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January 11, 2016

$15 Billion At Stake: TransCanada Sues U.S. Government, Argues Obama Administration’s Keystone Pipeline Rejection Broke International Law

Two months after President Barack Obama rejected TransCanada’s Keystone XL Pipeline project, the company filed two lawsuits against the U.S. government. 

According to TransCanada’s first suit, an investor-state dispute settlement (ISDS) case that will be heard by arbitrators selected by TransCanada and the Canadian government, the president’s decision violates the North American Free Trade Agreement (NAFTA) because the Obama administration has approved similar pipeline projects and opposition to the Keystone project was politically motivated. TransCanada said, “The delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the Administration’s own studies, and not based on the merits of Keystone’s application.” 

In the suit, TransCanada asked for $15 billion in compensation from the U.S. government. According to University of Cambridge scholar Todd Tucker, TransCanada “might win” its claim even though the United States has not lost an ISDS case before. (Tucker explains the arbitrators who will decide the suit “lack the formal power to overturn host state policies, so instead order the payment of cash compensation that can then be enforced in national courts.) 

TransCanada also filed a lawsuit in a federal court in Houston last week. In that case, TransCanada argued the Keystone rejection represented and “unprecedented assertion of Presidential power and that it intruded on the power of the United States Congress under the U.S. Constitution to regulate interstate and international commerce.” The company didn’t seek damages in that case, but instead asks the court to rule “that the denial of the pipeline permit was without legal merit and that the federal government officials named in the lawsuit not be allowed to enforce the White House’s decision to not proceed with the pipeline.” 

As the U.S. Chamber of Commerce reminded readers last week, the Keystone Pipeline would:

  • Add $3.4 billion to U.S. GDP;
  • Generate $55.6 million in annual property taxes in the first year of operation alone; and
  • Create 42,000 new direct and indirect jobs.