TransCanada Corporation has opened one of the largest trade appeals ever brought against the United States, seeking to recoup US$15 billion tied to President Barack Obama’s rejection of the Keystone XL oil pipeline.
The Canadian company intends to start a claim for costs and damages under the North American Free Trade Agreement (NAFTA) against the US after President Obama’s rejection of the $8 billion project in November, according to documents filed in court.
Proponents of the pipeline frustrated with the protracted US review have floated a NAFTA challenge as an option for years.
Bloomberg reports the case has merit, according to trade specialists who point to political reasons for President Obama’s denial following seven years of US study.
“This does not look like a kosher process when it comes to pipeline approval,” said Todd Weiler, an Ontario-based attorney who focuses on investment treaty law.
TransCanada has a “very strong case” in arguing that Keystone XL did not receive the same standard of review as other pipelines that have been approved, and it may take three to four years to be resolved by a three-person arbitration panel, he said.
A spokesman for the State Department told Bloomberg by e-mail, “We do not comment on pending litigation.”
Keystone XL would have carried as much as 830,000 barrels a day and spanned 1897 kilometres from Alberta to Nebraska, before connecting to an existing pipeline network feeding crude to US Gulf Coast refineries.
The project’s rejection was a victory for environmental advocates, who sought to couple the pipeline with campaigns to combat climate change.
“These lawsuits are about a foreign company trying to undercut safeguards that protect the American people.”
Meanwhile, Keystone’s backers praised the company for filing the appeal.
Backers said Keystone XL would create thousands of jobs, increase US energy security, and help an important ally in Canada develop its energy resources.
TransCanada has a legitimate argument that President Obama ruled on Keystone XL based on political considerations, not on the pipeline itself or the merits of the project, said Rob Merrifield, a former Conservative Canadian politician who served as an envoy for the project in Washington for both the federal and Alberta governments.
Investors had already written off the project, said Martin Pelletier, managing director and portfolio manager at TriVest Wealth Counsel in Calgary, who does not own TransCanada shares.
Appealing the US rejection in court and through NAFTA could help the company keep the project alive politically until President Obama’s successor is named, he said.
Mr Pelletier is among observers who have suggested TransCanada would have better luck winning approval for Keystone XL by re-applying after the 2016 presidential election, particularly if a Republican wins, because of the party’s support of the line.
“They’ve got nothing to lose,” Mr Pelletier said.