TC Energy, a Canadian company specializing in energy transmission, recently had its $15 billion claim rejected by an American arbitration tribunal. This claim followed the cancellation of the Keystone XL pipeline project by the U.S. government. The project, which was to transport 830,000 barrels of oil per day from Alberta to the U.S., was cancelled by President Joe Biden in 2021, shortly after the North American Free Trade Agreement (NAFTA) was terminated and replaced by the United States-Mexico-Canada Agreement (U.S.-Mexico-Canada Agreement).
The court ruled that TC Energy did not have the authority to decide whether the revocation of the presidential permit violated NAFTA obligations. This decision is a major blow for the company, which had hoped to obtain compensation for lost investments and costs associated with the cancellation of the project.
TC Energy’s position
In an official statement, TC Energy expressed its disappointment at this decision, saying it does not correspond to their interpretation of the protections provided by NAFTA and the AEUMC. The company stressed that these agreements were intended to offer guarantees against such unilateral and unexpected actions by signatory governments.
Despite this decision, TC Energy continues to focus on its other energy infrastructure projects in North America, seeking to diversify and strengthen its operations in a context of global energy transition. The company is considering further legal action to obtain compensation.
Implications for the Energy Sector
The cancellation of Keystone XL and the rejection of TC Energy’s claim have major implications for the North American energy sector. The pipeline was destined to become a vital artery for transporting Canadian oil to U.S. refineries, but it met with fierce opposition from environmental groups and some local communities due to concerns about greenhouse gas emissions and the risk of spills.
This decision could discourage future investment in similar projects, as companies fear significant financial losses in the event of government policy changes. It also highlights the need for companies to adapt to a rapidly changing energy landscape, marked by growing demand for more sustainable, less polluting solutions.
Political and economic repercussions
Politically, this case reflects the tensions between Canada and the United States over energy and environmental policies. The Canadian government, notably the province of Alberta, had also initiated a commercial challenge to recoup its C$1.3 billion investment in the project.
Economically, the cancellation of Keystone XL represents a significant loss for TC Energy and its partners. However, it could also accelerate the transition to renewable energy sources, as investment shifts to cleaner technologies.
The arbitral tribunal’s decision marks a crucial step in the dispute between TC Energy and the US government, but it also leaves the door open to further legal action and discussions on the future of major energy infrastructure projects in North America.
