TransCanada Files$15 Billion Claim Over Keystone XL

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By Peter Menyasz

June 27 — TransCanada Corp. is seeking $15 billion in compensation from the U.S. for allegedly unfair treatment of its proposal to build the Keystone XL oil pipeline.

The arbitration claim alleges that the U.S. government unfairly delayed its decision for seven years to collect information that ultimately played no role in its rejection of the project. The company argues that the rejection was solely intended to make the U.S. appear strong on climate change despite the State Department's conclusion that it would have no significant environmental impact.

The decision made Nov. 6, 2015, by the Obama administration could have been made immediately after the project application was filed in September 2008, the Calgary-based pipeline company said in a June 24 filing under the investor-state dispute provisions in Chapter 11 of the North American Free Trade Agreement. A copy of the filing was provided to Bloomberg BNA on June 27.

False Belief

“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,” it said.

The claim seeks damages totaling more than $15 billion, plus interest from the date of breach and the costs of conducting the arbitration, including TransCanada's legal fees and other expenses.

TransCanada will not comment on the filing or the arbitration process because it is a legal challenge, company spokesman Terry Cunha said June 27. “We are going to let our official filing speak for itself,” Cunha told Bloomberg BNA in an email.

No Other Denials

Rejection of the Keystone XL project is particularly disturbing because, to TransCanada's knowledge, the State Department has never previously denied an application for a Presidential Permit for a cross-border pipeline, the company said in its filing. Previous pipelines have been approved based on factors that, if applied to the Keystone application, would have resulted in approval, it said.

The Keystone XL project was not controversial when TransCanada filed its project application in 2008, but became highly politicized after a series of high-profile accidents in the oil and gas sector, although none involved TransCanada, it said.

“The United States also allows import and domestic transportation of hydrocarbons via other modes of transportation without any review of greenhouse gas emissions (or perceptions thereof) associated with those products,” it said. “By delaying the processing of Keystone's application for the Keystone XL Pipeline, and applying new and arbitrary criteria in deciding to deny the application, the United States discriminated against, and significantly damaged, [the] claimants.”

The filing alleges that the U.S. rejection of Keystone XL violates its NAFTA commitments under the agreement's provisions promising Canadian investors national treatment (Article 1102), most-favored-nation treatment (Article 1103), minimum standard of treatment (Article 1105), and protection against uncompensated expropriation (Article 1110).

TransCanada said it filed Jan. 6, 2016, a notice of intent to seek arbitration under NAFTA Chapter 11, and filed the arbitration claim only after unsuccessful negotiations with the U.S. government that started in April 2016.

TransCanada also filed a lawsuit in U.S. Federal Court in Houston, saying President Obama's decision to deny construction of the Keystone XL pipeline exceeded his power under the Constitution.

Keystone XL hit would have spanned 1,179 miles (1,897 kilometers) from Alberta through three states — Montana, South Dakota, and Nebraska — before connecting to an existing pipeline network feeding crude to U.S. Gulf Coast refineries. The line would have carried as much as 900,000 barrels of oil a day, including some from North Dakota's Bakken shale deposits.

Environmental Concern

The possibility that an arbitration panel could compensate TransCanada for rejection of Keystone XL demonstrates the anti-democratic nature of free trade agreements like NAFTA and the Trans-Pacific Partnership, Bill McKibben, co-founder of environmental group 350.org, a major critic of the pipeline, said June 27.

“The fight against Keystone was democracy at its best—a defense of science and sanity that involved millions upon millions of Americans,” McKibben said in a statement. “Anyone who supports the TPP after this has no excuses—TransCanada is making entirely clear what `free trade’ is all about’.”

To contact the reporter on this story: Peter Menyasz in Ottawa at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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