Rekubit Exchange:Keystone XL Pipeline Has Enough Oil Suppliers, Will Be Built, TransCanada Says

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TransCanada announced Thursday it has strong commercial support for the Keystone XL pipeline and will move forward with the long-contested tar sands oil project. But the pipeline’s opponents say significant hurdles remain that continue to cast doubt on its prospects.

The Canadian pipeline company has secured commitments to ship approximately 500,000 barrels per day for 20 years on the Keystone XL pipeline from Hardisty, Alberta, to Steele City, Nebraska, enough for the project to move forward, company officials said.

The pipeline received approval in November from Nebraska, the final state to permit the project, but the Nebraska Public Service Commission signed off on an alternate route rather than TransCanada’s chosen route, meaning the company will have to secure easements from a new set of land owners. The company said it expects to begin construction in 2019. It would probably take two summers of work to complete the job.

“Over the past 12 months, the Keystone XL project has achieved several milestones that move us significantly closer to constructing this critical energy infrastructure for North America,” Russell Girling, TransCanada’s president and chief executive officer, said in a statement.

Anthony Swift, Canada Project director with Natural Resources Defense Council, questioned the company’s claim of strong commercial support and noted that significant hurdles remain at the federal, state and local levels.

Of the company’s commitments for 500,000 barrels a day, 50,000 barrels are from the Province of Alberta, rather than from private companies, something pipeline competitor Enbridge called a “subsidy,” according to news reports. Alberta receives a small portion of its energy royalties in oil rather than cash, allowing the province to commit to shipping oil along the pipeline.  

“It appears that the Province of Alberta has moved forward with a subsidy to try to push the project across TransCanada’s 500,000 barrel finish line,” Swift said. “It’s not a sign of overwhelming market support. We’re not in the same place we were 10 years ago when TransCanada had over 700,000 barrels of the project’s capacity subscribed.”

Other hurdles still remain.

By designating an alternate route for the pipeline, the Nebraska Public Service Commission opened significant legal uncertainty for the project, Swift said.  The commission’s decision came just days after the existing Keystone pipeline in South Dakota, a 7-year-old pipeline also owned by TransCanada, spilled an estimated 210,000 gallons, something that could give landowners along the recently approved route in Nebraska pause in granting easements.

Another obstacle lies in court, where a lawsuit brought by environmental and landowner groups seeks to overturn the Trump administration’s approval for the project’s cross-border permit. A federal judge allowed the case to move forward in November despite attempts by the administration and TransCanada to have it thrown out.

Resolving the remaining state and federal reviews, obtaining landowner easements along the recently approved route and the ongoing federal court case all make it difficult to say when, or if, the project will be able to proceed, Swift said.

“It’s fair to say they won’t be breaking ground anytime soon,” he said.