TranCanada's lawsuit in a federal court in Houston, Texas, called rejection of its permit to build the pipeline unconstitutional. In a separate action under the North American Free Trade Agreement (NAFTA), the company said the pipeline permit denial was "arbitrary and unjustified." The company's U.S. lawsuit does not seek monetary damages but wants the permit denial invalidated and seeks a ruling that no future president can block construction. Its request for $15 billion under NAFTA reflects its desire to recover its investment in the pipeline. Defendants in the Houston lawsuit are U.S. Secretary of State John Kerry, Attorney General Loretta Lynch, U.S. Homeland Security Secretary Jeh Johnson and Sally Jewell, Secretary of the Department of Interior. Obama, who is not named as a defendant, rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.
A depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota
The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast. All the Democratic U.S. presidential candidates, including front runner Hillary Clinton, oppose the pipeline while most Republican candidates are in favor. Senator John Hoeven, a Republican from oil-producing North Dakota, said Keystone's rejection had cost Americans jobs and now also put taxpayers "on the hook for potentially billions of dollars in fines and legal costs." In filing the NAFTA claim, TransCanada said it "had every reason to expect its application would be granted" as it had met the same criteria the U.S. State Department used when approving other similar cross-border pipelines.
A depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota
Chapter 11 of the NAFTA trade agreement between Canada, Mexico and the United States gives investors the right to make claims against governments. Unlike Canada and Mexico, the United States has never lost a Chapter 11 NAFTA case. The NAFTA tribunal process, which cannot reverse the president's decision, would likely be lengthy and expensive. TransCanada said it was "prepared for a lengthy process that could take several years." James Rubin, an environmental regulatory lawyer with Dorsey & Whitney, said Keystone’s federal court suit would be "challenging.” He noted that courts have considered cross-border pipeline decisions before and have generally found they fall within the president’s discretion.
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