Environmental advocates were thrilled when Obama announced a long-awaited veto on the controversial Keystone XL pipeline last November. While this may have been good news for the planet, TransCanada, the company behind the project, is a little less happy about the outcome. So unhappy, in fact, the company has filed a lawsuit against the US government seeking to have the decision overturned, as well as issuing a claim under the North American Free Trade Agreement (NAFTA) demanding $15 billion Canadian dollars in compensation.
TransCanada claims it needs the money to recover lost investments spent over the last seven years promoting the potential pipeline. The company’s first lawsuit, filed in Texas, is an attempt to have Obama’s veto declared unconstitutional, and will be heard in a federal court. However, the second lawsuit will be heard outside of any national court. Instead, NAFTA provisions allow both parties in the dispute to select a panel of three arbitrators to judge the merits of the lawsuit. This shadowy system lacks the authority to overturn any state policies, but it does have the power to award cash settlements.
Expert opinion seems to be mixed on whether the Keystone suits have any chance of winning. In the past, the US has faced more than a dozen challenges by foreign investors under NAFTA, but so far, the US has never lost a case. However, the fact that the government blocked transportation of Canadian oil through one particular pipeline, but not by rail or other methods, could be used as evidence of unfair treatment.
The Texas challenge faces longer odds: TransCanada is essentially claiming that Obama doesn’t have the constitutional authority to block the construction of the project for environmental reasons. Courts have generally agreed that such decisions fall under the President’s foreign policy authority, so that argument is unlikely to persuade a federal judge. In other words, the lawsuits probably won’t force the US to allow the pipeline project to go ahead, but American taxpayers may or may not end up on the hook for damages.
While TransCanada’s challenge of US government authority is troubling, it’s a deliberate feature of free trade agreements like NAFTA. Similar provisions allowing corporations to sue governments and challenge state regulations are also present in the proposed Trans Pacific Partnership trade deal, which is opposed by a number of conservation and trade groups. Environmentalists worry the passage of the trade deal could end up undermining any progress made at the recent climate talks in Paris.