Sierra Club
TransCanada, the notorious fossil fuel corporation behind the ill-fated Keystone XL tar sands pipeline, just made abundantly clear the threats that the controversial Trans-Pacific Partnership (TPP) trade deal would pose to our communities, our climate, and our clean air and water, if approved.
Just two months after the Obama administration rejected TransCanada’s bid to build the dangerous Keystone XL tar sands pipeline – a landmark victory for the movement to keep fossil fuels in the ground – the Canadian corporation announced it will retaliate by using a TPP-like trade deal.
Specifically, TransCanada plans to ask a private tribunal of three lawyers to order the U.S. government to hand more than $15 billion of our tax dollars to the corporation as “compensation” for the Keystone XL decision that spared us the threat of increased climate disruption and spills of dirty tar sands oil.
How can TransCanada make such an audacious demand? By using a provision called "investor-state dispute settlement" in the North American Free Trade Agreement (NAFTA), which gives foreign corporations, including fossil fuel firms, expansive rights to challenge U.S. environmental protections in unaccountable trade tribunals.
The TPP, a U.S. trade deal with 11 Pacific Rim countries that could come before Congress this year, would expand these corporate rights more than any past U.S. trade deal by extending them to more than 9,000 additional foreign-owned firms. In one fell swoop, the TPP would roughly double the number of foreign corporations that could follow TransCanada’s example and challenge U.S. climate and environmental safeguards in private tribunals. The corporations that would gain this power include Australian and Japanese fossil fuel firms that are currently drilling for oil in the Gulf of Mexico and fracking for natural gas on U.S. public lands.
To be clear, TransCanada’s NAFTA case will not reverse the Keystone XL decision – Keystone is dead, thanks to years of organizing by a diverse and dogged movement. However, the case could put taxpayers on the hook for the Keystone XL rejection. Even more, it offers a clarion warning that the TPP, by multiplying our exposure to costly cases from the likes of TransCanada, could undermine our most important environmental achievements and imperil climate leadership from future administrations. By helping to defeat the TPP, the movement that defeated Keystone XL can help safeguard future environmental victories.
Like NAFTA, the TPP would give foreign corporations like TransCanada the power to demand compensation for environmental policies that do not conform to their “expectations.” In other words, when the government takes an unexpected step to protect our air, our water, our economy, or the health of our families from dangerous projects like Keystone XL, corporations can ask a tribunal to order the government to pay. Indeed, TransCanada argues that it “had every reason to expect that its application [for the pipeline] would be granted.” The corporation states that its expectation was thwarted, and thus its special trade pact rights were violated, because the decision was made to “appease those who held a view on the environmental impact of the Keystone XL Pipeline.”
While a judge in a U.S. court might toss out such a desperate argument, TransCanada is not taking its case to a court, but to a trade tribunal not accountable to any domestic legal system. Instead of a judge, three private lawyers will issue a binding ruling that cannot be appealed. Neither NAFTA nor the TPP has meaningful rules requiring these lawyers to be impartial. Indeed, under existing trade and investment deals, many such tribunal lawyers actually rotate between acting as tribunal “judges” and representing corporations in cases against governments.
Like NAFTA, the TPP would empower tribunal lawyers to order a government to pay a corporation for the profits it hypothetically would have earned in the absence of the government decision being challenged. Indeed, TransCanada’s notice indicates that it is demanding more than $15 billion from the U.S. government to cover not only its pipeline preparation costs, but also its “expected revenues” from the canceled project. The $15 billion sum is one of the largest compensation demands that the United States has ever faced under a trade deal.
However, TransCanada’s case is not, unfortunately, an anomaly. It is part of a rising trend of fossil fuel corporations using trade and investment deals to attack environmental victories in private tribunals. For example, after Quebec enacted a moratorium on fracking under the St. Lawrence River (akin to New York’s fracking ban), a U.S. oil and gas company named Lone Pine Resources asked a NAFTA tribunal to order compensation from Canadian taxpayers. A Swedish energy firm named Vattenfall has similarly responded to Germany’s decision to phase out nuclear energy, demanding $5 billion from Germany in a private tribunal. Chevron, meanwhile, is using another tribunal to try to evade a landmark court ruling requiring the oil giant to pay for the mass contamination of Ecuador’s Amazon rainforest.
Amid this surge in trade tribunal attacks on environmental achievements, it’s absurd that the TPP would go beyond any existing U.S. trade pact in exposing our safeguards to more greedy corporate challenges.
To protect our communities and the climate, we cannot allow TransCanada’s $15 billion demand to inhibit our efforts to keep dirty fossil fuels in the ground. Nor can we allow the TPP to further undermine those efforts.