Will TransCanada Corporation Win $15 Billion From Uncle Sam?

TransCanada Corporation (TSX:TRP)(NYSE:TRP) is suing the U.S. government for $15 billion. What are the company’s chances?

| More on:
The Motley Fool

When President Obama rejected the Keystone XL pipeline back in November, the saga did not end there. TransCanada Corporation (TSX:TRP)(NYSE:TRP) is bringing the U.S. government to court over the decision, seeking US$15 billion in damages as well as a reversal to President Obama’s decision.

So what exactly are TransCanada’s chances?

The lawsuits

TransCanada is actually filing two lawsuits. One of them is in the U.S. Federal Court in Texas, where the company is claiming President Obama overstepped his authority under the U.S. Constitution. In this suit TransCanada is not claiming any damages, but is instead challenging the constitutionality of the president’s decision and is seeking a reversal.

The other suit is the one capturing the most attention. TransCanada is challenging the president’s decision under the North American Free Trade Agreement (NAFTA), and this is where the company is seeking monetary damages.

In its notice of intent to pursue the NAFTA challenge, TransCanada is making the same basic argument: that President Obama’s decision was politically motivated. The company is also saying the decision ran contrary to the conclusion of the administration’s studies and that the decision violates American obligations under the agreement.

The chances

There have never been any successful challenges to the U.S. government under NAFTA, and TransCanada is very aware of this. But the company thinks it has a strong case, and it makes some compelling arguments:

“No president has ever prohibited the development of a significant, predominantly domestic facility. Nor has any president prohibited the development of any cross-border commercial facility on the ground that he must restrict foreign and domestic commerce to enhance his influence in foreign affairs.”

Here at The Motley Fool, we are not legal experts, and we will not pretend to be. But here’s one thing we can tell you: this will be a very long process. And even if TransCanada gets to build the pipeline later on, it might be too late. After all, Canadian heavy oil has taken a beating in today’s oil environment, and projects have been cancelled left and right. In another few years’ time, the environment could be a whole lot worse.

What difference does this make?

The $15 billion that TransCanada is seeking equals about half of the company’s market capitalization. So even a partial victory would mean a big boost in the share price.

But the odds of victory as well as the time involved are simply too long. So I wouldn’t recommend jumping on the TransCanada bandwagon just over this. It’s a headache that you’re better off avoiding.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Energy Stocks

oil and gas pipeline
Energy Stocks

TC Energy Stock Is Starting to Get Ridiculously Oversold

TC Energy (TSX:TRP) stock is one of those deep-value dividend plays for the next decade and beyond.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

3 Top Energy Stocks With High Dividends

Investors looking for big dividends in the energy sector can explore these top energy stocks.

Read more »

Dollar symbol and Canadian flag on keyboard
Energy Stocks

3 Canadian Stocks You Can Confidently Buy Now and Hold Forever

You don’t need to think twice about loading up on these three top stocks.

Read more »

Aerial view of a wind farm
Energy Stocks

Is There Any Hope for Brookfield Renewable Stock?

Brookfield Renewable stock (TSX:BEP.UN) may be going through a rough patch, but recent moves suggest more is yet to come.

Read more »

edit Balloon shaped as a heart
Energy Stocks

If You Like Enbridge Stock, Then You’ll Love These High-Yield Energy Stocks

Do you like Enbridge (TSX:ENB) stock for its dividend but not the share growth? Consider these two top monthly payers…

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Clean Energy Play: Is Brookfield Renewable a Good Stock for a TFSA?

Add this top renewable energy stock to your self-directed TFSA portfolio for significant long-term and tax-free wealth growth.

Read more »

grow dividends
Top TSX Stocks

Enbridge Stock Pays a Massive 7 Percent Dividend and Now is a Great Time to Buy  

Have you considered buying Enbridge stock lately? If not, you may want to buy this long-term gem to start earning…

Read more »

edit Woman calculating figures next to a laptop
Energy Stocks

Better Buy: Cameco Stock or Brookfield Renewable Stock?

If you're looking for a strong future, clean energy is the answer -- especially if you're looking at a strong…

Read more »