High-stakes claims, hazy precedent steer Keystone XL lawsuit

By Ellen M. Gilmer | 01/08/2016 07:51 AM EST

TransCanada Corp.’s attempt to resuscitate the Keystone XL pipeline promises a drawn out legal battle over President Obama’s rejection of the long-embattled oil project.

TransCanada Corp.’s attempt to resuscitate the Keystone XL pipeline promises a drawn out legal battle over President Obama’s rejection of the long-embattled oil project.

The pipeline backer Wednesday lodged dual complaints challenging Obama’s November rejection of the proposed oil pipeline. While one complaint seeks to recover sunk investments under the North American Free Trade Agreement (EnergyWire, Jan. 7), the other asks a federal court in Texas to declare that Obama was constitutionally out of bounds.

The U.S. District Court for the Southern District of Texas has its work cut out for it. TransCanada’s lawsuit makes high-stakes claims about the limits of presidential power and raises rarely litigated issues of executive authority over cross-border projects.


"The asserted Presidential power to prohibit construction of the Keystone XL Pipeline exceeds the Constitution’s limits because it concerns a matter committed to Congress," the company’s lawyers said in the complaint, "and is contrary to the express and implied will of Congress."

The lawsuit encapsulates the long-running feud between the Obama administration and Republicans and some Democrats in Congress over whether the pipeline is in the national interest. Using power reserved under an executive order, Obama decided in November that the pipeline did not serve the national interest because approval of the project — which has drawn massive opposition from environmentalists — would undermine the United States’ negotiating power in global climate discussions.

TransCanada counters that the president’s executive authority is limited by the will of Congress, which has authority over interstate and international commerce, and that his decision cannot be based on overly broad factors like international negotiations.

Environmentalists jumped to the administration’s defense yesterday, arguing that TransCanada’s claims were flimsy and fueled by political motives.

"This is not a separation-of-powers issue," Center for Biological Diversity attorney William Snape told EnergyWire. "I think what TransCanada’s doing is laying out that they’re not done fighting politically. They’re throwing a bucket of spaghetti on the ceiling and seeing what sticks."

Legal precedent

Applicable legal precedent for TransCanada’s challenge is sparse and murky, experts say.

In fact, TransCanada has made its own contributions to case law that doesn’t help the company’s current arguments. TransCanada was an intervenor-defendant in a 2009 case brought by American Indian tribes challenging the approval of the original Keystone pipeline. The U.S. District Court for the District of South Dakota ruled for the government and TransCanada, finding that the tribe lacked standing and, notably, that the president has "inherent Constitutional authority to conduct foreign policy on behalf of the nation."

The next day, the U.S. district court in Washington, D.C., handed down a similar ruling underscoring the role of the president in approving cross-border pipelines. TransCanada also took the government’s side in that case.

"Those are very bad cases for TransCanada," said James Coleman a law professor at the University of Calgary who helped represent TransCanada in those cases. But, he added, the courts’ conclusions were never subjected to further judicial review in an appellate court, and the holdings only reach so far.

TransCanada echoed that position in this week’s legal filings. First of all, they were decided in different jurisdictions so would be persuasive but not binding in the Houston court. But more importantly, TransCanada’s lawyers said, the decisions do not uphold the rejection of a pipeline, and they do not involve presidential actions that go against the will of Congress.

"District court decisions noting the President’s power to grant permits for cross-border oil pipelines have pointed to this tradition of the exercise of limited powers and the (then existing) absence of any objection by Congress," they wrote. "But none of these decisions affirmed the denial of a permit, much less one undertaken over the objection of Congress and based on a novel rationale well beyond the traditional criteria or scope of Presidential action."

For cases supporting its current cause, TransCanada is reaching back nearly a century, leaning in part on a 1920 dispute between the executive branch and Western Union Telegraph Co. Raising monopoly concerns, the executive branch tried to block Western Union from extending a submarine cable from Florida to offshore communications facilities. The U.S. District Court for the Southern District of New York found that the president was exceeding his power and interfering with commerce that falls under Congress’ authority.

"The implications of the power contended for by the government are very great," Judge Augustus Hand wrote in the opinion, noting that such power would be a slippery slope that could give the president tyrannical power over exports, imports and other matters. The 2nd U.S. Circuit Court of Appeals affirmed.

The power to block Keystone is just the kind of unilateral decision the courts were aiming to avoid, TransCanada argued this week.

Lawmakers’ wishes

Congress has passed several statutes since the Western Union case outlining the criteria for presidential powers over cross-border facilities, including cables, electric transmission, natural gas pipelines and international bridges. But lawmakers have not expressly addressed presidential powers over cross-border oil pipelines.

