White House Press Secretary Josh Earnest summed up the past seven years accurately when he said during an early November 2015 press briefing “I would venture to say that there’s probably no infrastructure project in the history of the United States that’s been as politicized as this one.”
Yet, just days later on November 6, 2015, despite five studies and 17,000 pages of scientific analysis by the State Department concluding that the project could be constructed with minimal impact to the environment and would not significantly contribute to climate change, Keystone XL was denied. The U.S. Administration acknowledged the decision was based on the perception by the international community about U.S. leadership on climate change.
In other words, misplaced symbolism was chosen over merit and science — rhetoric won out over reason.As a result, in the absence of increased pipeline infrastructure, North American oil will continue to be transported in less safe, more greenhouse-gas intensive ways such as rail and Americans will continue to be reliant on oil from Venezuela, Iraq and Saudi Arabia.
TransCanada followed every Federal and State process over a protracted seven-year review period and Keystone XL passed every economic, environmental and geopolitical test. The U.S. Administration’s decision was arbitrary and unjustified.
After careful consideration, TransCanada announced on January 6, 2016, that it has taken legal action under the North American Free Trade Agreement (NAFTA) and also initiated Constitutional litigation against the U.S. Administration.
Here are some questions and answers to help provide readers with some information about these actions:
Questions & Answers:
1. Is the NAFTA claim separate and distinct from the lawsuit filed in the U.S. Federal Court in Texas? If so, why pursue both courses of action?
- These are two very distinct legal actions. The NAFTA claim seeks recovery of the billions of dollars of damages that TransCanada has suffered as a result of the U.S. Administration’s breach of its NAFTA obligations.
- It specifically 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 similar cross-border pipelines — including the existing Keystone Pipeline, which has safely transported more than 1.1 billion barrels of Canadian and American oil through Canada and the United States. TransCanada invested billions of dollars in the Keystone XL project and the denial of permit deprived TransCanada of the value of that investment.
- The Constitutional challenge alleges that the permit denial reflected an unprecedented assertion of Presidential power and that it intruded on the power of the United States Congress under the U.S. Constitution to regulate interstate and international commerce.
- The federal court suit does not seek damages, but rather a declaration that the permit denial is without legal merit and that no further Presidential action is required before construction of the pipeline can proceed.
2. Why is it necessary for TransCanada to move ahead with this?
- TransCanada has been unjustly deprived of the value of its multi-billion dollar investment by the U.S. Administration’s action. As the Administration candidly admitted, its decision was not based on the merits of the project. Rather, the denial was a symbolic gesture based on speculation about the (false) perceptions of the international community regarding the Administration’s leadership on climate change. The State Department itself concluded on multiple occasions that the Keystone XL project would not significantly increase global greenhouse gas (GHG) emissions, and that alternative methods of transportation would be more GHG intensive than the pipeline.
- As the U.S. State Department highlighted many times, the benefits to local communities through this modern infrastructure project include hundreds of millions of dollars in tax revenue, and tens of thousands of jobs for American men and women.
- The State Department also concluded at least five times that Keystone XL would not have significant impacts to the environment.
- As a prudent business, TransCanada is utilizing the legal avenues it has available to protect its rights.
3. The U.S. has never lost a NAFTA claim. What makes you think you can win this time? Isn’t this a longshot?
- We have undertaken a careful evaluation of the Administration’s action as it relates to NAFTA and believe there has been a clear violation of NAFTA in these circumstances.
4. Why do you think the President overstepped his constitutional authority in denying the permit? Isn’t a “presidential permit” meant to be just that — a decision for the president to make?
- The U.S. Constitution provides that it is for Congress to regulate interstate and foreign commerce. There is no statute that provides for Presidential action concerning approval of an oil pipeline project.
- In the absence of statutory authority, the President has no power to act where Congress has expressed a contrary preference or has not agreed, at least implicitly, with the President’s exercise of power.
- In this case, Congress passed a bipartisan bill approving the construction of this specific pipeline (which the President later vetoed) and has never accepted a Presidential decision made on the basis of the Administration’s action in this case.
