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Andy Tully

Andy Tully

Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com

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TransCanada Sues U.S. For $15 Billion Over Keystone XL Rejection

TransCanada Corp., which lost its bid to build the Keystone XL oil pipeline from western Canada through the United States to the Gulf Coast, is taking a two-pronged approach to avenging the decision. On Wednesday it asked a U.S. federal court to reverse President Obama’s rejection of the project, and it’s also seeking $15 billion in damages under the North America Free Trade Agreement (NAFTA).

This dual approach is necessary because, under NAFTA, the trade pact for Canada, Mexico and the United States, does not allow a signatory to sue for the reversal of a decision in which it believes it was subject to discrimination. NAFTA does, however, allow the parties to sue for damages in such cases.

That’s why TransCanada filed a second lawsuit simultaneously in U.S. District Court in Houston – not for damages, but to get a federal judge to reverse Obama’s decision, which the company says exceeded his powers under the U.S. Constitution. Related: The Next Big Trend In Wind Energy?

In a statement, TransCanada, based in Calgary, called the president’s decision “arbitrary and unjustified,” and added, “TransCanada has been unjustly deprived of the value of its multibillion-dollar investment by the U.S. administration’s action.” It said the decision was “based on speculation about the [false] perceptions … regarding the [U.S.] administration’s leadership on climate change.”

In its claim for damages under NAFTA, TransCanada said it “had every reason to expect its application would be granted” because it had met the same criteria that the United States had applied when it approved similar cross-border pipelines.

The $8 billion Keystone XL would have moved up to 830,000 barrels of oil from the tar sands of Canada’s western province of Alberta with U.S. refineries on the coast of the Gulf of Mexico, a route spanning nearly 3,500 miles. The oil then would be consumed either in the United States or exported. Related: Oil Touches $32 Handle As Panic Takes Hold Of Chinese Markets

Environmentalists had complained that oil sands are a particularly dirty form of crude, and the U.S. State Department, which must advise the president on such international business deals, spent seven years studying the case. Obama finally ruled against the project in November, saying approval wasn’t consistent with U.S. leadership in the fight against climate change.

The White House declined comment on TransCanada’s actions, referring questions to the State Department. A spokesman there said only, “We do not comment on pending litigation.”

Obama’s rejection of Keystone XL has been welcomed by environmentalists, who condemned TransCanada’s efforts to seek redress. Anthony Swift, the Canada project director for the Natural Resources Defense Council, called the Canadian company “wrong to try to force American taxpayers to pay for its mistakes.” Related: These Two New Sources Of Financing Give Hope To The Energy Industry

Supporters of the project praised TransCanada for filing the appeals, saying the pipeline would have improved U.S. energy security, created thousands of jobs in both Canada and the United States, and would have helped Canada develop its energy industry further.

One such supporter is Rob Merrifield, a former Conservative member of the Canadian Parliament from Yellowhead in Alberta’s oil country who also lobbied for the project in Washington. He’s now a senior adviser with a consulting firm in Alberta, the Canadian Strategy Group. He says he not only supports TransCanada’s effort, but also believes it will win eventually.

“I’m betting for TransCanada on this one,” Merrifield said, “and certainly hoping they win the case.”

By Andy Tully of Oilprice.com

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