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Keystone XL Owners Sue US Government

Friday, January 8, 2016

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The Canadian company that expected the U.S. to approve a portion of the Keystone XL oil pipeline has filed one of the largest trade appeals ever brought against the federal government, according to recent media reports.

TransCanada Corp. is seeking costs and damages under the North American Free Trade Agreement after President Barack Obama rejected the $8 billion pipeline project in November, according to BloombergBusiness.

The pipeline builder also has sued the U.S. government in the United States District Court for the Southern District of Texas, according to a complaint filed Wednesday (Jan. 6).

Nafta Challenge, Lawsuit

According to BloombergBusiness, the NAFTA challenge has been considered for years as those supporting the pipeline have become frustrated with the Obama Administration. Trade specialists say the case has merit because Obama denied the pipeline after studying the subject for seven years, the news source says.

Photos: © iStock.com / Daniel Barnes

The Keystone XL pipeline was intended to carry crude oil from the oil sands in Alberta, Canada, into the U.S., but was rejected by the Obama Administration. TransCanada is now suing the U.S.

“This does not look like a kosher process when it comes to pipeline approval,” said Todd Weiler, a London, Ontario-based attorney who focuses on investment treaty law, in the BloombergBusiness story.

Weiler said TransCanada has a “very strong case” in arguing that Keystone XL didn’t receive the same standard of review as other pipelines that have been approved.

The business news source said that the White House referred questions to the State Department, which in turn said via email that it does not “comment on pending litigation.”

Obama Rejection

As previously reported, Obama rejected the pipeline on Nov. 6, just days after TransCanada had asked the State Department to suspend review of its permit application. The application to cross the border from Canada to the U.S. had been under consideration for years, but the U.S. eventually decided that it would not be in the U.S.’s best interest to approve the application.

It was a major shift from earlier indications when the pipeline was first announced, reports said. Job creation, a stable fuel source and reduced gas prices were among the touted benefits at that time.

But the Obama Administration said the threat of environmental damage, a focus on climate change and a mission to cut carbon emissions were factors that led to the president rejecting the pipeline, earlier reports said.

After the White House and State Department listed its reasons for rejecting the pipeline, TransCanada president and chief executive Russ Girling quickly voiced his displeasure in the federal government’s decision.

“Today, misplaced symbolism was chosen over merit and science—rhetoric won out over reason,” Girling reportedly said.

Canada’s Prime Minister Justin Trudeau also said he was disappointed, but that the decision would not change the relationship between the two countries.

“The Canada-U.S. relationship is much bigger than any one project,” Trudeau said in a statement, “and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and co-operation.”

Although the company remained committed to the project, several analysts suggested at the time of the Obama Administration’s rejection that the most sensible approach might be to wait until a new president takes office in January 2017.

Although the U.S. has done well in NAFTA appeals, companies usually win in cases such as this, said Lori Wallach, director of Public Citizen’s Global Trade Watch, to BloombergBusiness.

The pipeline was supposed to carry oil from Canada’s Alberta Oil Sands to Nebraska, where it would connect with an existing pipeline that led to the Gulf of Mexico refineries, BloombergBusiness reported. Keystone XL would have carried as much as 830,000 barrels a day and spanned 1,179 miles (1,897 kilometers) from Alberta to Nebraska.

Differing Opinions

Although the business news source says environmental advocates have praised the rejection, the pipeline’s proponents have praised TransCanada for filing its appeal.

TransCanada has a good argument that Obama ruled on Keystone XL based on his politics and not on the merits of the pipeline itself, said Rob Merrifield, a former Conservative Canadian lawmaker.

“I’m betting for TransCanada on this one and certainly hoping they win the case,” said Merrifield, now a senior adviser with the Canadian Strategy Group, an Alberta-based consulting firm.

Meanwhile, TransCanada is appealing under Chapter 11 of NAFTA, a deal signed by the U.S., Canada and Mexico that took effect in 1994. While a tribunal couldn’t force approval of Keystone, it could award damages for costs and lost profit, according to BloombergBusiness.

Although the U.S. has done well in NAFTA appeals, companies usually win in cases such as this, said Lori Wallach, director of Public Citizen’s Global Trade Watch, to the business news source.

“In a case like these facts and those claims, I have seen repeatedly, enormous amounts of money extracted from governments’ treasuries and taxpayers and doled out to corporations,” Wallach said.

TransCanada has invested C$4.3 billion ($3.1 billion) on Keystone XL. It said Wednesday that it plans to about half of that in an after-tax writedown, BloombergBusiness said. The company intends to stick to its plan to grow dividends by 8 percent to 10 percent a year through 2020, the report said.

However, BloombergBusiness also reported that investors have already written off the project.

   

Tagged categories: Government; Laws and litigation; Lawsuits; North America; Oil and Gas; Pipeline; President Obama; Program/Project Management

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