- While the State Department has issued permits to construct oil pipelines in the past, acting under a delegation of claimed Presidential authority, it has done so by applying narrow criteria focused on border-related and operational concerns. It has never denied a permit for an oil pipeline of this nature – and never using the rationale that the Administration used here.
5. Is TransCanada still able to able to reapply for a Presidential Permit while it is launching a legal claim?
- Through its actions in launching the Constitutional challenge, TransCanada’s commitment remains to build this project, which is in the economic, environmental and geopolitical interests of the United States.
- TransCanada is still able to apply for a permit and will carefully consider that option, as well.
- Nothing precludes TransCanada from filing a future presidential permit application.
6. How long will this process take? How much will this process cost TransCanada?
- It is difficult to predict length or cost. However, there is no doubt that TransCanada is prepared for a lengthy process that could take several years.
7. Why did TransCanada invest so much in the project before getting regulatory approval?
- Under State Department rules, if construction of a pipeline does not begin within five years after a permit is issued, the permit expires.
- Constructing a pipeline as large and complex as the Keystone XL Pipeline is not a simple task. Even before construction can begin, it is necessary, for example, to secure thousands of land easements, purchase equipment and hundreds of miles of pipe, and enter into long-term contracts with our customers to transport their oil. TransCanada could not wait for the issuance of a Permit before undertaking these and other long lead time activities.
- TransCanada followed exactly the process that it followed in developing and constructing the existing Keystone Pipeline and that is the normal, expected, and well understood process in the industry. It is in fact, industry best practice. Had the Administration not departed from the usual pipeline approval process, the Keystone XL Pipeline would be operating today.
8. Why is TransCanada seeking more than $15 billion in damages?
- This preliminary figure represents the initial estimated loss of value of TransCanada’s investments. TransCanada has invested billions of dollars in assets that have now been rendered useless for the intended purpose, specifically the transportation of Canadian and American oil — as outlined in our contracts. The preliminary damages figure for the NAFTA claim takes into account the lost value of these investments, as well as the lost economic return.
9. If the permit is approved by the next administration, will the legal challenges be dropped?
- TransCanada will not speculate at this time.
10. Could you highlight the next steps and expected timelines associated with the actions under both NAFTA and the U.S. Constitution?
- With regard to the NAFTA claim, TransCanada has sent a Notice of Intent to Submit a Claim to Arbitration to the U.S. State Department. TransCanada has to wait for six months from the date of the denial before filing a Request for Arbitration (RFA). This six-month period provides an opportunity for TransCanada to negotiate with the U.S. Administration. Once an RFA is filed, arbitrators are then selected and those arbitrators establish timelines and further proceedings.
- The Constitutional challenge is a normal federal court case where a complaint is filed, the defendants are served, and the court sets a schedule, usually with input from the parties. TransCanada will seek to move to a decision as promptly as possible. After the federal district court ruling, there is an opportunity to appeal.
11. Does it still make sense for the U.S. to build Keystone XL In light of low oil prices and overproduction of oil in the U.S?
- Yes. TransCanada shippers make that decision and they remain committed to the project. The United States still consumes 19 million barrels of oil every day. The Gulf Coast is still deeply reliant on millions of barrels of imported oil from Venezuela, Iraq and Saudi Arabia and will continue to be so for decades to come. Keystone XL was proposed in 2008 while oil prices were in the high thirties. It made sense then, it made sense when oil was over $100 a barrel and it makes sense today as the safest, least greenhouse-gas intensive and most efficient way to transport needed Canadian and American oil to fuel the lives of Americans.
12. Does it still make sense to construct Keystone XL in light of the Paris climate agreement and reported caps on oil sands production to meet Canadian climate goals?
- Yes. Given the continued demand for crude oil imports in the U.S. and the available supply of oil from the neighboring Canadian oil sands, we believe that Keystone XL continues to make sense today. It is significant to remember that the State Department’s final environmental impact statement showed that building Keystone XL would result in 28-42% lower GHG emissions than any alternative, including not building the pipeline at all.