Keystone XL's Prospects Renewed by Transcanada Lawsuits
Oil logistics developer Transcanada has filed two new federal suits alleging that the Obama administration improperly turned down its permit application for the transnational Keystone XL oil pipeline. The suits seek $15 billion in damages from the U.S. government.
“In its decision, the U.S. State Department acknowledged the denial was not based on the merits of the project,” said Transcanada in a statement. “Rather, it was a symbolic gesture based on speculation about the perceptions of the international community regarding the administration’s leadership on climate change and the president’s assertion of unprecedented, independent powers.”
The administration declined the application in November, saying that it would have had a “negligible impact on our energy security . . . would not lead to lower gas prices for American consumers . . . [and] would facilitate transportation into our country of a particularly dirty source of fuel.” Secretary of State John Kerry said that “the critical factor in my determination was this: moving forward with this project would significantly undermine our ability to continue leading the world in combating climate change.”
The U.S. State Department's analysis of the project found that Canadian tar sands oil carried by the pipeline would lead to an additional 1 million to 27 million tons of CO2 emissions each year over the use of equivalent oil volumes from less carbon-intensive upstream production. But the administration did not cite the material qualifications of the pipeline's design, engineering or planned route as primary factors in its decision.
The first Transcanada lawsuit alleges that this action violated provisions of the North American Free Trade Agreement (NAFTA). Transcanada claims that its permit application had met all the criteria used to evaluate and approve earlier cross-border pipelines, and that the rejection was “arbitrary and unjustified.”
“TransCanada has undertaken a careful evaluation of the Administration’s action and believe there has been a clear violation of NAFTA . . . in these circumstances,” TransCanada spokesman Mark Cooper said in a statement.
The second lawsuit claims that the administration improperly assumed the constitutional authority of Congress to regulate interstate and international commerce when it rejected the permit application. Both houses had earlier passed a bill approving the construction of the pipeline, which the president vetoed, in addition to his rejection of Transcanada's State Department permit application.
The pipeline design would have moved 800,000 barrels a day from Canada to a network of pipelines in the midwest, connecting oil sand and shale oil developments in the north to Gulf Coast refineries – and, now that the oil export ban has been lifted, to Gulf Coast tanker terminals.
Transcanada also announced Wednesday that following the permit denial it expects a write-down of nearly $3 billion related to investments in the Keystone XL.