TransCanada suspends $15B Keystone lawsuit
TransCanada Corp. has suspended a lawsuit against the U.S. government over its contentious Keystone XL pipeline after the proposal was revived last month.
The Calgary-based company has suspended the roughly $15-billion lawsuit for a month following an invitation by U.S. President Donald Trump during his first week in office to resubmit an application to build the pipeline. The company declined to provide further comment.
The one-month delay comes amid uncertainty over whether TransCanada can fulfil a Trump directive compelling the company to manufacture the majority of the pipeline’s steel in the U.S.
“As far as I know the only tweaking he wants to do on the pipeline is on the ‘ made-in-U.S.’ aspect of the pipeline,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington.
A final decision on the proposal “will be determined by (Commerce Secretary) Wilbur Ross having a confab with TransCanada,” he said.
The Council of Canadians, an activist group that opposes the Keystone XL project, said the company is using NAFTA as a “corporate tool.”
“Since TransCanada has suspended the lawsuit — not ended it — the company will always have that sword hanging over the U.S. government if it doesn’t get its way,” Maude Barlow, chairperson of the Council of Canadians, said in a statement.
Much of the pipe needed for the project has already been manufactured, according to TransCanada and several pipe mills contacted by the Financial Post. Most of the mills that manufactured the pipe were based in the U.S., although many use imported raw materials in order to meet company specs. Some of the U.S. pipe mills are owned by foreign conglomerates.
The company stated its intention to file the lawsuit in early 2016, after former U.S. president Barack Obama rejected the proposal. Concerns that the pipeline would significantly add to current atmospheric GHG emissions were a major factor in the decision.
“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,” Obama said in a statement on Nov. 6, 2015, just following the rejection.
Since it was first proposed in 2008, Keystone XL drew increasing protest from U.S. environmental groups and some residents who lived near the planned route.
The company posted a $2.89-billion impairment charge in 2015 in line with the rejection of Keystone XL.
In response to the decision, TransCanada filed two separate lawsuits, one of which was a challenge under the North American Free Trade Agreement (NAFTA) claiming Obama’s decision ignored evidence that the project would not cause a sharp rise in GHG emissions. The other was a constitutional challenge in a U.S. Federal Court in Houston.
A 2014 report by the U.S. State Department said the pipeline was “unlikely to significantly impact” the rate of oilsands production or refiners’ demand for heavy oil in the Southern U.S.
“The politically driven denial of Keystone’s application was contrary to all precedent; inconsistent with any reasonable and expected application of the relevant rules and regulations, and arbitrary, discriminatory and expropriatory,” TransCanada said in its intention to file the NAFTA challenge.
The U.S. government has never lost a NAFTA challenge, though many experts said the company could have made a convincing argument in the case of Keystone XL.
“It was a very strong case in my opinion, but politically it would have been explosive,” said Hufbauer.
Keystone XL would deliver mostly heavy oil nearly 1,900 kilometres from Hardisty, Alta., to Steele City, Neb. From there, oil would be shipped to refineries in the Gulf Coast via existing pipelines.