Alberta to pursue compensation through NAFTA for U.S. decision on Keystone XL, Kenney says

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Alberta Premier Jason Kenney says the province intends to seek compensation for U.S. President Joe Biden’s veto of the Keystone XL pipeline through remaining provisions of the North American free-trade agreement.

Mr. Kenney has railed against Mr. Biden’s decision, which he warned sets a dangerous precedent that could imperil other cross-border pipelines. He vowed a continued fight to either convince Mr. Biden to reverse his decision or attempt to recover some of the more than $1-billion the province has committed to the project.

The Alberta government would likely need the support of the pipeline owner, Calgary-based TC Energy Corp., to mount such a legal case. The company has yet to say what it plans to do, and the federal government has appeared reluctant to spend any more energy on the Keystone XL file.

Mr. Kenney was asked during a Facebook Live question-and-answer session on Tuesday evening whether his government planned to sue under NAFTA.

“Yes,” Mr. Kenney said. “We are absolutely going to use every legal tool at our disposal to protect our interests. This was, in my view, a clear violation of the investor protection provisions in the North American free-trade agreement.”

While NAFTA has been replaced by the United States-Mexico-Canada Agreement, the previous trade agreement’s Chapter 11 provisions allowing investors to sue the U.S., Canadian or Mexican governments for compensation remain in force for three years, or until July, 2023.

Mr. Kenney’s office referred follow-up questions to Energy Minister Sonya Savage. Her press secretary, Peter Brodsky, said in a statement that the government is working with TC Energy to explore potential options, including legal action under trade agreements.

TC Energy spokesman Terry Cunha said in an e-mail that the company is reviewing its options on Keystone XL and has not yet made a decision.

Last March, the Alberta government agreed to contribute US$1.1-billion for an ownership stake in Keystone XL. The province also agreed to guarantee US$4.2-billion of debt related to the pipeline. The death of the project would leave Alberta on the hook for about $1-billion in equity and $400-million in loan guarantees that have already been committed.

Kristen van de Biezenbos, an associate professor at the University of Calgary’s law school who specializes in energy law, said it’s unlikely that the Alberta government could pursue a case under NAFTA’s Chapter 11 without TC Energy on board, even as a part owner of the pipeline.

Prof. van de Biezenbos said another issue for both the province and TC Energy is that the executive order approving the pipeline’s border crossing, signed by then-president Donald Trump in 2017, explicitly said the permit could be revoked at any time and that the company would be responsible for the costs if that happened. “They knew that, and they invested billions anyway,” she said.

Prof. van de Biezenbos said arbitration through NAFTA can be long and expensive, with no guarantee of success. She noted the United States has never been forced to pay a claim under Chapter 11.

Mr. Kenney has also called on Prime Minister Justin Trudeau to continue pressing the case for Keystone XL, including by using economic sanctions. Mr. Trudeau has spoken to Mr. Biden and Vice-President Kamala Harris since their inauguration.

Mr. Trudeau brought up the topic with Mr. Biden, who acknowledged Canada’s disappointment, according to readouts of that call from both governments. The readouts of Mr. Trudeau’s call with Ms. Harris did not mention the pipeline.

Canadian regulators approved the 830,000-barrel-a-day Keystone XL project in 2010, but then-U.S. president Barack Obama blocked it in 2015.

TC Energy filed a US$15-billion lawsuit seeking compensation under NAFTA, but the company suspended the lawsuit after Mr. Trump signed the construction permit in 2017.

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