A depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota

A depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline is seen in Gascoyne, North Dakota (Reuters)

TransCanada Launches Legal Action Over Keystone XL Rejection

Markets Reuters

TransCanada Corp sued the U.S government in U.S. federal court on Wednesday, alleging President Barack Obama's rejection of the Keystone XL pipeline exceeded his power under the U.S. Constitution.

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Obama rejected the cross-border crude oil pipeline late last year, seven years after it was first proposed. TransCanada also filed legal action under the North American Free Trade Agreement (NAFTA), saying the pipeline permit denial was "arbitrary and unjustified."

As part of the NAFTA claim, the company was seeking $15 billion.

Obama rejected Keystone in November, saying it would not make a meaningful long-term contribution to the U.S. economy.

In filing the NAFTA claim, TransCanada said it "had every reason to expect its application would be granted" as it had met the same criteria the U.S. State Department used when approving other similar cross-border pipelines.

The White House referred requests for comment to the U.S. State Department.

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"We have undertaken a careful evaluation of the (U.S) Administration's action as it relates to NAFTA and believe there has been a clear violation of NAFTA in these circumstances," TransCanada said.

The separate claim, filed in federal court in Houston, does not seek legal damages but wants the permit denial invalidated. It also requests that no future presidential action be needed for construction to continue.

The Canadian company said it will also take an after-tax write down of C$2.5 billion ($1.78 billion) to C$2.9 billion in the fourth quarter after the permit denial.

TransCanada is also developing the Energy East pipeline, designed to move 1.1 million barrels per day of western crude to Canada's East Coast, although it too faces opposition from environmentalists trying to halt industry expansion.

The Keystone XL pipeline was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast. The project ran into opposition from environmental groups in the United States. ($1 = 1.4075 Canadian dollars) 

(Reporting by Nia Williams in Calgary and Roberta Rampton in Washington; writing by Amran Abocar; Editing by David Gregorio)