Keystone XL rejection leads TransCanada to sue Obama administration

TransCanada has filed a lawsuit against the Obama administration and plans to file a claim under the North American Free Trade Agreement over the U.S. government's rejection of the company's proposed Keystone XL pipeline.

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The company said Wednesday it has filed a notice of intent to initiate the NAFTA claim on the basis that the denial was not justified.

"TransCanada has been unjustly deprived of the value of its multibillion-dollar investment by the U.S. administration's action," said the company in a release.

The firm says it will be looking to recover $15 billion US in costs and damages as a result of what it says is a breach of obligations under Chapter 11 of NAFTA.

"TransCanada asserts the U.S. administration's decision to deny a presidential permit for the Keystone XL pipeline was arbitrary and unjustified," the company said.

Obama exceeded his power, says company

TransCanada says it has also filed a lawsuit in the U.S. Federal Court in Texas asserting that President Barack Obama's decision to deny construction of Keystone XL exceeded his power under the U.S. Constitution.

The company says it was a "symbolic gesture" to support the perception that the Obama administration was taking action on climate change.

The Alberta government issued a short statement on Wednesday evening.

"This is a private sector decision made by TransCanada, one our government will be watching closely. NAFTA has an established formal arbitration process in place to handle this type of dispute," said Brad Hartle, press secretary to Energy Minister Margaret McCuaig-Boyd, in an email.

"Alberta's trade with the U.S. is critical to our prosperity and we look forward to continuing to collaborate with our U.S. partners to create jobs and grow the economy on both sides of the border."

Obama rejected the proposal in early November, stating it would not serve the national interests of the United States.

He said the U.S. State Department agreed, even though the agency had concluded in the past that the pipeline would not have "significant impacts to the environment" and would benefit local communities with tax revenue and jobs — although mostly during the construction phase.

The 1,900-kilometre pipeline has been in limbo for more than seven years, and at times has been an irritant in U.S.-Canadian relations.

Corporate 'temper tantrum'

The project, which also became a focal point of environmental protests, would have shipped bitumen from Alberta's oilsands through a pipeline hub in the Hardisty area to U.S. Gulf Coast refineries.

A group of environmental, land and tribal organizations — including the Sierra Club and 350.org — issued a statement saying the company was "throwing the corporate equivalent of a temper tantrum" in hopes of "forcing American taxpayers to pay them billions of dollars to recoup their losses."

The group called it an "ill-fated project that they spent seven years trying to bully the U.S. into letting them build."

Greenpeace Canada agreed, saying the company's arguments do not add up.

"Their legal argument is, since no president before has taken serious action on climate change, Obama shouldn't be allowed to either," Keith Stewart of Greenpeace Canada said.

"And that is an argument that is not going to pass muster in the 21st century."

Legal experts weigh in

Toronto-based lawyer Lawrence Herman said TransCanada could argue the decision to reject the project wasn't made entirely on its merits.

"Their position is the decision was made on political grounds related to legacy issues, presidential politics, etc. and I think they have a pretty strong case in that regard," he said.

"This could go on for several years before you finally get a decision."

Another legal expert specializing in international trade said TransCanada has a strong case to recuperate money it has already spent.

"They could not just wait because if it was approved they would be behind the eight ball, so they had to spend money during the seven-year process," Cyndee Cherniak of LexSage said.

"And so what they spent has now basically been tantamount to expropriation."

She also said the odds are historically against TransCanada, as the U.S. has a 100 per cent winning percentage in NAFTA claims, but there could be a first. 

TransCanada said it had every reason to expect the pipeline would be approved since it met the same criteria as previous pipelines that were sanctioned.

"The denial reflected an unprecedented exercise of presidential power and intruded on Congress's power under the constitution to regulate interstate and international commerce," TransCanada said.

See the lawsuit documents that TransCanada filed here.

See TransCanada's documents showing intent to file a NAFTA challenge here.