TransCanada sues for US$15bn over XL refusal

TRANSCANADA is suing the US for more than US$15bn over the Obama Administration’s decision to block the construction of its Keystone XL oil pipeline.

It claims the refusal in November to grant a Presidential permit was “arbitrary and unjustified”. It has also filed a lawsuit arguing that President Barack Obama exceeded his constitutional powers when he rejected the US$8bn project.

It is seeking US$15bn in compensation using the North Atlantic Free Trade Agreement (NAFTA), which should have seen its application receive the same treatment as previous projects that were approved. Keystone XL – the subject of a heated campaign by environmentalists to prevent its construction – would have linked oilsands production in Canada with refineries in the US.

TransCanada says the rejection was a “symbolic gesture” based on how the international community would regard the Administration's leadership on climate change.

Previous successful applications include the existing Keystone pipeline that was approved in less than two years. In comparison, the unsuccessful application for an extension dragged on for seven.

The lawsuits look set to reignite a polarised debate that pitched environmentalists claiming approval stood in the way of a transition to a low carbon future against proponents arguing a rejection would damage the economy.

When announcing the decision in November, Obama said the pipeline had played “an overinflated role” in the political debate and too often had been used as a “campaign cudgel by both parties rather than a serious policy matter.”

The odds of success look stacked against TransCanada given that the US government has never lost a NAFTA dispute. However, it’s expected that Obama’s decision could be overturned if a Republican president is elected later this year.