TransCanada Launches Two Legal Challenges to Obama’s Rejection of Keystone

Company tries to revive its controversial pipeline project by appealing through NAFTA as well as the U.S. courts.

TransCanada is fighting President Obama's rejection of its controversial Keystone XL project
TransCanada made it clear it is not done fighting President Obama's rejection of the Keystone XL pipeline. Credit: Wikimedia

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Moving on two new legal fronts to overturn President Barack Obama’s rejection of its Keystone XL pipeline, TransCanada Corp. on Wednesday launched a free-trade challenge and a federal lawsuit to salvage the stranded project.

The first maneuver, under provisions of the North American Free Trade Agreement, (NAFTA) seeks compensation of $15 billion – a prize rich enough not just to repay the money already invested, but also to compensate for the loss of future income investors had expected.

The second, a constitutional challenge to the President’s authority over cross-border pipelines, contended that his act “reflected an unprecedented assertion of Presidential power and that it intruded on the power of the United States Congress.”

Either action would take years to bear any fruit – long past the day next year when a new president and a new Congress will be sworn in. If the Republicans were to retain a majority and win the White House, they could revive the project and make these cases moot.

The pipeline’s opponents called the company’s move a brazen effort to punish American taxpayers for Obama’s decision in November that it was not in the national interest of the United States to proceed with the project.

“Even for TransCanada this is beyond the pale,” said Tiernan Sittenfeld of the League of Conservation Voters.  “It’s long past time for them to accept the fact that their dirty and dangerous pipeline will never be built.”

But the filings demonstrate that TransCanada remains determined to use every arrow in its legal quiver before giving up on a pipeline that, if it is ever approved, would provide steady cash flow for decades to come. In a financial statement, it said it was writing down billions of dollars to reflect the pipeline’s rejection, but also said its record of providing rising dividends to investors remains secure despite a weak oil market.

TransCanada, in its trade-related filings, said Obama’s decision was “based on politics, not the merits of the application,” and called it “arbitrary, discriminatory and expropriatory.”

It is hard to say which of the company’s two tosses of the legal dice carries longer odds.

Is it the chance that a prolonged constitutional challenge, perhaps carried all the way to the Supreme Court, would strip future presidents of the power to unilaterally block this kind of project? In that case, the current Congressional majority that favors fossil fuels would gain ground in a perennial power struggle. But even then, a pro-climate president would retain veto power to fight projects with hefty carbon footprints, whether or not they involved border crossings.

Or is it the hope that KXL’s investors would win a financial jackpot from an arbitration panel established under NAFTA? This device, operating outside normal judicial channels, is viewed as a dangerous loose cannon by green groups opposed to putting trade expansion above environmental protection. They reacted to TransCanada’s filings by warning that another free trade agreement, the new Trans-Pacific Partnership (TPP), is even more alarming than NAFTA in undermining pollution safeguards, including action on climate change.

The company complained bitterly that it has already lost billions of dollars to a “decision tainted by politics,” and said it is “prepared for a lengthy process that could take several years.”

A coalition of environmental groups that fought the KXL project for seven years denounced TransCanada’s bid – and decried the use of a trade agreement to force a disputed project past legal and political obstacles

“This lawsuit will do nothing to change Keystone’s fate,” the coalition, including the Sierra Club,, the Natural Resources Defense Council and others, predicted in a statement.

“It will merely serve to remind the American people that companies like TransCanada are working against their interests, and that trade agreements like TPP would only strengthen their ability to do so.”

The latest litigation opens yet another chapter in the long-running saga of the giant KXL pipeline, first proposed in 2008. It was designed to carry hundreds of thousands of barrels a day of high-carbon tar sands crude oil across hundreds of miles of sensitive terrain toward oil refineries and export terminals on the Gulf Coast.

The fight has featured clashes with landowners, the emergence and burgeoning of a grassroots movement into a potent political force, litigation at the state level, pitched partisan fights in Congress, and eventually the iconization of the KXL line as a litmus test of Obama’s commitment to the fight against climate change.

TransCanada argues that despite the role of pipelines in Canadian ambitions to  expand production of high-carbon tar sands for export, Obama was wrong to link TransCanada’s project to the resulting greenhouse gas emissions, and that he had no right to reject it on climate grounds.

TransCanada’s federal lawsuit hopes to exploit the enthusiasm for Keystone among Congressional Republicans, who along with some Democrats from fossil fuel states have favored the pipeline. It argues that Obama’s approach to the Keystone line has violated the doctrine of separation of powers between the legislative and executive branch, and for the first time invites the judicial branch to settle the case.

The White House’s power to review energy projects that cross international borders is not spelled out in the Constitution, which grants Congress broad powers over international commerce, nor established under any particular law. It has been upheld based on the inherent foreign policy powers of the executive, but never brought directly before the Supreme Court.

“While the President has traditionally granted permits on narrow, established grounds, any such power does not exist when Congress has acted to the contrary or when the decision is based on the unprecedented and symbolic grounds that are the foundation of the denial in this case,” TransCanada argued.

No such Constitutional challenge was raised when Congress passed a law in 2011 with a fixed deadline for a decision on KXL. Obama signed the bill but promptly rejected TransCanada’s application. Altering the route, and building a southern leg that needed no permit, TransCanada filed a new application and the battle simply dragged on.

Later, when Congress passed a law to ram the project through whether or not the president approved, Obama vetoed the bill, and there weren’t enough votes in the Senate to override him.