Earlier this week, TransCanada has made a decision of pursuing legal action against the US government. The company is suing the government for US$15 billion. The reason behind the legal battle is because the US government has alleged blocked the oil pipeline project which would link Canada and the Gulf of Mexico.
TransCanada Corp. said that the government has denied the company's application for a permit in order to finish the Keystone XL pipeline project. Under the North American Free Trade Agreement, this denial was "arbitrary and unjustified." Additionally, the company is fighting that this decision was beyond the constitutional powers of the current US President, Barack Obama.
In October last year, the administration (led by Obama) denied the Canadian company's permit to build a key section of the pipeline which would be laid across the US-Canada border. The US government ruled that this project would be detrimental for the fight against climate change. But considering it's been seven years since TransCanada Corp. first submitted the project, this decision has put a mark on the good relations between the US and Canada. At the same time, it has angered a lot of people, particularly those in the oil industry.
In its complaint, the company pointed out that the permit denial given to the project has discriminated against it. They have also cited three other pipeline companies that carry Alberta crude into the country. These other companies have been given permits for similar operations.
Environmentalists, however, have a different view of the situation. Arguing that Alberta deposits are among the "dirtiest" crude oils in the world, they have assailed the project. Rumor has it that the Obama administration had no choice but to give into the pressure from the environmentalists, especially since the administration had already been able to conclude on six occasions that the controversial pipeline would have no significant role in affecting climate change.
TransCanada believes that the decision of the government to deny its permit is politically driven. As payment for the costs and damages resulting from permit denial, the company is seeking $15 billion. According to them, the US breached its obligations under the NAFTA treaty; which specified to treat investors equally and fairly.
TransCanada has already invested billions of dollars on the project. Seeing as to how the permit denial deprived them of their investment return, the company is preparing for a long, legal battle. At the same time, they are still prepared to reapply for the permit.
If permitted, the controversial Keystone XL pipeline would have been able to transport crude oil from the Alberta tar sands deposits to the US Gulf Coast. This would then block off the 1,179-mile Alberta-Nebraska section, which would deem the project useless.
