Keystone blowback: TransCanada sues Obama for $15 billion

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Published by: Dan Calabrese on Friday July 01st, 2016

Seven years of foot-dragging followed by a political denial cost the company a fortune.

The boss explained in detail back in November why Obama's refusal to permit the Keystone XL pipeline was a load of crap. We've talked about it a lot here, and when we do, we usually focus on all the economic benefits to the United States that were lost because Obama chose to cater to his extreme leftist environmentalist base rather than govern like a serious person.

But we didn't focus quite as much on the blow this dealt to TransCanada, the company that proposed to build the pipeline and lost seven years with nothing to show for it when Obama foot-dragged its application as long as he could, only to finally reject it just because that's what his political agenda dictated he should do.

Well, believe me, TransCanada didn't lose sight of how much this fiasco cost it, and it's now filed suit against the Obama Administration for $15 billion in lost costs, earnings and opportunities. As the Wall Street Journal points out, the State Department's own paper trail is probably going to be Exhibit A for TransCanada in the case, and it's pretty damning:

In 2008 and 2009, permits for the Keystone I pipeline and the Alberta Clipper pipeline were approved within 27 months. Gulf Coast refineries relied on crude from Venezuela, an anti-American dictatorship. By making it possible to substitute Canadian oil for Venezuela’s, the Keystone XL was in the U.S. national interest, the key permitting requirement.

TransCanada says it “consulted extensively” with the State Department about the “viability of the project.” It also paid $25 million so State could hire a third-party to do an environmental-impact study. In April 2010, State issued a draft statement from that study, concluding that the pipeline would have few adverse effects on the environment or greenhouse-gas emissions. In October 2010 then-Secretary of State Hillary Clinton said State was “inclined” to give the project a green light.

The “final” environmental statement in August 2011 echoed the draft. In November 2011 State said the only hold-up to the permit was the proposed routing through Nebraska, where the pipeline had become controversial. Yet when an alternate route was proposed, State still didn’t approve the permit.

TransCanada says the U.S. assured the company that the January 2012 denial “was procedural and not a decision on the merits.” So the company continued to invest in the pipeline and filed a second application to include an alternate Nebraska route. In March 2013 State released another draft environmental statement that corroborated the first one. The final State report on Keystone XL’s environmental impact, in January 2014, found the same. But by then the project had become a political cause for the green lobby and in November 2015 the State Department officially denied the permit.

This is a clear pattern of foot-dragging and excuse-making by the administration, which didn't want to approve the pipeline because of its ideological distaste for fossil fuels (and that of its political supporters), but which also had no serious reason to reject it based on the merits of the application and the established legal requirements - all of which TransCanada satisfied.

So the administration drew the process out for seven years, costing TransCanada substantial time and money, before Obama decided to just go ahead and reject it in November 2015 using the thinnest of rationalizations.

TransCanada is not suing in a U.S. court, but rather is bringing the matter to a panel empowered under the North American Free Trade Agreement to adjudicate such matters. It's impossible to see how the Obama Administration wins that case on the merits, but I suppose they could delay and appeal for years without ever paying a cent.

The best possible outcome here would be for the next president to offer a mea culpa on behalf of the federal government and allow TransCanada to re-apply under a fast-tracked process that would hopefully get the pipeline built and in full operation quickly. That would create the jobs we should have had under the original proposal, and would further enhance the energy independence of all three North American nations. Maybe TransCanada would drop the suit if that happened, but no fair-minded person can deny that they deserve to get something back for their losses.

I don't really think President Hillary would do that. Maybe there's someone else we could elect who will.

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