TransCanada formally seeks NAFTA damages in Keystone XL rejection

TORONTO (Reuters) - TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday.

TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website.

"Unfortunately, the parties were unable to settle the dispute."

TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement (NAFTA) provisions, seeking to recover what it says are costs and damages.

The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast.

Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.

TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

NAFTA, whose arbitration provisions allow companies to challenge governments before international panels, has been a target of recent anti-free-trade sentiments in the United States.

The heads of NAFTA members, Canada, the United States and Mexico, are expected to meet in Ottawa for a North American leaders' Summit on June 29.

Canada was supposed to host the meeting early last year but canceled it amid tension between then Prime Minister Stephen Harper and Obama over the Keystone XL pipeline.

TransCanada and the U.S. Department of Energy did not immediately respond to requests for comment.

(Reporting by Ethan Lou in Toronto, Editing by Franklin Paul)