TransCanada files NAFTA claim over Keystone XL

OREANDA-NEWS. June 28, 2016. Canadian midstream company TransCanada has moved ahead with a \\$15bn claim against the US for damages related to President Barack Obama's decision to block the 830,000 b/d Keystone XL crude pipeline.

TransCanada on 24 June formally requested arbitration for claims that the Obama administration unfairly singled out and rejected the Keystone XL pipeline last year over concerns related to the project's greenhouse gas emissions. The company filed its claim under the North American Free Trade Agreement (NAFTA), under which the US has never lost a case.

TransCanada in its legal filing said the US State Department, which oversaw the company's request for a presidential cross-border pipeline permit, unjustifiably discriminated against the pipeline using new and arbitrary criteria.

The State Department in its denial of the permit said it was worried approving Keystone XL would undermine US leadership in ongoing climate negotiations, given the public's perception that the pipeline was particularly damaging to the environment. The project would have transported crude from Alberta's oil sands into the US.

But the company said other fossil fuel projects approved in recent years did not face the same level of scrutiny. TransCanada offers as an example the administration's 2009 decision to approve Enbridge's 230,000 b/d Alberta Clipper crude pipeline.

If the same approach had been used in evaluating the Keystone XL pipeline, TransCanada said "there is no question that the State Department would have approved the presidential permit" for Keystone XL. The company said the agency "radically altered is approach" and used the perception of third parties to issue its first-ever denial of a cross-border pipeline permit.

Under NAFTA's procedures for filing a claim, TransCanada and the State Department will each appoint their own arbitrator and work together to agree on a third. They will then set up a schedule to hear the case.

TransCanada did not have an estimate for how long the arbitration process might take, but said it is prepared for "a lengthy challenge." The company has separately sued the State Department in a federal court in Texas aiming to overturn its decision to reject the cross-border pipeline.

The State Department does not comment on pending litigation.