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Keystone XL ISDS Case Explained: Oil Company Sues US for $15 Billion

This page will be updated as the case progresses.


The proposed expansion of the Keystone XL pipeline across the U.S. sparked a groundbreaking movement to prioritize the well-being of people, the climate, and the planet over the interests of large, profit-hungry oil corporations. After over a decade of relentless protests and legal battles, President Joe Biden halted the dangerous pipeline on his first day in office.

This was a huge victory, but the fight isn’t over. 

The Canadian company behind the pipeline, TC Energy (formerly TransCanada), is now pursuing legal action against the United States. While it seems impossible, some trade and investment deals give multinational companies the power to sue governments and win taxpayer money as compensation. This shady system, known as investor-state dispute settlement (ISDS), can even order governments to pay for the loss of “expected future profits” that the corporation would have earned in the absence of the public policy it is attacking. TC Energy’s lawsuit against the United States could leave taxpayers on the hook to pay $15 billion.

How did we get here?

The proposed expansion of the Keystone XL pipeline in 2008 would have pumped 830,000 barrels of tar sands oil per day across 1,200 miles of U.S. land, putting communities and the environment at risk of ecological disaster. The pipeline would have also undermined important climate goals and intruded on indigenous sovereignty.

In November 2015, tens of thousands of activists nationwide demonstrated that the pipeline was not in the public interest, posing serious health and environmental risks. The Obama administration responded by rejecting the proposed pipeline. This historic rejection marked the first time a major fossil fuel project was halted due to climate concerns. It also sparked a grassroots movement to keep fossil fuels in the ground in a global effort to address climate change.

The Keystone fight hit a major road bump when Donald Trump signed an executive order within his first week in office allowing the pipeline to move forward. Communities continued to lead the fight against fossil fuel expansion anyway, with demonstrations led by indigenous leaders, farmers, ranchers, and environmental activists continuing to stall the project’s expansion.

Yet again, collective action made an impact. Biden pulled the plug on the Keystone XL pipeline on his first day in office, responding to well-documented risks to public health, climate change, and environmental protection.

TC Energy is now using an Investor-State Dispute Settlement (ISDS) clause to sue the U.S. government for $15 billion even though the estimated cost of the project was to be $8 billion, and only $1.1 billion had been invested in the project. TC Energy claims that preventing the expansion of the Keystone XL Pipeline into U.S. territory violates its rights under the North American Free Trade Agreement (NAFTA).

The ISDS case has recently progressed to a key step in which the three legal representatives (also known as arbitrators) who will determine its outcome have been selected. 

The US State Department requested the $15 billion case be thrown out on jurisdictional grounds. NAFTA was replaced by the U.S.-Mexico-Canada Agreement (USMCA) in 2020, which eliminated ISDS between the U.S. and Canada. President Joe Biden revoked the permit for the pipeline on his first day in office, long after Canadian companies lost the right to sue the U.S. government.

According to documents released by the tribunal overseeing the case, the U.S. government has already paid out $250,000 in taxpayer money to cover the initial tribunal members’ fees and expenses and will be expected to hand over more taxpayer dollars to the tribunal as the case progresses. This is in addition to paying the salaries of the many State Department attorneys defending the U.S. in the case and the lost opportunity cost of other work they could be doing. 

ISDS cases pose serious threat to improving environmental standards

ISDS cases like Keystone put corporate polluters above the law, threatening to undermine global climate commitments.

This system allows foreign investors to bypass U.S. courts and challenge American laws in a corporate-rigged arbitration system.

ISDS has been abused by corporations in the past. The U.S.’s ExxonMobil subsidiary, Mobil Investments Canada, is a good example. Mobil Investments Canada sued the Canadian government for $26 million in 2014 and won. Mobil Investments had refused to follow a Canadian law that required them to invest a small amount of earnings into research and development for environmental safeguards, and ISDS provisions in NAFTA rewarded them for doing so.   

Many of these cases similarly target government efforts to address climate change and protect the environment, though they’re presented as “trade” issues. In fact, of the 35 pending ISDS cases filed under U.S. free trade agreements (FTAs), nearly all relate to environment, energy, public health, finance, land use, and transportation policies. 

ISDS also poses a particular threat to developing countries that pass laws in defense of community health and environmental sustainability. These countries often do not have the resources to afford the exorbitant legal fees brought forward by ISDS lawsuits, which pressures governments to settle cases or refrain from passing public interest policies in the first place. 

Future of ISDS

Once the world’s leading proponent of ISDS, the U.S. has started to recognize the problems with the system. This comes after decades of action from civil society groups raising the alarm on the threat of ISDS to global democracy. 

As the Keystone case demonstrates, citizen health and environmental wellbeing will remain under threat from corporate polluters unless ISDS powers are completely revoked. 

Phasing out ISDS in current trade deals is an important step in the right direction, and it should remain the standard for future trade deals. President Biden has promised that ISDS will not be included in future trade agreements. This sets a powerful precedent and example for other countries that may want to follow suit. However, the U.S. still has ISDS-enforced pacts with more than 50 countries, and thousands of ISDS-enforced agreements are causing ongoing harm worldwide.

 “I don’t believe that corporations should get special tribunals that are not available to other organizations. I oppose the ability of private corporations to attack labor, health, and environmental policies through the Investor-State Dispute Settlement (ISDS) process and I oppose the inclusion of such provisions in future trade agreements.”
– Presiden Joe Biden

The Americas Partnership for Economic Prosperity (APEP) — an economic initiative between the U.S., Latin America, and the Caribbean — would be a great opportunity to eliminate ISDS with participating countries.