Oil Change International

Exposing the true costs of fossil fuels

TransCanada Sues U.S. Taxpayers, Scores Oil Industry Own Goal

Keystone XL got rejected, the oil industry is sad, and they want you to make it up to them – to the tune of over $15 billion (yes, that’s billion, with a “b”).

Late Wednesday, TransCanada, the company behind the Keystone XL pipeline, kicked off two legal challenges: one is a federal lawsuit claiming that President Obama’s rejection of the pipeline exceeded his authority under the Constitution, while the other is seeking compensation under the North American Free Trade Agreement (NAFTA). The NAFTA filing is the real whopper, where TransCanada is seeking over $15 billion, which would come out of US taxpayer pockets.

In its NAFTA filing, TransCanada criticizes the Obama administration’s decision to reject the Keystone XL pipeline by calling it “contrary to all precedent.”


Their whining continued: “To [our] knowledge, this was the first time in history that the United States had denied an application to construct a pipeline across an international border.”

Yes.  Exactly.

Climate science means that business as usual for the fossil fuel industry is over. Get used to it guys. Let it sink in.  This fact may need to be repeated several (thousand) times in order for the fossil fuel industry and their allies in government to understand it. But it is an actual fact and it is not going away, no matter how inconvenient.

The idea that anyone in the fossil fuel industry is due compensation for government acting in defense of our climate is beyond ludicrous.  It is deeply offensive given the clear evidence that the oil industry has known of the dangers of climate change for decades, while profiting from their pollution and fueling denial. It is also a dangerous end run around democratic institutions that puts climate change and communities at the mercy of corporate power.

By the way, if fossil fuel companies are entitled to compensation for government acting in defense of the environment, then in truth, investors need not worry about their fossil fuel dollars becoming stranded assets at all.  It turns out the industry does have a plan – they’ve bought their investors insurance in the form of the Investor-State Dispute Settlement mechanism embedded in modern trade agreements.  Why would anyone be worried about investing in an industry that is backed by the full faith and credit of a faceless bureaucratic international trade regime?  But I digress…

The scale of the climate crisis we face is without precedent; so, too, must our response be to that crisis. In rejecting Keystone XL, setting a new precedent was precisely the idea. During his statement about the rejection, President Obama noted for the first time that “we’re gonna have to keep some fossil fuels in the ground.”

And there’s the rub.

As we said when the Keystone XL pipeline was rejected, “the Keystone XL tar sands pipeline is now the first ever fossil fuel project rejected explicitly on climate grounds. It will not be the last.”

TransCanada’s NAFTA challenge maintains that “The denial was based on politics, not the merits of the application.” Understanding the huge climate impact of the Keystone XL tar sands pipeline is therefore a crucial point to defend against TransCanada’s NAFTA tantrum. TransCanada’s NAFTA filing contains the usual and thoroughly debunked “analysis” about Keystone XL’s climate & economic impact. Contrary to TransCanada’s claims, we know that the climate impact of stopping the Keystone XL pipeline is neither irrelevant nor symbolic.

TransCanada’s NAFTA filing also highlights how dodgy trade deals bestow superpowers on corporations at the expense of regular people. The Trans-Pacific Partnership, a new trade deal that’s even worse than NAFTA in handing big polluters the key to undermine climate policy, would exacerbate this situation. These sweeping trade deals can have a serious chilling effect on climate policy. “Sure,” decision-makers ask themselves, “we could end fossil fuel subsidies, put a price on carbon, establish more stringent methane regulations, or increase energy efficiency standards, but what if we get sued?” Instead of building more trade regimes that open the door to the kind of challenge TransCanada is pursuing, we need a new model of trade that recognizes how important it is to protect communities and the climate.

In the end, it is likely that this move by TransCanada will mostly be memorable for how useful it was for their opposition.  Steve Kretzmann of Oil Change International had this to say: “Thank you, TransCanada. We were just discussing how to explain the danger the TPP poses to the environment, and this is the perfect example. We’re also really happy to use this opportunity to explain again why KXL and all tar sands infrastructure is a disaster for the climate. For your sake, we’ll use really small words this time. We promise.”


-This post was authored by Alex Doukas and Steve Kretzmann

Comments (2)

  1. Honey Fortney says:

    Thank you for enlightening me and all of us.
    Americans have already shown their strong objection to both the TPP and the KXL.

  2. Peggy James says:

    Maybe they need to sue the politicians they gave millions to who tried to get their dirty tar sand deal enforced against the best interest of our land, our sea, and American’s health.

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