Jan 07, 2016 - 4:30pm

TransCanada's Keystone XL Legal Case Against the Obama Administration Explained

Senior Editor, Digital Content


President Barack Obama speaks at the White House with Vice President Joe Biden Secretary of State John Kerry

If you thought the Keystone XL pipeline story would be dormant until a new president came into office, think again.

Two months after President Barack Obama rejected the pipeline, TransCanada, the company proposing to build the pipeline, filed a federal lawsuit and will file a complaint that the decision violated international trade law.

TransCanada contends that symbolic politics--not merits or facts--were what led the president to reject the Keystone XL pipeline.

“The delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the Administration’s own studies, and not based on the merits of Keystone’s application,” TransCanada said in its filing that the pipeline’s rejection violates the North American Free Trade Agreement (NAFTA).

TransCanada argues the decision violates NAFTA because the administration approved pipelines that carry domestic oil but rejected Keystone XL for moving Canadian oil—for the record and our benefit, it will also move Bakken oil from North Dakota and Montana.

The company explains that while the federal government issued a permit for the original Keystone pipeline in 2008—which has safely moved over one billion barrels of oil since 2010—and a permit for the Alberta Clipper pipeline in 2009, the permit application for Keystone XL (which would move the same oil) was dragged out to seven years before being rejected. Other pipelines also exist that carry Canadian crude and which received presidential permits in the past.

The only thing that changed since the last approved permit was the political environment. Anti-energy activists glommed onto a mundane issue about an energy infrastructure project and stoked it into a political bonfire:

As the controversy over the pipeline intensified, however, the Administration began to stall for time. For more than seven years, it made use of every conceivable excuse to delay a decision. It cited ongoing state-level litigation, claimed the U.S. Congress was exerting undue political pressure, and continually asserted the need for more technical work and analysis. Meanwhile, the political controversy built to a fever pitch. Environmental activists turned the pipeline into a campaign issue in Congressional elections, and politicians on both sides of the issue continued to fight over the disposition of the application.

Pipeline opponents harping on carbon emissions ignored the facts about the project.

The State Department’s environmental analysis concluded that not building the Keystone XL pipeline would mean higher carbon emissions, because Canadian and Bakken oil intended to travel through the pipeline would to get to market by some other, less efficient method. Nevertheless, opponents spouted that the pipeline would deliver a “crushing blow” to our climate.

The facts didn’t matter to the Obama administration either, because it was preoccupied with making a deal at climate change talks in Paris in December 2015. Before the talks, the administration felt the need make a symbolic gesture about reducing carbon emissions—apparently damaging the reliability of the U.S. power grid by way of EPA’s carbon regulations wouldn’t be enough. The long-delayed pipeline was put on the chopping block:

Secretary Kerry stated that the “decision [to deny the permit] could not be made solely on the numbers.” Indeed, it was not, as the numbers would have led to the conclusion that the pipeline should have been approved. In the very press statement where Secretary Kerry announced the denial of the permit, he also stated that “[t]he proposed project by itself is unlikely to significantly impact the level of crude extraction or the continued demand for heavy crude oil at refineries in the United States.”

The Administration concluded that the denial was necessary to demonstrate U.S. leadership on climate change, even though the Administration concluded multiple times that the pipeline would have no significant impact on climate change. The Administration sought to explain this perverse decision by saying that the pipeline was perceived to be bad for the environment, and the Administration had to appease those in the international community who held that (false) belief.

Along with ignoring the science surrounding it, President Obama also ignored the economic benefits his own administration projected will come from the Keystone XL pipeline:

  • $3.4 billion added to U.S. GDP.
  • $55.6 million in annual property taxes generated in the first year of operation alone.
  • 42,000 new direct and indirect jobs created.

There's also the human toll: The president chose to ignore the people living along the pipeline’s route who saw economic opportunity yanked away by fiat.

When it came to the Keystone XL pipeline perceptions and symbolism trumped facts and reality. That may be acceptable in politics, but it’s unacceptable when using (abusing) constitutional regulatory authority. The federal government can’t just make edicts that one project can go forward while another can’t. It must offer good reasons. Satisfying loud domestic and international political constituencies doesn’t cut it.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.