Company Behind Keystone XL Sues Obama Administration Over Rejected Pipeline

Domestic and international challenges extend saga over controversial tar-sands project.

Demonstrators gather in front of the White House to celebrate President Obama's rejection of the Keystone XL pipeline on Nov. 6.
AP Photo/Evan Vucci
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Jan. 6, 2016, 5:21 p.m.

The com­pany be­hind the Key­stone XL pipeline an­nounced Wed­nes­day that it is su­ing the Obama ad­min­is­tra­tion over its re­jec­tion of the con­tro­ver­sial tar-sands pipeline.

Tran­sCanada has filed suit in a fed­er­al court, claim­ing that Pres­id­ent Obama’s re­jec­tion of the pro­ject in Novem­ber rep­res­en­ted an “un­pre­ced­en­ted ex­er­cise of Pres­id­en­tial power” and over­stepped Con­gress’s power to reg­u­late in­ter­state and in­ter­na­tion­al com­merce.

The com­pany also said it will sep­ar­ately ini­ti­ate a claim un­der the North Amer­ic­an Free Trade Agree­ment to re­cov­er more than $15 bil­lion in dam­ages that the com­pany says it suffered “as a res­ult of the U.S. ad­min­is­tra­tion’s breach of its NAF­TA ob­lig­a­tions.”

Pres­id­ent Obama in Novem­ber re­jec­ted the pipeline after a sev­en-year re­view pro­cess, say­ing that its po­ten­tial im­pact on cli­mate change far out­weighed any eco­nom­ic be­ne­fits. Com­ing just weeks be­fore the open­ing of the United Na­tions cli­mate talks in Par­is, the White House framed the de­cision as a clear sym­bol to the rest of the world of the coun­try’s cli­mate lead­er­ship.

“Frankly, ap­prov­ing this pro­ject would have un­der­cut that glob­al lead­er­ship,” Obama said at the time. “And that’s the biggest risk we face—not act­ing.”

Tran­sCanada said that ra­tionale doesn’t hold wa­ter and it is go­ing to sue to keep the pro­ject alive.

“Mis­placed sym­bol­ism was chosen over mer­it and sci­ence—rhet­or­ic won out over reas­on,” the com­pany said in a blog post ex­plain­ing its law­suit.

The pipeline would have sent oil from Ca­na­dian oil sands to Gulf Coast re­finer­ies. En­vir­on­ment­al­ists have long ar­gued that the pipeline would be “game over” for the cli­mate by spur­ring more de­vel­op­ment of car­bon-in­tens­ive oil sands. Re­pub­lic­ans and the oil in­dustry pushed for its con­struc­tion, say­ing it would help free Amer­ica from its re­li­ance on for­eign oil and cre­ate jobs along the route.

Tran­sCanada’s suit—filed in a fed­er­al court in Texas—also charges that the White House su­per­seded Con­gress’s au­thor­ity to de­term­ine wheth­er a cross-bor­der pipeline should be de­veloped. The House and Sen­ate last year passed a bill that would have ap­proved the pro­ject, but it was ve­toed by the White House on the grounds that it was in­ter­fer­ing with the State De­part­ment’s per­mit­ting pro­cess.

Sep­ar­ately, the com­pany an­nounced its plans to sub­mit an ar­bit­ra­tion claim un­der Chapter 11 of NAF­TA to take back bil­lions in dam­ages and costs. The lengthy re­view pro­cess, the com­pany said, re­quired heavy spend­ing to keep the pipeline route alive.

The re­jec­tion, Tran­sCanada ad­ded, de­prived in­vestors “of the value of bil­lions of dol­lars of in­vest­ment in the pro­ject.”

The NAF­TA charge could be a tough sell—the U.S. has nev­er lost a NAF­TA claim since the treaty was signed in 1994.

Un­der the NAF­TA pro­cess, Tran­sCanada sent a no­tice of in­tent to sub­mit a claim to the State De­part­ment, but it must wait six months from the date of the Nov. 7 deni­al be­fore it can file an ar­bit­ra­tion re­quest. The com­pany can ne­go­ti­ate with the ad­min­is­tra­tion in the mean­time.

Earli­er this week, South Dakota state reg­u­lat­ors once again ap­proved a por­tion of the pipeline that would go through the state, in spite of the fed­er­al re­jec­tion.

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