Company Behind Keystone XL Sues Obama Administration Over Rejected Pipeline

Domestic and international challenges extend saga over controversial tar-sands project.

Demonstrators gather in front of the White House to celebrate President Obama's rejection of the Keystone XL pipeline on Nov. 6. (AP Photo/Evan Vucci)

The company behind the Keystone XL pipeline announced Wednesday that it is suing the Obama administration over its rejection of the controversial tar-sands pipeline.

TransCanada has filed suit in a federal court, claiming that President Obama’s rejection of the project in November represented an “unprecedented exercise of Presidential power” and overstepped Congress’s power to regulate interstate and international commerce.

The company also said it will separately initiate a claim under the North American Free Trade Agreement to recover more than $15 billion in damages that the company says it suffered “as a result of the U.S. administration’s breach of its NAFTA obligations.”

President Obama in November rejected the pipeline after a seven-year review process, saying that its potential impact on climate change far outweighed any economic benefits. Coming just weeks before the opening of the United Nations climate talks in Paris, the White House framed the decision as a clear symbol to the rest of the world of the country’s climate leadership.

“Frankly, ap­prov­ing this pro­ject would have un­der­cut that glob­al lead­er­ship,” Obama said at the time. “And that’s the biggest risk we face—not act­ing.”

TransCanada said that rationale doesn’t hold water and it is going to sue to keep the project alive.

“Misplaced symbolism was chosen over merit and science—rhetoric won out over reason,” the company said in a blog post explaining its lawsuit.

The pipeline would have sent oil from Canadian oil sands to Gulf Coast refineries. Environmentalists have long argued that the pipeline would be “game over” for the climate by spurring more development of carbon-intensive oil sands. Republicans and the oil industry pushed for its construction, saying it would help free America from its reliance on foreign oil and create jobs along the route.

TransCanada’s suit—filed in a federal court in Texas—also charges that the White House superseded Congress’s authority to determine whether a cross-border pipeline should be developed. The House and Senate last year passed a bill that would have approved the project, but it was vetoed by the White House on the grounds that it was interfering with the State Department’s permitting process.

Separately, the company announced its plans to submit an arbitration claim under Chapter 11 of NAFTA to take back billions in damages and costs. The lengthy review process, the company said, required heavy spending to keep the pipeline route alive.

The rejection, TransCanada added, deprived investors “of the value of billions of dollars of investment in the project.”

The NAFTA charge could be a tough sell—the U.S. has never lost a NAFTA claim since the treaty was signed in 1994.

Under the NAFTA process, TransCanada sent a notice of intent to submit a claim to the State Department, but it must wait six months from the date of the Nov. 7 denial before it can file an arbitration request. The company can negotiate with the administration in the meantime.

Earlier this week, South Dakota state regulators once again approved a portion of the pipeline that would go through the state, in spite of the federal rejection.