TransCanada will sue the US government for $15 billion for blocking its controversial project for an oil pipeline linking Canada with the Gulf of Mexico, the firm has said.

TransCanada Corp yesterday said the denial of a permit to complete the Keystone XL pipeline "was arbitrary and unjustified" under the North American Free Trade Agreement, and that the decision also exceeded the constitutional powers of US President Barack Obama.

The Obama administration decided in October to deny the Canadian company a permit to construct a key section of the pipeline across the US-Canada border, ruling it would harm the fight against climate change.

The decision, which came seven years after the company first submitted the project, marred US-Canada relations and angered many in the oil industry in both countries.

The pipeline would carry crude oil from the Alberta tar sands deposits all the way to the US Gulf Coast, and blocking the 1,900 kilometer Alberta-Nebraska section effectively undermined the entire project.

Environmentalists have assailed the project -- and the move to sue -- arguing that the Alberta deposits produce some of the "dirtiest" crude in the world.

TransCanada said in its complaint that the permit denial discriminated against it -- noting that three other pipeline had been granted permits for similar operations carrying Alberta crude into the United States.

It said that the Obama administration had instead bowed to pressure from environmental activists "even though the administration had concluded on six occasions that the pipeline would not have a significant impact on climate change."



"The delay and the ultimate decision to deny the permit were politically driven, directly contrary to the findings of the administration's own studies, and not based on the merits of Keystone's application," the company said in a statement.

TransCanada said it will seek to recover $15 billion in costs and damages as a result of the permit denial, which it said breached US obligations under the NAFTA treaty to treat investors fairly and equally.