Canada firm prepares NAFTA lawsuit against US believing Obama is ready to ax Keystone XL

Who’s ready for a good old fashioned diplomatic breakdown with our international neighbors? No.. for once I’m not talking about Mexico. There may be a lawsuit coming our way shortly from our neighbors to the north. TransCanada Corporation officials in Canada are pretty sure that years of good faith bargaining and effort aimed at completing the Keystone XL pipeline may be about to go down the drain, and they don’t plan to go quietly into that good night. (CBC News)

The Canadian company involved in the controversy-plagued Keystone XL project has begun planning its response as indications mount the proposed oil pipeline will be rejected by U.S. President Barack Obama…

[P]eople close to the project say the company has become all but convinced a rejection is imminent based on signals the White House is sending publicly and privately — and it’s now considering the next move.

One possible response is a challenge under the North American Free Trade Agreement to recoup damages from the U.S. government. Another is immediately re-filing a permit application with the U.S. State Department before the 2016 presidential election.

Public statements from the company are still trying to take a cheerful tone, saying they “hope” that the President will do the right thing, but they’ve obviously gotten the inside track from beltway folks in the know and are taking the same position as most of us in the lower 48. Sooner or later Barack Obama is going to finally issue his decision (via the State Department) and he’s going to shoot down the pipeline. So what can TransCanada do at that point? As the article suggests, they can file a lawsuit claiming that the United States is acting in bad faith under NAFTA, but that’s a rather long shot play. There has never been a successful NAFTA lawsuit brought against the United States. Conversely, Canada has been hit with roughly 70% of all NAFTA lawsuits ever started and they have settled a fair percentage of them out of court. (Usually with environmental groups.)

Their second option of refiling the application yet again is certainly possible, but where will that get them? All it’s going to do is restart the battle and turn it into even more of a campaign issue next year. Here at home that might be a plus because it could finally force Hillary Clinton to get off the bench and say what she would do, but unless a Republican wins the White House I’m not all that optimistic that things would end any differently next time around. And in the meantime, more years would slip by with all those jobs and development funds sitting on the shelf.

On a related note, the Obama administration is really racking up quite the record of launching international kerfuffles this month which wrap up energy companies and foreign nations. New sanctions against Russia have suddenly jeopardized Royal Dutch Shell in their efforts to close a large deal with a Russian energy firm. Of course in that case it’s hard to have too much sympathy for Shell. Given our relationship with Russia these past few years that was going to be problematic at best and they hopefully have an escape hatch on that deal. But still, it’s yet another example of how politics can poison the energy industry because it’s truly a global beast in nature.