I’m sure our regular readers remember when Barack Obama went with his conscience (as opposed to boring old things like science) and shut down construction of the Keystone XL pipeline. At the time he claimed that it didn’t meet the test of combating climate change, though in reality he was running from a massive revolt on his Left flank if he’d approved it. But it took a long time to “get to No.” There was one review after another, coming from the EPA, the State Department, the Department of the Interior and the Federation of Urban Dog Walkers. (Okay… I may have made up that last one.)

During all of that time, TransCanada (the company working to complete the project) was running up some significant bills doing preparatory work, filing reports, paying for armies of lawyers and engineering talent… this was not a low cost, low risk endeavor. And all the while they were being assured that the plan would get a fair hearing and held obvious benefits for both the United States and Canada. Then the plug was unceremoniously pulled.

With all of that history as prologue, it may not be surprising that they would now like some of the money which was invested in good faith returned to them, and they’d like Barack Obama to sign the check. (Reuters)

TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama’s rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday.

TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to “reach an amicable settlement,” the company said in files posted on the pipeline’s website.

“Unfortunately, the parties were unable to settle the dispute.”

TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement (NAFTA) provisions, seeking to recover what it says are costs and damages.

I’ve never been a big fan of NAFTA nor of international arbitration of American disputes in general, but this may be a case of the chickens coming home to roost. Plenty of conservatives in particular are uneasy about aspects of trade deals which contain provisions wherein foreign companies can challenge American laws or government policy in front of an international board of arbitration. NAFTA has it and so does the pending TPP deal. But since it involves dirty old crude oil, environmentalists are up in arms over the prospect also. As Bloomberg reports, this TransCanada dispute could invigorate opposition to the Pacific deal.

TransCanada’s claim could reinvigorate opponents of the proposed Trans-Pacific Partnership and make it even harder for advocates of that 12-nation trade deal to get it ratified by Congress. Like Nafta, the Trans-Pacific Partnership includes investor-state dispute settlement provisions that allow foreign companies to challenge domestic laws in front of international arbitration panels.
Investor-State Provisions

Foreign companies could exploit the investor-state dispute settlement provisions in the Trans-Pacific Partnership to weaken U.S. environmental policy and labor protections. TransCanada’s Nafta claim highlights the risk, said Sierra Club Executive Director Michael Brune.

“TransCanada’s attempt to make American taxpayers hand over more than $15 billion because the company’s dirty Keystone XL pipeline was rejected shows exactly why Nafta was wrong and why the even more dangerous and far-reaching Trans-Pacific Partnership must be stopped,” Brune said in an e-mailed statement.

This is the law of unintended consequences springing into action. Barack Obama and John Kerry shut down the Keystone XL pipeline to win points with their liberal base. But now, those same supporters are using NAFTA and a potential cash settlement to TransCanada as a tool to hammer away at the TPP. If we must have these international arbitrators hanging over our shoulders, they may has well make the White House pay up for the Keystone fiasco. And if that happens, perhaps we should be taking a fresh look at TPP as well.