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Keystone lawsuit

January 7, 2016

Last November, President Obama decided not to approve the Keystone tar-sands oil pipeline project. Now TransCanada is suing the US government in an attempt to force a reversal of the decision.

USA Keystone Pipeline project
Image: Reuters/A. Cullen

TransCanada announced it had lodged the lawsuit in a federal court in Houston, Texas, the oil capital of the US. The lawsuit took the position that rejection of a permit to build TransCanada's Keystone XL pipeline was unconstitutional, and asked the court to invalidate the permit denial and rule that no future US President can block construction.

In a separate legal action under the North American Free Trade Agreement (NAFTA), the company claimed the permit denial was "arbitrary and unjustified." Chapter 11 of NAFTA gives investors the right to make claims against governments. However, unlike the governments of Canada and Mexico, the US government has never lost a Chapter 11 case.

Keystone XL Pipeline protest
Some Native Canadian and American indigenous groups have joined Greens in anti-Keystone XL protestsImage: picture alliance/Abaca

The NAFTA suit demanded $15 billion (13.8 billion euros) in damages. TransCanada said it had already spent $3.1 billion in the Keystone XL project, and that it expected to announce a balance-sheet write-down of $2.9 billion in after-tax write-offs in consequence to the US government's having stopped the project.

In filing the NAFTA claim, TransCanada said it had "had every reason to expect its [XL pipeline development] application would be granted," since the project had met the same criteria the US State Department used when approving other similar cross-border pipelines.

The company said Keystone XL's rejection, announced just before the COP21 UN climate negotiations in Paris late last year, was "a symbolic gesture" aimed at burninshing the Obama administration's reputation for leadership on climate policy.

One more pipeline

TransCanada, an energy company based in Calgary in the province of Alberta, Canada, is the developer and operator of a large network of gas pipelines connecting most of the major gas supply basins in North America - several tens of thousands of kilometers of gas pipeline in total.

Alberta tar sands
Alberta tar sands are seen as a giant environmental disaster by opponents, laying waste to landscapes, polluting waters and generating massive CO2 releasesImage: dapd

It is also the owner of 3,461 km (2,151 miles) of oil pipeline, including the Keystone pipeline system that carries crude oil derived from tar sands bitumen from the Western Canadian Sedimentary Basin in the provinces of Alberta and Saskatchewan down to refineries in the US Midwest.

The Keystone pipeline system has four phases. Phases 1, 2, and 3a are complete and operational. The first stretch of Phase 4, called Keystone XL, would have followed the same route as Phase 1, adding a larger-diameter pipeline, before departing from the Phase 1 route in order to find a shorter path southeastward across the US border.

Keystone XL would have transported about 830,000 barrels of crude oil per day, with refineries on the Texas coast the ultimate destination. The planned route would have started at Hardisty, Alberta, crossed the US border at Morgan, Montana, and traveled through Baker, Montana, where US-produced crude oil would be added to the pipeline. It would then travel through South Dakota and Nebraska, where it would join existing Keystone pipelines at Steele City.

Dirtier than average

Phase 4 was rejected by the Obama administration after six years of review and an intense lobbying campaign by environmental groups, including 350.org, a group focused on trying to stop large-scale global climate disruption due to excessive dumping of carbon dioxide into the atmosphere as a result of fossil fuels burning.

Oil derived from bitumen or "tar sands" in Canada generates a great deal of water pollution and significantly more CO2 pollution that conventional oil production, environmental scientists say. Over the past several years, blocking Keystone XL became a cause celebre amongst green groups - a litmus test of the North American environmental movement's ability to hinder fossil fuel extraction from Canada's tar sands.

"The [law]suit is a reminder that we shouldn't be signing new trade agreements like the TransPacific Partnership [TPP] that allow corporations to sue governments that try to keep fossil fuels in the ground," said Jason Kowalski, policy director of 350.org.

In Ottawa, a spokesman for the Canadian foreign ministry said the Canadian government "has no role in this disbute."

nz/hg (dpa, Reuters)

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