With more than 99% of all easements successfully negotiated with hundreds of landowners in seven states so far, it's clear Keystone is responsive to landowner concerns and apparently is addressing them to their satisfaction," the spokesman said in an emailed statement.

The U.S. State Department is reviewing TransCanada's proposal to double the capacity of the Keystone pipeline system, which transports oil from Canada's oil sands region, and to extend it to refineries on the U.S. Gulf Coast that process heavy oil. If approved on schedule early this year, the pipeline could be completed by 2013.

Environmental groups oppose the expansion because they say oil sands crude is more environmentally harmful than conventional oil.

TransCanada and the Alberta government have argued that the expansion comes with significant economic benefits, including a more than $20 billion economic boost from its construction and more oil supply from Canada, a secure and friendly supplier to the U.S.

The expansion would roughly double the line's capacity to 1.1 million barrels a day. Canada is already the largest source of U.S. oil imports at about 1.9 million barrels a day, with roughly half of that amount coming from Canada's oil sands region in northeast Alberta.

A TransCanada representative wasn't immediately available for comment.

Shares of TransCanada declined 0.5% to C$37.11 in recent trading on the Toronto Stock Exchange. Trading on the New York Stock Exchange was closed Monday for a holiday in observance of Martin Luther King's Birthday.

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