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TC Energy (TRP) Loses $15 Billion Keystone XL Arbitration Case
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TC Energy Corporation (TRP - Free Report) , an energy infrastructure firm based in Canada, has lost the arbitration case against the U.S. government over the 1,900-kilometre long Keystone XL pipeline. The Keystone XL pipeline project was deemed to transport oil from the oilsands of northern Alberta to a crude storage hub in Okla and further to the refineries in the Gulf Coast.
In 2021, the Biden administration revoked a key permit for the project, effectively rejecting it. TC Energy responded to the move by suing the U.S. government for $15 million for damages under a mechanism known as the investor-state dispute settlement (ISDS), included in the North American Free Trade Agreement (“NAFTA”).
The permit was pulled by the Biden administration when construction activities for the project had already begun. The ISDS mechanism enabled the U.S., Mexican and Canadian corporations to sue the government if public policies, regulations or other state actions impacted their profitability. NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020. The replacement of NAFTA ended up being disadvantageous for Canadian investors as they could no longer sue the governments between Canada and the United States.
TC Energy’s claims were made based on the legacy rights related to NAFTA. The USMCA allowed three years of "legacy rights" for using the NAFTA dispute settlement process. The International Centre for Settlement of Investment Disputes tribunal refused to hear TC Energy’s case on the matter. The tribunal stated that it did not have jurisdiction over the matter as the Biden government revoked the permit long after NAFTA was replaced. It also mentioned that the legacy provisions associated with NAFTA only allowed claims for the breaches committed while NAFTA was still active.
TRP believes that it has received an unfair judgment in the case and that the revocation of the permit for Keystone XL was driven by political motives. The company further stated that the tribunal’s decision did not align with the protection that the NAFTA and USMCA agreements were intended to provide. Additionally, this ruling raises concerns about the Alberta government's ability to recover any losses as an investor in the Keystone XL pipeline project.
Investor-state dispute settlements pose a significant hindrance to effective climate action, as per the Intergovernmental Panel on Climate Change. This controversial mechanism is an extremely powerful tool for corporations. Governments across the world have coughed up roughly $114 billion because of ISDS claims.
The tribunal’s decision was received gladly by climate activists and environmentalists in the United States. However, according to the Business Council of Canada, the ruling on TRP's case may have a stifling effect on future business investments across sectors beyond oil and gas. The decision implies a lack of protection for current investment decisions, leading to uncertainty and hesitation among corporations for investing in long-term projects.
TC Energy stated that any potential recovery related to the NAFTA case was not included in its financial statements.
SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Its current distribution yield is greater than the composite stocks in the industry, providing unitholders with consistent returns.
Hess is a leading upstream energy company with its operations focused on the prolific resources offshore Guyana. The company has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. Hess is currently in the process of being acquired by energy supermajor Chevron in an all-stock deal that will result in the creation of an energy behemoth with a massive portfolio of producing assets.
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TC Energy (TRP) Loses $15 Billion Keystone XL Arbitration Case
TC Energy Corporation (TRP - Free Report) , an energy infrastructure firm based in Canada, has lost the arbitration case against the U.S. government over the 1,900-kilometre long Keystone XL pipeline. The Keystone XL pipeline project was deemed to transport oil from the oilsands of northern Alberta to a crude storage hub in Okla and further to the refineries in the Gulf Coast.
In 2021, the Biden administration revoked a key permit for the project, effectively rejecting it. TC Energy responded to the move by suing the U.S. government for $15 million for damages under a mechanism known as the investor-state dispute settlement (ISDS), included in the North American Free Trade Agreement (“NAFTA”).
The permit was pulled by the Biden administration when construction activities for the project had already begun. The ISDS mechanism enabled the U.S., Mexican and Canadian corporations to sue the government if public policies, regulations or other state actions impacted their profitability. NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020. The replacement of NAFTA ended up being disadvantageous for Canadian investors as they could no longer sue the governments between Canada and the United States.
TC Energy’s claims were made based on the legacy rights related to NAFTA. The USMCA allowed three years of "legacy rights" for using the NAFTA dispute settlement process. The International Centre for Settlement of Investment Disputes tribunal refused to hear TC Energy’s case on the matter. The tribunal stated that it did not have jurisdiction over the matter as the Biden government revoked the permit long after NAFTA was replaced. It also mentioned that the legacy provisions associated with NAFTA only allowed claims for the breaches committed while NAFTA was still active.
TRP believes that it has received an unfair judgment in the case and that the revocation of the permit for Keystone XL was driven by political motives. The company further stated that the tribunal’s decision did not align with the protection that the NAFTA and USMCA agreements were intended to provide. Additionally, this ruling raises concerns about the Alberta government's ability to recover any losses as an investor in the Keystone XL pipeline project.
Investor-state dispute settlements pose a significant hindrance to effective climate action, as per the Intergovernmental Panel on Climate Change. This controversial mechanism is an extremely powerful tool for corporations. Governments across the world have coughed up roughly $114 billion because of ISDS claims.
The tribunal’s decision was received gladly by climate activists and environmentalists in the United States. However, according to the Business Council of Canada, the ruling on TRP's case may have a stifling effect on future business investments across sectors beyond oil and gas. The decision implies a lack of protection for current investment decisions, leading to uncertainty and hesitation among corporations for investing in long-term projects.
TC Energy stated that any potential recovery related to the NAFTA case was not included in its financial statements.
Zacks Rank and Key Picks
Currently, TRP carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are SM Energy (SM - Free Report) , Sunoco LP (SUN - Free Report) and Hess Corporation (HES - Free Report) . SM Energy and Sunoco presently sport a Zacks Rank #1 (Strong Buy) each, while Hess Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Its current distribution yield is greater than the composite stocks in the industry, providing unitholders with consistent returns.
Hess is a leading upstream energy company with its operations focused on the prolific resources offshore Guyana. The company has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. Hess is currently in the process of being acquired by energy supermajor Chevron in an all-stock deal that will result in the creation of an energy behemoth with a massive portfolio of producing assets.