Calgary-based TC Energy recently lost its US$15-billion arbitration case against the U.S. government over the Keystone XL pipeline, much to the relief of environmentalists.
“This is going to be a massive relief for climate activists in the United States, for people who've been fighting the Keystone XL Pipeline forever,” said Stuart Trew, a senior researcher at the Canadian Centre for Policy Alternatives (CCPA) and director of its trade and investment research project.
The decision, with details not yet released, could have an impact on several cases unfolding in Canada, Trew said.
TC Energy argued it should be paid the $15 billion as part of a controversial investor protection mechanism that has since been removed from Canada-U.S. trade agreements.
In 2021, after President Joe Biden revoked a key permit for Keystone XL — effectively rejecting the project — TC Energy responded by suing the U.S. government for $15 billion under the North American Free Trade Agreement (NAFTA). NAFTA contained a controversial mechanism called investor-state dispute settlement (ISDS), which allowed corporations based and operating in the U.S., Canada and Mexico to sue the government when public policy, regulations or other state action affect their bottom line. However, in 2020 NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) which ended the ability for Canadian investors to sue governments between Canada and the U.S.
The new agreement allowed companies three years of “legacy rights” when the NAFTA dispute settlement process could still be used.
The U.S. argued that the legacy provision in the USMCA was only meant to allow arbitration of disputes that had already emerged before NAFTA ended. But TC Energy and other investors believed it meant NAFTA continued to apply for three years, said Kyla Tienhaara, an associate professor at Queen’s University’s school of environmental studies. Ultimately, the tribunal decided it didn’t have jurisdiction to proceed with arbitration because Biden revoked Keystone XL’s permit about six months after NAFTA was replaced by USMCA.
“We are both disappointed and frustrated with the Tribunal’s decision to deny our right to bring a legacy NAFTA claim,” said Patrick Keys, executive vice-president and general counsel for TC Energy, in a company statement emailed to Canada’s National Observer. Keys said the ruling does not align with the company’s expectations and views on how to interpret the legacy provision.
“TC Energy was treated unfairly and inequitably in the revocation of the Permit, which was driven by political considerations,” Keys’ statement added.
This won’t automatically result in other similar cases being thrown out, but it's still likely to influence ongoing tribunals, said Tienhaara.
While Mexico intervened in the case to support the U.S. position, Canada sat on the sidelines. This is unusual, said Trew. Canada has “intervened in almost every NAFTA case since at least the late 90s,” he added.
Tienhaara said there were some political factors at play, not only because TC Energy is a big Canadian company, but because Alberta also has a legacy claim against the U.S. over the Keystone XL pipeline seeking damages of $1.33 billion.
“So the domestic politics are kind of complicated for Canada,” she said.
It gets even more complicated than just those two cases.
One of the biggest current cases is Ruby River Capital’s US$20 billion lawsuit against Canada. The American company sued after the federal government and Quebec rejected its proposal to build a natural gas liquefaction plant and maritime terminal near the mouth of the St. Lawrence River, citing climate and environmental concerns that arose during the environmental assessment.
Ruby River Capital’s claim is the largest in the history of NAFTA investor-state dispute settlements and could leave Canada on the hook for US$20 billion. However, the tribunal’s decision to throw out TC Energy’s lawsuit suggests this case could also be thrown out on similar grounds.
Investor-state dispute settlements are a controversial and powerful tool for corporations, and the Canadian Centre for Policy Alternatives is pushing for its removal in all trade agreements.
Governments around the world have paid about $114 billion to investors as a result of ISDS claims, with fossil fuel companies as the biggest beneficiaries by far, according to recent analysis.
A UN report from July concluded that the ISDS regime, “with its roots in colonialism and extractivism, is not fit for purpose in the [21st] century because it prioritizes the interests of foreign investors over the rights of [states], human rights and the environment.” It found the “crippling costs” of ISDS claims “have already had enormous impacts by deterring, delaying and watering down [states’] climate and environmental policy decisions” and put a chill on climate and environmental action.
The Intergovernmental Panel on Climate Change (IPCC) also acknowledged in 2022 that ISDS poses a huge obstacle to effective climate action.
