OTTAWA, Ontario — TransCanada said Wednesday that it would seek $15 billion in damages over the Obama administration's decision to cancel the company's Keystone XL pipeline project.
The company is taking the unusual step of suing through the North American Free Trade Agreement, calling the decision "arbitrary and unjustified." The Canadian business also filed a lawsuit in Houston asking that the decision be overturned.
"TransCanada has been unjustly deprived of the value of its multibillion-dollar investment by the U.S. administration's action," the company said in a statement. "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 $3.1 billion Keystone XL pipeline would have connected Canada's oil sands to American refineries on the Gulf Coast, offering the promise of improving prices. Canadian energy companies viewed the pipeline as the key to sustaining growth, since the United States buys the vast majority of petroleum produced by the oil sands.
But many American environmentalists used the project as a proxy for the oil sands, an energy source that they considered particularly polluting. The pipeline plan got caught in a regulatory and legal struggle, as the State Department environmental review dragged on for years.
In November, President Barack Obama rejected the plan, saying the pipeline would undercut the country's leadership on climate change. Still, he added "this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others."
TransCanada said it would take a write-down of $1.8 billion to $2 billion for its fourth quarter.
The NAFTA challenge process does not allow Canadian or Mexican companies that believe they are being discriminated against by the U.S. government to overturn decisions. But the measure, which grew out of earlier trade provisions to compensate corporations after a foreign government expropriated their assets, does allow them to seek a range of damages, including unrealized profits.
The case filed by TransCanada at the Houston division of the U.S. District Court for the Southern District of Texas does not seek financial compensation. Instead the company is seeking to have Obama's decision reversed on the grounds that he exceeded his constitutional powers.
After accounting for the consolidation of cases, the United States has faced 12 challenges under NAFTA, all from Canadian companies. All of them failed, several on procedural grounds. Canada, however, has lost cases brought by American companies.
Trade experts were reluctant to speculate on TransCanada's case, which will be heard through an arbitration process outside the U.S. judicial system.
"The rules themselves are so vague by design that practically every case is a crap shoot," said Robert Stumberg, an international law professor at Georgetown University.
Lori Wallach, the director of Public Citizen's Global Trade Watch and a longtime critic of provisions that allow corporations to seek damages through trade agreements, said that TransCanada was bringing its case at a time when panels that hear such disputes seem increasingly more willing to rule against governments.
"We've really dodged the bullet to date," she said. "It's not because we have great laws."
While NAFTA's arbitration process was intended to be faster than litigation through courts, Scott Miller, a trade dispute expert at the Center for Strategic and International Studies in Washington, said he anticipated that it would take up to six years for a decision and its outcome was uncertain.
"I don't think that the fact that the U.S. has a good record means a whole lot in this case," he said. "Everything will depend on its facts."