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TransCanada Seeks Damages After Keystone Rejection

Keystone XL

By MarEx 2016-06-25 19:51:36

TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday.

TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website.

"Unfortunately, the parties were unable to settle the dispute."

TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement (NAFTA) provisions, seeking to recover what it says are costs and damages.

The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast.

Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.

TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

NAFTA, whose arbitration provisions allow companies to challenge governments before international panels, has been a target of recent anti-free-trade sentiments in the United States.

The heads of NAFTA members, Canada, the United States and Mexico, are expected to meet in Ottawa for a North American leaders' Summit on June 29.

Canada was supposed to host the meeting early last year but canceled it amid tension between then Prime Minister Stephen Harper and Obama over the Keystone XL pipeline.

TransCanada and the U.S. Department of Energy did not immediately respond to requests for comment.

Mexican Contract

Earlier this month, TransCanada announced that its joint venture with IEnova, Infraestructura Marina del Golfo (IMG), has been chosen to build, own and operate the US$2.1 billion Sur de Texas-Tuxpan natural gas pipeline in Mexico. 

TransCanada expects to invest approximately US$1.3 billion in the partnership to construct the 42-inch diameter, approximately 800-kilometre (497-mile) pipeline and anticipates an in-service date of late 2018. The pipeline will begin offshore in the Gulf of Mexico, at the border point near Brownsville, Texas and end in Tuxpan, in the state of Veracruz.

The project will be supported by a 25-year natural gas transportation service contract for 2.6 billion cubic feet a day with the Comisión Federal de Electricidad (CFE), Mexico's state-owned power company.