The removal of ISDS in USMCA for Canada and the U.S. was celebrated by then-minister of foreign affairs Chrystia Freeland, who said the investor-state dispute resolution system had cost Canadian taxpayers more than $300 million in penalties and legal fees. The vast majority of ISDS cases against Canada are brought by U.S. investors, so USMCA “got a huge risk out of the way,” Tienhaara said.
Past analysis by the CCPA found 70 per cent of the dispute settlements Canadian investors have brought against countries outside North America since 1998 were initiated by companies in the mining and oil and gas industries — frequently as a result of environment-related decisions.
However, nearly all Canada’s other international investment agreements allow foreign companies to sue governments if they are treated unfairly. Canada has indicated it wants to keep ISDS in many of its trade agreements, like with Ecuador, for example.
“Canada is the 12th biggest economy in the world, but we're the fourth most litigious country when it comes to companies using ISDS to challenge environmental decisions in other countries, challenges with respect to mining permits and whatnot,” said Trew in a previous interview.
TC Energy said it has not recognized any potential recoveries related to the NAFTA claim in its financial statements, nor factored into its outlook.
Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer
Comments
"However, nearly all Canada’s other international investment agreements allow foreign companies to sue governments if they are treated unfairly."
A small but important edit is, I think, necessary here.
"However, nearly all Canada’s other international investment agreements allow foreign companies, if they believe they have been treated unfairly, to sue governments."
Otherwise, I'm very happy to hear of any reports of these undemocratic, extra-judicial proceedings not awarding public money to investors, and being removed from trade agreements outright.
Strange position for Canada to sit on the sidelines over shipping a Canadian natural resource abroad :
A.1. Keystone XL would carry the cleanest fossil fuel to the USA economy, while they transition to Renewable Energy over the next 35 years.
(Climate CRISIS? If governments believed it, they would stop us from flying and driving.)
A.2. NatGas is a BIG tax generator for Alberta, and all of Canada shares this wealth. This will hurt.
A.3. Will TV Energy appeal to SCOTUS, which was appointed by Trump?
B.1. The Ruby River Capital LNG>Pipeline project on the
St Lawrence River was to provide NatGas for eastern USA so that the LNG terminal would be Outside America if it exploded, as once happened disastrously in Algeria.
B.2. A similar proposed LNG>Pipeline project on the Welland Canal was nixed by the Seaway Authority as too risky for PortColborne, Welland and Canada’s economy.
(Imagine rebuilding the Canal over 10 years with no export-import shipping!
And >10k people killed.)
LW wrote: "Strange position for Canada to sit on the sidelines over shipping a Canadian natural resource abroad."
Up until the last minute before Pres. Biden cancelled Keystone XL, the Trudeau government was still advertising that Canada's climate plan had room for new export pipelines transporting oilsands bitumen.
Kirsten Hillman, Canada's ambassador to the U.S.: "Keystone XL fits within Canada's climate plan" (National Observer)
"Cleanest fossil fuel"?
Even using the industry's under-estimates, Canada's oilpatch is the fourth most carbon-intensive on the planet, behind Algeria, Venezuela, and Cameroon. Canada's rating is nearly twice the global average. (CP, Sep 04, 2018)
"Pollution from oilsands far higher than official estimates, new research shows" (National Observer, January 25 2024)
LW wrote: "Keystone XL would carry the cleanest fossil fuel to the USA economy, while they transition to Renewable Energy over the next 35 years."
Keystone XL would carry among the dirtiest fossil fuels to the USA economy, while delaying its transition to renewable energy. Major fossil fuel infrastructure takes decades to recoup its capital costs. You don't build big infrastructure projects only to run them for a decade.
Making huge fossil-fuel investments locks us into a fossil-fuel future. Major pipelines enable oilsands expansion. Governments and fossil fuel companies are not going to invest billions only to see expensive infrastructure stranded a decade or two from now.
LW wrote: "Climate CRISIS? If governments believed it, they would stop us from flying and driving."
Climate CRISIS? If governments believed it, they would stop approving, subsidizing, supporting, buying, and building new fossil fuel infrastructure.
