Following last week’s episode on Investor-State Dispute Settlements, our expert Dr. Kyla Tienhaara tweeted about the episode, adding that the timing was eerie and sharing a link to a news story. On Friday—the day the episode was published—CBC reported that TC Energy, the company behind the Keystone XL pipeline, had just filed a 15 billion dollar ISDS case against the United States, trying to recoup damages and lost profits from their investment.
For anyone who hasn’t tuned into Friday’s episode, here’s a quick refresher: Investor-State Dispute Settlements are a mechanism written into international treaties where foreign investors can sue countries for alleged discriminatory practices. ISDS was originally meant to encourage trade and economic development, but instead, led corporations to start suing countries for adopting aggressive environmental and public health policies. ISDS cases aren’t decided in courts, but instead, via arbitration. The company picks an arbitrator, the state picks an arbitrator, and the two arbitrators pick a third. The arbitrators are typically just commercial lawyers making sometimes even $1,000/hr, giving them an incentive to favor investors so investors sue more often. In one of the more famous cases, the cigarette company Philip Morris sued Australia for implementing cigarette-reducing policies, and while Philip Morris lost, they were only asked to pay half of Australia’s legal fees, leaving Australian taxpayers to have to pay a 9 million dollar bill for no reason.
So after the United States revoked a key permit for the Keystone XL pipeline in January 2021, TC Energy and Alberta began considering their options. I mentioned in the podcast that they announced in June they would walk away from the project, but that had they wanted to file an ISDS case, they could have.
Then, they did.
I’m not saying the executives at TC Energy are listening to The Sweaty Penguin, but…
It’s hard to discuss this particular case without discussing the pros and cons of the Keystone XL pipeline. I always take the effort to consider costs and benefits, and in this case, we have to acknowledge there are both. The benefits include more energy, cheaper oil, and many new construction jobs (albeit temporary ones). The costs include carbon emissions, land degradation, intruding on the land of many people who don’t want the pipeline in their backyard including many Indigenous people, and furthering an energy source that, economically speaking, is less financially sensible than wind or solar. That’s a very oversimplified look, but to me, the cons outweigh the pros.
Regardless, though, the idea that TC Energy deserves a 15 billion dollar payout from U.S. taxpayers is strange, to say the least. They chose to make the investment in the Keystone XL pipeline, knowing it would face roadblocks and political pressure. Yet, they banked on the belief that the U.S. would want to buy their oil. As it turns out, the U.S. didn’t want it. That’s capitalism. Sometimes, demand for your product disappears. You’re not entitled to a multi-billion dollar payout because your investment failed.
Okay, maybe that’s a little simplistic. Demand for oil in the United States didn’t disappear. But was it ever really demand for oil, or is it just demand for cheap energy? I’d have to imagine when high-quality electric cars become cheaper than gasoline-powered cars, everyone’s next car will be electric. At that point, if there’s no roadblocks to using electric cars, there’s no reason to complain about gas prices!
The United States has never lost an ISDS case before. But TC Energy could threaten to break that undefeated streak. I’d be surprised to see the U.S. re-allow the Keystone XL pipeline to weasel out of the ISDS case, but having to pony up 15 billion dollars plus massive legal fees isn’t out of the realm of possibility. That’s over $45 per American to a foreign fossil fuel company.
I know Investor-State Dispute Settlements was a random topic to do an episode on, but this news made me so glad we had the chance to cover it. Now, let’s make that episode go viral so that hopefully we can all keep our sanity, and our 45 dollars.