TransCanada sues over Keystone rejection

The Canadian company that proposed the Keystone XL oil pipeline on Wednesday filed a lawsuit over the U.S. government's rejection of the project and announced it plans to file a second legal challenge that will seek more than $15 billion in damages.

TransCanada filed a federal lawsuit in Houston alleging President Barack Obama's decision in November to kill the pipeline exceeded his power under the U.S. Constitution.

The company also announced it will submit a separate petition seeking the billions in damages, alleging the U.S. breached its obligations under the North American Free Trade Agreement.

In November, Obama quashed the pipeline, declaring it would have undercut U.S. efforts to clinch a global climate change deal at the center of his environmental legacy. The president said he agreed with a State Department conclusion that Keystone wouldn't advance U.S. national interests.

In its lawsuit, TransCanada alleges Obama's decision exceeded his powers as president and infringed upon Congress' power under the Constitution to regulate interstate and international commerce.

The White House and the State Department both declined to comment on the lawsuit or the NAFTA challenge.

The lawsuit does not seek any monetary damages but asks for a ruling that the denial of the pipeline permit was without legal merit and that the federal government officials named in the lawsuit not be allowed to enforce Obama's decision to not proceed with the pipeline. Named as defendants in the lawsuit are: Secretary of State John Kerry; U.S. Attorney General Loretta Lynch; Homeland Security Secretary Jeh Johnson; and Secretary of the Department of Interior Sally Jewell.

TransCanada said it plans to submit a separate petition that alleges the U.S. breached four articles under NAFTA — which governs trade between the U.S., Canada and Mexico — that provide financial protections for all Canadian investors.

"The denial was based on politics, not the merits of the application," attorneys for TransCanada said in a notice they filed with the State Department on Wednesday that the company will submit a claim of arbitration under NAFTA and ask for more than $15 billion in damages.

TransCanada first applied for Keystone permits in September 2008, shortly before Obama was elected. As envisioned, Keystone would snake from Canada's tar sands through Montana, South Dakota and Nebraska, then connect with existing pipelines to carry more than 800,000 barrels of crude oil a day to specialized refineries along the Texas Gulf Coast.

Republicans, Canadian politicians and the energy industry argued the pipeline would create thousands of jobs and inject billions into the economy. But Democrats and environmental groups latched onto Keystone as just the type of project that must be phased out if the world is to seriously combat climate change.

The Associated Press