TransCanada pushing Alberta to buy Keystone capacity: sources

O T TAWA TransCanada Corp. is pressing the Alberta government to buy capacity in its Keystone XL pipeline, seeking the same type of support the province had pledged for its cancelled project to the Atlantic coast, people familiar with the matter said.

The pipeline company, which has won approval for Keystone XL from U.S. President Donald Trump, is urging Alberta Premier Rachel Notley to commit a similar “take or pay” agreement on Keystone that the province gave TransCanada’s defunct Energy East pipeline, according to people familiar with the matter who asked not to be identified discussing private talks.

The Calgary-based firm declined to comment.

The request, which comes as TransCanada pushes for more private-sector shipping commitments to Keystone, puts Notley in a bind as she faces a fierce re-election fight in 2019 amid voter anxiety over slumping crude prices. While it’s politically fraught to be seen as not fully supporting a pipeline in Canada’s oil hub, she’s also said to be under pressure from rival Enbridge Inc. to not subsidize its competitor, the people said.

The Alberta government has its own oil to sell because it collects barrels of sandy bitumen in lieu of royalties from some producers under the bitumen royalty-in-kind, or BRIK, program. A take-or-pay agreement commits the province to a minimum shipping requirement.

Alberta backed Energy East as essentially an anchor tenant in an effort to get the pipeline off the ground and bring provincial oil to a deepwater port. It pledged to pay to ship 100,000 barrels a day in Energy East, a commitment projected to have a “minimum” government cost of $4.6 billion over 20 years, or a higher figure depending on volumes.

A former Alberta energy minister behind the original Energy East pledge says the idea was to spur a pipeline to the ocean that was deemed critical for the province. He said supporting Keystone, which would send as much as 830,000 daily barrels of crude to the U.S., is another matter.

“The reason we made the commitment was because it was the most important strategic play available to get us to deep water,” while also replacing foreign oil in Eastern Canadian refineries with domestic crude, said Ken Hughes, a former Progressive Conservative lawmaker. “It had a wide range of benefits, and none of those benefits come about with Keystone.”

Officials in Notley’s New Democratic Party government, including Energy Minister Margaret McCuaig-Boyd, declined to comment on any talks with the company, saying only that the province isn’t liable for any costs related to Energy East’s collapse.

TransCanada is seeking support from shippers, and government support could help meet its target.

The “open season” to solicit commitments for a chunk of Keystone XL’s capacity has concluded, and TransCanada will be reviewing commercial backing for the project, spokesman Terry Cunha said.

Keystone won votes of confidence from the chief executive officers of Canadian oil producers Cenovus Energy Inc. and Suncor Energy Inc. in late July.

The CEOs both said they support Keystone and that the Canadian energy industry needs more pipeline capacity.

Suncor confirmed at the time that it plans to ship its products on Keystone.