Commentary

TransCanada Sues US Gov’t: US Taxpayers Could Be on the Hook for Obama’s Blunder

Nicolas Loris
By Nicolas Loris | January 7, 2016 | 4:49 PM EST

Miles of pipe for the stalled Canada-to-Texas Keystone XL pipeline are stacked in a field near Ripley, Okla. (AP Photo/Sue Ogrocki)

TransCanada, the company that should have built the Keystone XL pipeline years ago, is filing a claim under Chapter 11 of the North American Free Trade Agreement (NAFTA) and is also suing the federal government in U.S. court because of the Obama administration’s rejection of the project.

TransCanada first applied for the permit to build Keystone XL in 2008. At the time, it was not considered especially controversial. After all, America already had more than half a million miles of crude oil, petroleum, and natural gas pipelines—including a Keystone Pipeline that runs from Alberta to Illinois. Keystone XL would have generated tens of thousands of construction jobs and safely delivered up to 830,000 barrels of American and Canadian crude oil to the Gulf Coast for refining.

But Obama dismissed the economic value of the pipeline and rejected TransCanada’s application.

Unlike the failures of government-funded green energy boondoggles, building and operating the Keystone XL pipeline should have created jobs and grown the economy.

Instead, much like the government’s failed attempt at picking which politically-connected companies should succeed, the Obama administration’s rejection of Keystone XL could cost taxpayers. According to TransCanada’s press release:

“Through the NAFTA claim, TransCanada will be seeking to recover more than US $15 billion in costs and damages that it has suffered as a result of the U.S. Administration’s breach of its NAFTA obligations.

“The NAFTA claim asserts that TransCanada had every reason to expect its application would be granted as the application met the same criteria the U.S. State Department applied when approving applications to construct other similar cross-border pipelines – including the existing Keystone pipeline, which was approved in under two years, in contrast with the seven years the Administration took to make a decision on Keystone XL. The Keystone Pipeline System has now safely transported more than 1.1 billion barrels of Canadian and American oil through Canada and the United States.”

Todd Weiler, a lawyer specializing in international treaty law, believes TransCanada has a “very strong case,” stating that “this does not look like a kosher process when it comes to pipeline approval.”

The Keystone Steele City pumping station, into which the planned Keystone XL pipeline is to connect to, is seen in Steele City, Neb., Tuesday, Nov. 3, 2015. (AP Photo/Nati Harnik)

If the international arbitration panel finds in favor of TransCanada, U.S. taxpayers would be on the hook for the bill. However, NAFTA and other free trade agreements do allow for legitimate environmental standards.

In addition to the NAFTA arbitration claim, TransCanada is suing the federal government in U.S. court, claiming that the president lacked authority to block the project. The company wants the decision reversed.

Obama’s environmental and climate reasons for denying Keystone XL are just as off base as his economic ones. In the statement rejecting Keystone XL, Obama said, “America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership.”

The State Department’s final environmental impact statement concludes that the Canadian oil is coming out of the ground whether Keystone XL is built or not, so the difference in greenhouse gas emissions is minuscule.

No matter your position on climate change, Keystone XL wouldn’t make a difference on that issue. State Department’s multiple environmental reviews found that Keystone XL would pose minimal environmental risk to soil, wetlands, water resources, vegetation, fish, and wildlife. But the Obama administration still rejected the permit application.

Whatever happens remains to be seen and an outcome could take years. By the time the arbitrators make a decision, a new administration and Congress could approve of the project. But the NAFTA challenge provides another opportunity to point out that the Obama administration got this one completely wrong.

Nicolas Loris, an economist, focuses on energy, environmental and regulatory issues as the Herbert and Joyce Morgan fellow at The Heritage Foundation.

Editor's Note: This piece was originally published by The Daily Signal.