(Adds byline, TransCanada comment)
By Nia Williams and Valerie Volcovici
CALGARY/WASHINGTON, Jan 6 (Reuters) - TransCanada Corp sued the U.S government on Wednesday to reverse President Barack Obama’s rejection of the Keystone XL pipeline, and also plans to seek $15 billion in damages from a trade tribunal.
TranCanada’s lawsuit in a federal court in Houston, Texas, called rejection of its permit to build the pipeline unconstitutional. In a separate action under the North American Free Trade Agreement (NAFTA), the company said the pipeline permit denial was “arbitrary and unjustified.”
The company’s U.S. lawsuit does not seek monetary damages but wants the permit denial invalidated and seeks a ruling that no future president can block construction. Its request for $15 billion under NAFTA reflects its desire to recover its investment in the pipeline.
Defendants in the Houston lawsuit are U.S. Secretary of State John Kerry, Attorney General Loretta Lynch, U.S. Homeland Security Secretary Jeh Johnson and Sally Jewell, Secretary of the Department of Interior.
Obama, who is not named as a defendant, rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.
The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast.
All the Democratic U.S. presidential candidates, including front runner Hillary Clinton, oppose the pipeline while most Republican candidates are in favor.
Senator John Hoeven, a Republican from oil-producing North Dakota, said Keystone’s rejection had cost Americans jobs and now also put taxpayers “on the hook for potentially billions of dollars in fines and legal costs.”
In filing the NAFTA claim, TransCanada said it “had every reason to expect its application would be granted” as it had met the same criteria the U.S. State Department used when approving other similar cross-border pipelines.
Chapter 11 of the NAFTA trade agreement between Canada, Mexico and the United States gives investors the right to make claims against governments.
Unlike Canada and Mexico, the United States has never lost a Chapter 11 NAFTA case. The NAFTA tribunal process, which cannot reverse the president’s decision, would likely be lengthy and expensive.
TransCanada said it was “prepared for a lengthy process that could take several years.”
James Rubin, an environmental regulatory lawyer with Dorsey & Whitney, said Keystone’s federal court suit would be “challenging.” He noted that courts have considered cross-border pipeline decisions before and have generally found they fall within the president’s discretion.
The White House referred requests for comment to the U.S. State Department. A State Department spokesperson said it would not comment on pending litigation.
In Ottawa, a spokesman for the Canadian foreign ministry said the government “has no role in this dispute.”
Since October, Canada has been run by Prime Minister Justin Trudeau’s Liberals, who backed the pipeline but has said the Canada-U.S. relationship is “much bigger than any one project.”
TransCanada said it will also take an after-tax write down of C$2.5 billion ($1.78 billion) to C$2.9 billion in the fourth quarter after the permit denial.
The project ran into opposition from environmental groups, and blocking it became a litmus test of the green movement’s ability to hinder fossil fuel extraction in Canada’s oil sands.
“The suit is a reminder that we shouldn’t be signing new trade agreements like the Trans Pacific Partnership that allow corporations to sue governments that try and keep fossil fuels in the ground,” said Jason Kowalski, policy director of environmental group 350.org which opposed the pipeline.
TransCanada called the rejection “a symbolic gesture” aimed at burnishing the Obama administration’s leadership on climate change in the eyes of the international community.
TransCanada is also developing the Energy East pipeline, designed to move 1.1 million barrels per day of western crude to Canada’s East Coast. That project too faces opposition from environmentalists trying to halt industry expansion.
TransCanada shares closed down 1.6 percent at $31.70 on the New York Stock Exchange on Wednesday. After hours, the stock price stayed steady after the legal actions were announced. ($1 = 1.4075 Canadian dollars)
Additional reporting by Roberta Rampton in Washington, David Ljunggren in Ottawa, Euan Rocha in Toronto, Anthony Lin in New York; Writing by Amran Abocar; Editing by David Gregorio, Toni Reinhold