A legal dispute over the Keystone XL oil pipeline is giving opponents of a Pacific trade agreement a fresh argument in their effort to get Congress to kill the pact.

They say the case announced Wednesday, in which Trans Canada Corp. is seeking arbitration to recover $15 billion tied to the Obama administration's rejection of Keystone, shows how foreign companies could use provisions of the proposed Trans-Pacific Partnership trade agreement to challenge U.S. policy on the environment and other matters.

"I can't think of many clearer signals that could have been offered at this moment to show how big a threat the TPP poses to our efforts to keep fossil fuels in the ground," said Ben Beachy, a senior policy adviser for the Sierra Club, the San Francisco-based environmental group.

The trade pact will encourage oil and gas companies to use arbitration to seek compensation from the U.S., he said.

TransCanada argues that by rejecting the pipeline, the Obama administration violated provisions of a different trade deal — the North American Free Trade agreement.

The Calgary, Alberta-based company said it intends to start a claim for costs and damages under NAFTA against the United States. The dispute would be decided by a three-member arbitration panel to be established under the terms of the trade agreement. A panel couldn't force approval of the pipeline, proposed to carry Canadian crude into the U.S., but it could award damages for lost profits and costs incurred by the company.


Keystone supporters said conservationists were confusing the issue.

"President Obama's environmental extremist friends will look for any excuse to deny Americans natural resources, driving up the cost of energy and costing jobs," said AshLee Strong, a spokeswoman for House Speaker Paul Ryan, a Wisconsin Republican who backs passage of the trade agreement.

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