The Keystone Steele City pumping station, into which the planned Keystone XL pipeline was to connect to, is seen in Steele City, Neb., in December.

The Keystone Steele City pumping station, into which the planned Keystone XL pipeline was to connect to, is seen in Steele City, Neb., in December. Nati Harnik/AP

Firm Tied to Keystone XL Sues Obama Administration Over Rejected Pipeline

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

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 de­cisionas 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.