Fate of Keystone XL Pipeline Could Be Decided in a Texas Courtroom Before NAFTA Tribunal

Michael Bishop on his land in Douglas, Texas. (Photo: Julie Dermansky)Michael Bishop on his land in Douglas, Texas. (Photo: Julie Dermansky)

Texas landowner Michael Bishop continues to challenge TransCanada’s right to build the southern route of the Keystone XLpipeline, renamed the Gulf Coast pipeline when the project was divided into segments. Meanwhile, TransCanada is suing the United States for not being granted the presidential permit needed in order to build the Keystone XL’s northern route. A win for Bishop in his suit against TransCanada Keystone Pipeline L.P. in Nacogdoches County District Court could complicate TransCanada’s North American Free Trade Agreement (NAFTA) challenge.

Bishop is suing TransCanada for “fraud, conspiracy to commit fraud, misrepresentation, perjury, theft, bribery, and violating plaintiff’s rights as delineated under the Constitution of the State of Texas.” His case alleges TransCanada doesn’t rightfully possess common carrier status, which enabled the company to use eminent domain.

On June 4, a judge in Nacogdoches County District Court heard motions by Bishop and TransCanada and made rulings that left Bishop’s case in play. The judge granted Bishop a continuance, giving him more time for discovery, and refused to hear TransCanada’s lawyers’ motion for a “no-evidence summary judgment” against Bishop that would have stopped his case.

TransCanada’s lawyers argued Bishop’s claims against the company have been asked and answered in other legal challenges by Bishop and other landowners, including Texas rancher Julia Trigg Crawford. Crawford, who challenged TransCanada’s status as a common carrier, lost her case in an appellate court, and then was denied a chance to have her case heard by the Texas Supreme Court.

But Bishop successfully argued that he never was given a chance to fully make his case against TransCanada’s standing as a common carrier, and that the matter is still unsettled. “To be a common carrier, it has to be for the good of many, but in this case, this is about the good of one foreign corporation,” Bishop said.

Bishop plans to argue that when TransCanada checked off a box on a T-4 form filed with the Texas Railroad Commission claiming the pipeline would transport crude oil, the company knowingly lied. “TransCanada is moving diluted bitumen, also know as synthetic crude,” he said, asserting, “You can’t move Canadian crude in a pipeline without diluting it, which means the product is a synthetic crude, not crude oil.”

“The Keystone System moves various grades of crude from light to heavy produced in Canada and the U.S,” TransCanada representative Matthew John wrote DeSmog in an email. And Mark Cooper, also a TransCanada representative, wrote DeSmog previously that “dilbit is indeed crude oil.”

But Bishop points out that the IRS defines crude oil and synthetic crude differently, as does the Oil Spill Liability Trust Fund (OSLTF).

A Congressional Research Service report, Oil Sands and the Oil Spill Liability Trust Fund: The Definition of “Oil’ and Related Issues for Congress, says: “A 1980 House committee report stated that ‘the term crude oil does not include synthetic petroleum, e.g., shale oil, liquids from coal, tar sands, or biomass, or refined oil.’ And that ‘based on that statement, the Internal Revenue Service (IRS) concluded that oil-sands-derived crude oils are not subject to the OSLTF excise tax.'”

Bishop also made a motion for the judge to suspend his case until the Texas Supreme Court hears the Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC case. A Denbury Green ruling could establish that TransCanada should not have been granted common carrier status. But the judge denied his request.

In addition, Bishop charged TransCanada with not fulfilling its contractual obligation to restore his property to pre-construction conditions. TransCanada’s lawyers argue Bishop has no legal standing because he signed a contract with the company giving them permission to build the pipeline on his land. Bishop countered that the contract was signed under duress and should be void.

TransCanada declined to comment on the district court’s ruling: “We don’t comment on ongoing legal proceedings,” John wrote in an email.

Two weeks after Bishop’s June 13 hearing, TransCanada filed a formal request under NAFTA to recover $15 billion lost by the United States government’s “arbitrary refusal” to let it build the northern route of the Keystone XL pipeline. That NAFTA challenge is in addition to a lawsuit TransCanada initiated in the US Federal Court in Houston against the federal government in January, days after President Obama refused to grant the permit needed to build the northern route of the pipeline.

One point TransCanada and Bishop agree on is that decisions related to the permitting of the Keystone XL Pipeline are political. “How can a president permit one part of the project’s pipeline and then reject the other part for environmental reasons, when both parts of the pipeline impact the environment in the same way?” Bishop asks.

Bishop alleges in his suit that when President Obama fast-tracked the Keystone pipeline’s southern route, he did so for political reasons that did not take into account the best interests of the country.

“No part of the Keystone XL pipeline is in the United States’ best interests,” Bishop said. “The pipeline is for a foreign company moving a foreign product that is being shipped to foreign lands with little financial benefit to the United States, but a maximum amount of risk.”

TransCanada interpreted the president’s fast-tracking the southern route completely differently. In its NAFTA challenge against the US, the company borrows a passage from a speech Obama gave in Cushing, Oklahoma praising TransCanada for its plans to build the southern route of the pipeline that shows his support: “Now, right now, a company called TransCanada has applied to build a new pipeline to speed more oil from Cushing to state-of-the-art refineries down on the Gulf Coast. And today, I’m directing my administration to cut through the red tape, break through the bureaucratic hurdles, and make this project a priority, to go ahead and get it done.”

TransCanada argues that the President’s support for the project and numerous State Department Environmental Impact Statements (EIS) that concluded, “that the pipeline would not significantly worsen carbon pollution,” gave the company the expectation that it would be granted the needed permit to build the northern segment of the pipeline.

According to TransCanada’s motion, the decision to deny the permit “was based not on the Keystone XL Pipeline’s actual or anticipated impact on the environment, but on the desire to prove US leadership credentials to environmental activists and foreign governments who supposedly believed, incorrectly, that the pipeline actually would result in greater GHG (greenhouse gas) emissions.”

“If my lawsuit against TransCanada is successful, TransCanada’s suit against the United States government is moot,” Bishop told DeSmog. While he acknowledges the work ahead to mount his case is daunting, as a former Marine, he isn’t the type to back down from a fight.

He suggests those fighting to stop the Keystone XL northern route could lend him a hand – and a good lawyer or two. “If I can get this case before a jury, I will win, hands down,” Bishop said.

Regardless of the outcome of Bishop’s battle against TransCanada, the company’s suit against the US government under NAFTA illustrates the potential power NAFTA allows corporations.

Michael Brune, president of the Sierra Club, used TransCanada’s NAFTA suit to reiterate the need to reject the Trans Pacific Partnership (TPP) in an editorial published by EcoWatch.

Brune warns: “TransCanada’s attempt to make American taxpayers hand over more than $15 billion because the company’s dirty Keystone XL pipeline was rejected shows exactly why NAFTA was wrong, and why the even more dangerous and far-reaching Trans-Pacific Partnership must be stopped in its tracks.”