The question of whether Presidential Permit authority is constitutional and/or subject to judicial review has been and continues to be an unsettled issue.  A little more than a month after the State Department’s November 2015 denial of TransCanada’s application for a Presidential Permit to construct its Keystone XL pipeline project, the United States District Court for the District of Minnesota ruled in White Earth Nation et al. v. Kerry et al. that State Department Presidential Permitting decisions are Presidential in nature and are therefore not subject to judicial review.  Approximately one month later, in January 2016, TransCanada filed two separate actions to challenge the Obama administration’s rejection of its application for a Presidential Permit for the Keystone XL pipeline.  The first action was filed in federal district court in Texas to challenge the denial of the Keystone Presidential Permit, and the second is a Notice of Intent to submit a claim to arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA).

The Minnesota case concerned a challenge brought under the Administrative Procedure Act (APA) to decisions made by the State Department in 2014 concerning planned capacity expansion and replacement on Enbridge’s Line 3 and Line 67 (Alberta Clipper), both of which transport crude oil between Alberta, Canada and Superior, Wisconsin, pursuant to a previously issued Presidential Permit.   Enbridge notified the State Department in early 2014 of its intention to replace a section of Line 3 and of its plans to construct interconnections between Lines 3 and 67.  By letters dated April 24 and July 24, 2014, the State Department informed Enbridge that the replacement project was consistent with the authorizations in the existing 1991 Presidential Permit for Line 3; and that the interconnection project would not require authorization from the State Department, as the planned interconnections were located outside of the border segments for both Lines 3 and 67.

A Native American tribe and several environmental groups filed the Minnesota suit, arguing that these letters violated the National Environmental Policy Act (NEPA), the National Historic Preservation Act (NHPA), and the APA by authorizing: (1) new, high-capacity pipelines without any NEPA or NHPA compliance; and (2) the interconnection before full NEPA and NHPA review of a related expansion project was complete, thereby short-circuiting the review process.  The Court rejected these arguments in its December 9, 2015 decision, finding that in making its determinations in the two letters at issue, the State Department was acting pursuant its delegated authority to issue Presidential Permits, set forth in Executive Order 13337.  The Court held that even where Presidential authority is delegated to an agency head, the actions remained the action of the President and as such were not reviewable under the APA.  In doing so, the Court joined two other federal courts who have ruled on the issue.  See NRDC v. Dep’t of State and Sisseton-Wahpeton Oyate v. Dep’t of State.

The extent of Presidential authority to issue or deny Presidential Permits—and the related question of judicial authority to review such decisions—is also at issue in TransCanada’s recent challenge in Texas federal district court to the Obama administration’s denial of the Keystone XL Presidential Permit.  At the heart of TransCanada’s lawsuit is the claim that the denial constitutes an unprecedented, unconstitutional and unlawful exercise of unilateral power by the President (which infringed on Congress’ power to regulate interstate and international commerce).  The case will likely entail consideration of the basis for and extent of Presidential authority to make permitting decisions for cross-border pipeline facilities, which White Earth Nation and predecessor cases have deemed unreviewable.

TransCanada has filed a related Notice of Intent to submit a claim for arbitration under Chapter 11 of NAFTA based upon the Obama administration’s Keystone XL denial.  That provision allows a Canadian or Mexican company to seek damages or reversal of decision against the U.S. (through international arbitration panels) if it can show unfair treatment or discrimination as a foreign company.  NAFTA also contains a provision for “Investor State Dispute Settlement” which allows the claimant to seek lost profits and future profits.  While only a dozen or so claims such as this have been filed against the U.S. since the treaty was signed in 1994 (and none of those involved energy or fossil fuel claims), the U.S. has thus far prevailed (as compared to claims filed against Canada).

In short, the issue of the constitutionality of Presidential Permit authority, whether it is subject to judicial review, and whether the Obama administration properly exercised its authority in denying the Keystone XL pipeline’s application, will continue to play out over the next several years.