Keystone XL Pipeline’s Demise Leaves Graveyard of Legal Issues

June 10, 2021, 2:53 PM

U.S. courts are poised to wipe out a series of Keystone XL-related lawsuits after developer TC Energy Corp. announced it was officially abandoning the embattled oil pipeline.

It’s an anticlimactic end to high-stakes litigation that dominated headlines for years and raised urgent questions about environmental permitting, property rights, and even constitutional law.

“It seems unlikely that we’ll get them resolved,” said James Coleman, an energy law professor at Southern Methodist University in Dallas. “It has really been an incredible saga for those of us who are focused on energy transport and trade.”

Keystone XL was proposed more than a decade ago to move Canadian oil to the U.S. But it faced legal and political hurdles that proved insurmountable, culminating in a presidential permit revocation on Joe Biden’s first day in the White House.

TC Energy and its supporters fought back when the Obama administration blocked the project in 2015, winning the attention and eventual patronage of Donald Trump. But years of litigation costs and broader disruptions to energy markets have rendered the pipeline no longer worth the fight.

‘No Longer Exists’

Lawsuits focused on Keystone XL are scattered in state and federal courts in Nebraska, Montana, Texas, and elsewhere. Most are expected to come to an end, as judges generally dismiss cases when there’s no live controversy.

TC Energy used stark language in a legal filing Wednesday shortly after announcing its decision to walk away from the project. Litigation in the U.S. District Court for the District of Montana was “conclusively moot,” the company said, because nobody is seeking permits to build the pipeline.

“No President will unilaterally issue another permit for the Keystone XL Project, which no longer exists,” TC Energy told the court. “In addition, the changed circumstances make it clear that the Court can no longer grant Plaintiffs the relief they requested in this case.”

The legal question in the Montana case is whether the Trump administration violated the Constitution when issuing a fresh permit for Keystone XL in 2019 after a court suspended an earlier version. The court kept the case on track even after Biden revoked the approval, but TC Energy says the official cancellation of Keystone XL means there’s nothing left to litigate.

VIDEO: We look at the series of high profile legal setbacks that has some in the industry asking—is it still possible to build pipelines in America?

Sunk Costs

The project’s formal demise could spawn some new litigation, though it’s unlikely to ever reach the fever pitch of cases past.

Industry lawyer Tom Sansonetti of Holland & Hart LLP predicted TC Energy and its business partners and contractors would have legal disagreements among themselves as the company unwinds its contracts and financing. They could also have claims against the U.S. government for lost investments, he said.

“This project now goes into the dustbin of history, but it is going to leave some really big impacts,” said Sansonetti, who was a senior Justice Department official in the George W. Bush administration.

Property owners, too, have battles left to fight as they work to wrest easements back from Keystone XL. Jane Kleeb, a Nebraska activist credited with galvanizing local opposition to the pipeline, called on the state Public Service Commission to revoke project route approvals.

“Until the Commissioners act, farmers and ranchers will continue to face TransCanada’s attorneys in court, protecting their property from an eminent domain land grab by a foreign corporation,” she said in a statement, using TC Energy’s former corporate name.

‘Losing a Friend’

Most existing Keystone XL cases will disappear from dockets quickly, despite unanswered legal issues that are likely to crop up in future projects. Tribes and environmental groups are expected to withdraw district court lawsuits targeting federal rights-of-way after the Biden administration rescinds the approvals—likely soon, in light of TC Energy’s decision.

Separately, the Biden administration and TC Energy have called on the U.S. Court of Appeals for the Ninth Circuit to dismiss an appeal over fast-tracked wetlands permitting. Environmentalists want to keep the litigation going, saying the legal issues go beyond one pipeline.

A newer case in Texas faces similar wrangling. Republican attorneys general from Texas, Montana, and other states sued the Biden administration in March, saying the president’s permit revocation violated the Constitution by effectively changing U.S. energy policy without congressional approval. Montana Attorney General Austin Knudsen (R) lamented Keystone XL’s cancellation Wednesday, but his office didn’t respond to questions about the pending litigation.

Legal debates about presidential authority over cross-border permits have bounced through federal courts for years, without any broad resolution. Coleman, the law professor, worked on related legal questions about the original Keystone pipeline when he was in private practice more than a decade ago. Like other energy lawyers and academics, he’s followed every twist and turn of Keystone XL litigation since.

Now that the legal saga is effectively over, he said, “it’s like losing a friend.”

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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