Keystone pipeline-maker braces for Obama rejection, planning next move

Pipes ready for the Keystone XL pipeline are shown in Gascoyne, N.D., on Wednesday April 22, 2015. (Alex Panetta/The Canadian Press)

WASHINGTON -- The Canadian company involved in the controversy-plagued Keystone XL pipeline project has begun planning its response to an anticipated rejection of the project by U.S. President Barack Obama.

In its public statements, TransCanada Corp. is expressing hope Obama might still approve the pipeline, which over the course of its years-long delay has become an irritant between the U.S. and Canadian governments.

But people 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.

One source involved in the project said the company is consulting lawyers on the mechanics of a NAFTA challenge, and weighing the legal and political implications.

He said the main suspense now is how Obama will make his big announcement -- quietly, in a mid-summer Friday afternoon statement, or boldly from a platform like his upcoming Aug. 31 trip to a climate-change conference in Alaska.

"There's a broad acceptance that the decision's been made," he said, adding that different White House employees had suggested a rejection's coming.

"The rumour is that the decision to deny has been made, and they're just waiting for the right time and venue."

He said the company would not likely reveal its next move on the day of the Obama announcement: "I think the most likely scenario is we'll let it cool for a while. And then we'd have this more vigorous discussion."

One aspect of that internal discussion is the political calculus -- and whether fanning the flames during the 2016 American election would help the project, or harm it.

Keystone could easily become a 2016 issue, with Republicans already accusing Democratic stalling of hurting the economy, energy security, and relations with next-door neighbour Canada. Meanwhile, Democrats have been pushing their party frontrunner Hillary Clinton to state her position on the US$8 billion project.

One expert said he'd advise the company to hold off, and hope a more pipeline-friendly administration takes office in 2017. The U.S. government has a 13-0 record in NAFTA cases. A suit would likely fail, cost the company a few million dollars, and possibly antagonize the U.S. government, said David Gantz, who was been a panelist on NAFTA cases and who teaches trade law at the University of Arizona.

"I think it's a fairly long shot, it's an expensive way to do a long shot, and it doesn't seem to me to be something they're very likely to do," said Gantz.

"They can talk about doing it but my guess is once they have consulted with counsel... they will decide it's -- if not a long shot, then well under a 50-50 chance."

He said the company could try filing under NAFTA's articles 1102, 1105 or 1110 -- which deal with discrimination, unfair or arbitrary treatment and expropriation.

But another expert said the company might as well try. She said a recent decision against the Canadian government in the Bilcon case involving a Nova Scotia quarry could give TransCanada some hope.

"Why not? And see where it goes," said Debra Steger, who was the first director of the World Trade Organization's appellate body, and now teaches law at the University of Ottawa.

The White House hasn't said when it will make a Keystone announcement, or what that announcement might be. However, it hasn't denied a claim by U.S. Sen. John Hoeven that a rejection is coming this month.

The pipeline is also being fought in court in Nebraska. One opponent there said TransCanada should just let it go.

"No matter what they try, not an ounce of TransCanada's toxic pipeline will touch Nebraska's soil," said Jane Kleeb. "At some point, TransCanada's investors are going to fire the CEO for wasting billions of dollars and years on a pipeline going nowhere."

TransCanada CEO Russ Girling hasn't speculated publicly on next steps. He recently said TransCanada will employ whatever means necessary to protect its shareholders and its shareholder value, but for now is focusing on getting a permit approved by Obama.