WSJ: Why We’re Suing Obama Over Keystone
The president canceled the pipeline in a purely political move that violated the law and the U.S. Constitution.
The Wall Street Journal
January 13, 2016
When President Obama denied a permit in November that would allow our company to build the Keystone XL pipeline, TransCanada responded that “misplaced symbolism was chosen over merit and science—rhetoric won out over reason.” Last week the company filed a federal lawsuit asserting that the president lacks the power under the U.S. Constitution to prohibit construction of the pipeline.
TransCanada also gave notice of its intent to recover damages caused by the administration’s denial of a permit as a violation of the North American Free Trade Agreement (Nafta). Given the significance of the administration’s decision and our actions in response, further context and explanation are warranted.
For 65 years, TransCanada has built oil and gas pipelines in North America. It’s a job the company is good at, and one we much prefer to building lengthy legal filings that could take several years to resolve. Still, when TransCanada in 2008 walked its application for a presidential permit into the U.S. State Department, the company was prepared for an extensive evidentiary process—albeit one that has traditionally been straightforward.
Until the Keystone XL pipeline, no U.S. administration had prohibited the cross-border construction of a major oil pipeline. And within the past decade, U.S. regulators approved two very similar, large cross-border pipelines that transport exactly the same type of oil that the Keystone XL pipeline would have carried from the same region in Alberta, Canada, to the U.S.
TransCanada already operates the initial Keystone pipeline, which was approved in 2008. And in 2009 the State Department under Secretary Hillary Clinton and Mr. Obama permitted Enbridge, a direct competitor to TransCanada, to build another. Each of these permit reviews took about two years.
Keystone XL was very different. For seven years the State Department and eight other federal agencies considered issues related to environmental and economic impact, supply security, stability and relations with Canada, and other factors.
The Obama administration’s decision to deny the pipeline explicitly acknowledged that building it would benefit the U.S. economy, create jobs, increase energy security, advance relations with Canada, not harm the environment and cause no significant increase in greenhouse-gas production. Expert analysis concluded, and Secretary of State John Kerry admitted, that approving or denying the pipeline would likely not have a significant impact on oil production in Canada (principally because other transport options and markets exist).
But environmental activists made rejection of the project a litmus test of the president’s climate-change credentials. The State Department’s official Record of Decision reasoned that permitting the pipeline to proceed would “undermine U.S. climate leadership” because “the understanding of the international community”—contrary to the administration’s own findings—was that the pipeline would increase greenhouse-gas emissions. Permitting construction would “undercut the credibility and influence of the United States” in negotiating with other countries, including at the coming Paris climate conference.
In other words, the pipeline and its benefits were sacrificed to increase the president’s negotiating leverage with other countries.
This decision was unlawful in two respects. First, it was contrary to basic principles of constitutional law. The president can exercise only powers granted by a statute or the Constitution. The administration acknowledged that no statute supports its action. Nor does the Constitution.
The Supreme Court’s famous 1952 ruling in Youngstown Sheet & Tube Co. v. Sawyer, rejecting President Truman’s claim that he could seize private steel mills, sets out the governing principles that also defeat President Obama’s similar claim of unilateral power. Unless Congress expressly or implicitly approves of presidential action, the president has no independent power to act unless the matter falls beyond the scope of Congress’s constitutional interests.
Article I of the Constitution provides Congress with power over the domestic and international commerce at issue. And in early 2015, both houses of Congress passed legislation—later vetoed by the president—directing that the Keystone XL pipeline be constructed without any further presidential action.
Still, even if Congress had not acted, Mr. Obama’s action is unlawful because it falls far outside of the limited tradition of presidential-permit approvals. Presidents have for many decades lightly regulated certain border facilities through a permit-approval process focused on distinctly cross-border and operational concerns. No president before has prohibited construction of a major infrastructure project affecting such extensive domestic and international commerce. Nor has any other president ever claimed the power to block cross-border trade to enhance his negotiating power abroad.
Second, the administration’s decision violates international agreements. When the U.S. government signed Nafta, it committed to provide Canadian investors with various protections against unfair, inequitable, and uncompensated expropriatory and discriminatory U.S. regulatory actions. The agreement enables companies, like TransCanada, to recover damages through international arbitration when Nafta’s provisions have been violated.
White House press secretary Josh Earnest said on Nov. 3 that “there’s probably no infrastructure project in the history of the United States that has been as politicized as this one.” No doubt—as was the administration’s decision to deny a permit, which rested entirely on the president’s belief that his international reputation and negotiating leverage on climate leadership required the symbolic act of denying the permit.
The damage to TransCanada is clear. It has lost the value of the project and incurred significant costs in pursuing what should have been a robust regulatory process based on facts and established criteria, not based on meeting misplaced symbolic political objectives.
The administration’s actions harm business and public interests that extend far beyond a particular pipeline. The decision calls into question the entire process for cross-border facility approvals. It strongly suggests that investing in the U.S. is subject to a level of “sovereign risk” usually associated with far less developed economies.
Unless they are remedied in court or arbitration, the Keystone decision and the political expediency underlying it will also encourage future administrations to conclude that they, too, can disregard the most basic legal requirements.
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