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TransCanada Serves U.S. a $15B Bill

Thursday, June 30, 2016

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After having filed suit against the U.S. government in January, the company behind the controversial Keystone XL oil pipeline is now formally seeking $15 billion in damages in response to the project’s rejection.

TransCanada Corporation claims unfair treatment in the prolonged consideration of its permit application, Bloomberg Bureau of National Affairs reported.

Originally filed in September 2008, the application to permit cross-border construction was ultimately rejected by President Barack Obama on Nov. 6, 2015, under grounds that allowing construction would not serve the national interests of the U.S.

Keystone Pipeline construciton
© TransCanada Corporation. All rights reserved.

TransCanada Corporation, based in Calgary, is seeking $15 billion in damages from the United States government, alleging discrimination in its rejection of application to build the cross-border Keystone XL oil pipeline.

The energy company’s request for formal arbitration, filed Friday (June 24) with the International Centre for Settlement of Investment Disputes, also claims that, as a signatory to the North American Free Trade Agreement, the U.S. government “failed in its commitment to protect Canadian investors and ensure the company was treated in accordance with international law,” according to the Toronto Star.

The Keystone XL pipeline project was intended to carry crude oil from the oil sands in Alberta, Canada, into the U.S. Heartland region, and on to the Gulf of Mexico for distribution. 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.

Prolonged, Costly Review Process

Seeking to reverse the late-2015 rejection, TransCanada, based in Calgary, filed suit against the U.S. government on Jan. 6 in the U.S. District Court for the Southern District of Texas. It made the move to request arbitration for compensation, it said, after negotiations to resolve the dispute in April failed.

According to the pipeline owner, federal officials could have made an immediate decision on the application; instead, they prolonged the review process under the premise of collecting more information that played no role in the final decision.

Rather, the rejection was purely a political move, it alleges, to make the government appear to be taking a strong case on climate change—despite the fact that its own investigations found the pipeline would not have a significant impact on greenhouse gas emissions.

“For political reasons, however, the State Department delayed its decision for seven years, with full knowledge that TransCanada was continuing to invest billions of dollars in the pipeline project in the legitimate but ultimately false belief—a belief that had been based on the Administration's assurance—that the Administration would decide Keystone's application based on the merits,” the request noted.

Keystone Pipeline protest at White House
By Brylie Oxley / CC BY-SA 3.0 via Wikimedia Commons

The pipeline. which was not controversial at the time the application was submitted, became highly politicized and a target of environmental activists, the company claims, adding that the decision was a political move designed to bolster the government's position on climate change.

The process, as the company understood it, was that the State Department would assess its applications based on a set of “standard and largely technical criteria” and address any environmental concerns related to proposed pipelines by requiring “specific construction and environmental mitigation measures or enhancements to the design of the pipeline.”

Instead, the pipeline. which was not controversial at the time the application was submitted, became highly politicized and a target of environmental activists. “It was the Administration’s own negligent delays that allowed the application to become a political symbol,” the filing noted. 

Good Faith Expenditures

To recover what it says are costs and damages related to their preparations during the seven-year review period, TransCanada is asking for $15 billion plus interest plus arbitration and legal fees.

“As with any pipeline of this type, construction of the Keystone XL Pipeline could not begin until after a substantial amount of advance work had been completed, and it was critical to begin that work while the application for the Presidential Permit was pending, the complaint read.

“Throughout the more than seven-year delay, Claimants and Claimants’ U.S. enterprises had no choice but to continue making capital expenditures, and investing in land easements, pipe, materials, equipment, etc. so that it would be in a position to start construction as soon as possible after the permit was granted. These investments were undertaken with the State Department’s knowledge,” it explained. 

At the time of its application, TransCanada noted that the stated U.S. policy was—and remains—to “expedite the development of energy production and transmission projects, including oil pipelines.”

Moreover, the company noted, to its knowledge, the government had never before denied an application for cross-border oil pipeline prior to the rejection of Keystone XL.

Arbitration Hearing

TransCanada’s case will be held before a tribunal consisting of three arbitrators, according to the arbitration filing. One arbitrator will be appointed by each of the affected parties, and the third will be selected under agreement of both parties.

According to The Toronto Star, the U.S. has never lost a claim under NAFTA, although experts are reluctant to rely on that winning streak.

Jim Rubin, a partner at law firm Dorsey & Whitney in Washington, D.C., told the Star that NAFTA arbitration tribunals are not bound to follow precedents set in past cases such as in a traditional court setting.

Meanwhile, the heads of NAFTA members (Canada, the United States and Mexico) were slated to meet in Ottawa for a North American leaders' Summit Wednesday (June 29). Canada was supposed to host the meeting early last year but canceled the event because of tensions over the Keystone XL pipeline, Reuters said.

   

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

Comment from peter gibson, (6/30/2016, 6:20 PM)

The Canadians should have been aware of who they were dealing with in the WH. They gambled and lost. They should have known in no way that it would be approved with the ideologue in the WH. WH would rather they spend $15B on windmills,batteries and solar.( the coal miners are still waiting for the promised green jobs) In the modern age they reckon oil , gas and coal is old school. But the rest of us say- pump,drill,extract. Lets see how this plays out. For my part, they won't be awarded anything.


Comment from Clyde Morgan, (7/11/2016, 7:54 AM)

It is good to see a hard stance instead of just say yes to something that does not benefit the citizen's of the United States. Too bad the government won't stand up to the big M seed company and their consumption of agriculture freedom.


Comment from Tom Schwerdt, (7/11/2016, 8:36 AM)

Peter - the green jobs are here, but the media would rather scream about coal jobs lost than the massively greater number of green jobs created in this country - and you fell for it. There are more workers in solar power alone than all of coal mining. There are more workers in wind power alone than all of coal mining. There are more workers in energy-efficiency retrofits of buildings than all of coal mining. Et cetera. That's not combined - each of those categories alone has more workers than coal mining. Green jobs are growing MUCH faster than coal jobs are being lost. If the coal miners just sit in their towns in West Virginia or wherever, the green jobs aren't coming to their laps - because their politicians are fighting to keep the green jobs out. WV could have wind power jobs in the Appalachians on top of the mountains instead of tearing down those mountains and dumping them in the creeks. Look at Texas - plenty of "green" wind jobs here, lots of solar too. More installed wind power than the next two states combined.


Comment from M. Halliwell, (7/11/2016, 11:25 AM)

Peter, I agree that TransCanada will likely not see anything from the suit (though a couple million in legal fees on the chance is worth it if they were even able to get a billion or two back). Still, when the pipeline was proposed, the US was relying heavily on foreign oil, did not have excess domestic production and the political climate was not heavily influenced by anti-oilsands activists (rather there was a lot of anti-middle east oil sentiment). Had the reviews and approvals been done in a timely manner, the pipeline may already have been in and operational years ago. On that basis, I can see why TransCanada put in the suit. The delays allowed the conditions to change such that it became a political no-win. Still, for all the political activism on the oil sands, it's a drop in the ocean when it comes to going carbon emissions...after all, China is bringing a new coal fired electrical plant on-line every week or so and Japan is adding 43 new coal fired plants to replace their shuttered nuclear plants.


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