Kinder Morgan has spent plenty of time recently on the defensive as it faces legal challenges against its proposed Trans Mountain expansion pipeline. However, if the project fails, the Houston-based company could go on the offensive to try to recoup billions of dollars.

Investors are already asking whether the company will take such action, and some legal experts say it has a legitimate case against Canada because of how the B.C. government and some municipalities have tried to oppose the project.

If the company seeks damages, it would likely use NAFTA, since Chapter 11 of the agreement allows foreign companies to file compensation claims in countries where they have investments and believe a government action is unfair and discriminatory.

Similar to Keystone XL

It's the same step Calgary-based TransCanada took two years ago after then-president Barack Obama rejected the Keystone XL project. TransCanada asked for $15 billion US because the company felt it did not receive fair and equitable treatment in the review process, while other companies were able to construct pipelines with few delays.

The $15 billion in damages in the NAFTA claim related to TransCanada trying to recoup its investment and the lost future economic return for the project. The company dropped the claim and corresponding lawsuit after President Donald Trump approved the project.

Union of B.C. Indian Chiefs president, Grand Chief Stewart Phillip, centre, says Kinder Morgan has 'finally woken up and smelled the coffee and realized that you can’t build a pipeline in a war zone.' (CBC)

A New York-based analyst asked Kinder Morgan on a Monday morning conference call whether it would potentially sue British Columbia to recover costs, but chief executive Steven Kean said, "That is way too premature to discuss."

Kinder Morgan announced it is suspending non-essential activities and related spending for the $7.4-billion Trans Mountain pipeline expansion. The company set a deadline of May 31 to solve the political risk posed by B.C. and its legal challenges, or else it will likely abandon the project.

"It's not a normal course of business regulatory process here. What we have is a government that is openly in opposition and has reaffirmed that opposition," said Kean.

Several court challenges

Last month, the Federal Court of Appeal dismissed the B.C. government's application to appeal a National Energy Board ruling allowing Kinder Morgan to bypass City of Burnaby bylaws during construction. The company still faces other court challenges.

B.C. Premier John Horgan promised to "use every tool in the toolbox" to stop the project. So far, those efforts seem to be working.

"They're being creative. They're trying to figure out any way they can stop it," said James Coleman, an energy law professor at Southern Methodist University, who previously worked at the University of Calgary.

Coleman said Kinder Morgan would have a legitimate NAFTA claim. Even if the company believes a province or municipality is the problem, under NAFTA, the claim would target the federal government.

"They would say Canada hasn't done enough to ensure that their investment wouldn't be effectively expropriated or stolen."

Chris Bloomer calls on the federal government to ensure the expansion of Trans Mountain. 0:47 American companies have been successful in recouping costs using NAFTA. The federal government paid American forestry giant AbitibiBowater Inc. $130-million after Newfoundland and Labrador expropriated some of its assets in 2008.

Fair treatment

NAFTA claims have been made when there is a "lack of clarity about the role of municipal governments versus federal and provincial governments," according to Nigel Bankes, a law professor at the University of Calgary. He too said Kinder Morgan could make a claim against Canada for "breach of fair and equitable treatment."

The B.C. government still plans to have the courts decide whether the province could implement a temporary ban on increased exports of bitumen from Alberta.

B.C. Premier John Horgan said he was told by Kinder Morgan that the project has been 'unnecessarily harassed'' by the provincial government, but Horgan disagrees. (CBC)

Not everyone is so sure a NAFTA claim against Canada would be successful, though.

"I really don't. I think Kinder Morgan has had an opportunity to participate in the judicial process. All British Columbia is trying to do right now is propose regulations that would have the effect of protecting its lands and waters from a spill," said Jason MacLean, a law professor at the University of Saskatchewan and director at the Victoria-based Pacific Centre for Environmental Law and Litigation.

The courts have made it clear that projects like Trans Mountain are in federal jurisdiction. However, one court case shows the responsibility to protect the environment is shared jurisdiction.

A few years ago, the B.C. Supreme Court sided with Coastal First Nations in a case involving Enbridge's proposed Northern Gateway project. The judge decided the provincial government should do its own environmental assessment and consult with First Nations and other local stakeholders.