That’s where the analysis of Obama’s action gets sticky.

"For oil, we don’t have a statute. What we’ve had is that the president has asserted his authority under an executive order to decide these issues," Coleman said. "The president’s never denied one, so there’s never been an opportunity to test whether the president has the power to deny this type of pipeline."

Tulane University Law School professor Keith Werhan said the scenario creates unpredictable litigation prospects, with few clear statutes or standards on which the court can rely.

"If the president can’t trace his authority to a statute, you get into the prospect of reading the tea leaves," Werhan said. "There are no hard and fast rules."

According to TransCanada, the court should look to the legal framework established in the seminal Youngstown v. Sawyer, a 1952 dispute over President Truman’s decision to seize steel production facilities to avoid a strike during the Korean War. A concurring opinion in the case that is often applied today establishes a rough legal approach to the legality of unilateral presidential decisions in the context of congressional support.

The framework suggests that presidential actions that have congressional support are most likely legitimate, presidential actions on subjects Congress has not addressed are more limited, and presidential actions that go against congressional orders are most limited.

Under a Youngstown analysis, TransCanada argues, Obama’s decision would fall into the third category because the House and Senate have repeatedly passed bills in recent years to support construction of Keystone XL.

Lewis & Clark Law School professor William Funk noted that TransCanada’s argument could be persuasive, given that the concurring opinion in Youngstown put Truman in the third category after finding that Congress had clearly signaled its opposition to his action.

And the fact that the pro-Keystone bills never became law (one was vetoed; others did not advance) does not detract from their status as indicators of congressional will, Werhan said.

"It suggests he’s acting contrary to congressional will," he said. "Even though Congress couldn’t muster a statute to block it, Congress is making clear that it doesn’t want that action to happen."

Lewis & Clark Law School professor Melissa Powers disagreed, questioning how failed congressional actions could supplant authority granted in an executive order.

"Congress could not override his veto because there were not enough votes in the Senate," she said in an email. "Nonetheless, TransCanada wants the court to find that failed ‘legislation’ somehow should have operative effect overriding the Executive Order. I just don’t see how that’s a viable claim."

In any case, Funk said, a conclusion that Obama acted contrary to Congress’ wishes does not necessarily mean he acted beyond his powers. A recent Supreme Court case found that Obama acted within his authority in a question of foreign state recognition even though Congress had passed a law directly contradicting his position.

Even in the second Youngstown category, the pipeline rejection would be considered an overreach, TransCanada argues, because Congress had never acquiesced to the president’s reasoning that approving the pipeline would undermine global climate negotiations.

"The President’s need to prohibit international and domestic trade to secure greater negotiating power with foreign states resembles no rationale any President has asserted to limit and transborder facilities in the past," the company’s lawyers wrote. "[T]he breadth of its effect is unprecedented, and the prohibition encroaches on the power committed by the Constitution to Congress to regulate foreign and domestic commerce."

Still, Coleman said, the analysis is strained. Congress may have signaled its support for the pipeline, but it never expressed exactly what criteria it wanted the president to use in making his decision.

"Congress has never suggested that the president has some authority to consider global perceptions and approve or deny a permit on that basis," he said. "But at that point, you’re grasping at straws for something. That’s the messy situation that you’re in if you decide, ‘Well, we have to figure out what Congress would want the president to do.’"

Snape agreed, arguing that TransCanada is "splitting hairs" in its analysis of Obama’s reasons for rejecting the pipeline. The president’s decisionmaking authority inherently includes the ability to consider constantly changing factors, he said.

"They are splitting hairs," he said. "That does not sound convincing to me at all. We live in different times, and the president makes determinations on the national interest based on the times he or she is in."


Experts watching the case remained circumspect about its prospects in court.

"You always have worse than even odds when you’re a private company suing the government," said Coleman, the Calgary professor. "But these are open questions, and it’s quite possible that you would win."

Coleman said TransCanada’s move to file the case in Houston was likely a strategic attempt to end up in the 5th U.S. Circuit Court of Appeals after the district court issues its decision. The 5th Circuit recently ruled against Obama’s unilateral immigration amnesty plan.

"Sometimes courts, when they see particularly aggressive assertions of unilateral executive power, they’re more likely to push back," he said.

Still, Snape, who said CBD has no current plans to intervene in the lawsuit, remained confident in the government’s position in the case.

"That’s exactly why we have a president," he said. "TransCanada ought to bone up on U.S. high school civics and how the Constitution works."