The Trudeau government is banking on unsustainable EVs to replace ICE cars, with much less visible support for sustainable options like public transit.
A hefty carbon price is needed to price jet travel out of existence.
LW wrote: "NatGas is a BIG tax generator for Alberta, and all of Canada shares this wealth. This will hurt."
Wealth that degrades our life-support systems is illusory. The costs of climate change and fossil-fuel pollution are prohibitive. The fossil fuel industry is viable only because it largely externalizes its health and environmental costs. Voodoo economics.
Hence, the shift away from fossil fuels.
A.1. Calling bitumen the cleanest fossil fuel is a claim the Pathways Alliance would have scrubbed from their website once the bill passed parliament requiring honesty in advertising. What we do to water....and the environment when we in situ mine for bitumen (tar) is not affordable, going forward into a climate constrained world.
A.2l What exactly will hurt?? TC not being able to sue the American government???
A.3. A good question...let's keep watch for that.
Seems to me, that whether we like it or not.......the fossil fuel age has to start winding down. Luckily, green energy is growing more inexpensive every day...as for flying, that's getting more expensive, inconvenient and problematic as more of our escape destinations become risky due to fire, flood and storm.
ISDS are legal instruments whereby foreign companies have total control over the local government , and all democratic tools of a country. It means that any attemps to protect the environment, indigenous rights, and the health and safety of citizens will automatically be termed « capricious» and therefore must be punished. Not only is it anti-democratic, it also means that foreign investors have total control to crush any attempts to fight climate change. In short, ISDS clauses are 17th century colonialism as the tool of choice for extractive industries.
In Canada, we witnessed at least 3 such attempts to destroy environmental concerns with punitive charges.
A) Lone Pine ressources sued Canada for 250 millions (C)$ because the Charest goverment forbade drilling and fracking in the bed of the St Lawrence River in June 2011. After nearly 10 years of litigations, the case was rejected
B) The text documents TC 's second attempt to browbeat the gouvernment of the USA with a 15 billion lawsuit because Keystone XL was cancelled by President Biden in 2021. Many Americans were against this pipeline. Please remember that this is TC second lawsuit on the same subject. When President Obama cancelled Keystone ten years ago , TC launched a first lawsuit, but dropped its case when newly elected Trump allowed Keystone in 2017. Thank God, this second case is dismissed!
C) The text says;«...One of the biggest current cases is Ruby River Capital’s US$20 billion lawsuit against Canada. The American company sued after the federal government and Quebec rejected its proposal to build a natural gas liquefaction plant and maritime terminal near the mouth of the St. Lawrence River, citing climate and environmental concerns that arose during the environmental assessment....» Once more, foreign investors want to impose their financial interest despite the will of duly elected government, environmental assessments, indigeonous rights and the fact that this Gazoduct project was greenwashing fracked gas in clear violation of the Paris Accord. Democracy urgently demands that this ludicrous case be dismissed.
Finally, an interesting refusal to answer the question. In March 2016, during hearings by the BAPE(Québec's environmental assestment agency) about the Energy East pipeline project, M Patrick Bonin (Greenpeace) asked it Trans Canada Pipelines( now TC) would agree not to sue Canada (and Québec) if Energy East should be rejected. The representative of TC did not answer the question!
And to Lorne White; who writes; « The Ryby River capital LNG pipeline project on the St Lawrence River was to provide nat gas for the eastern USA...». Fact. That project was on the Saguenay River and all the documents stated that its objective was to export gas to Europe.
For more information on ISDS see https://www.youtube.com/watch?v=j0LOwmwgkdA
Keep doing what you're doing.......its far too easy for Fossil fools to keep touting the same old horn that has delayed a transition that could have begun 50 years ago........when fossil fuel companies themselves knew the long term consequences of continuing to peddle their extinction technologies.
That Pathways Alliance scrubbed its website of virtually everything once the act prohibiting greenwashing in advertising passed in Parliament should tell us all we need to know about their bogus plans to clean up an act that is fire intensive........that has no other object but to be burned.
We're seeing the fiery consequences of their business model every summer now.