KXL CHUGS ALONG
As Trans Mountain stalls, TransCanada’s pipeline nears construction
More than a decade after it was proposed by TransCanada Corp., the Keystone XL project is moving closer to construction in Canada and the U.S., despite legal obstacles.
Preliminary work has begun on the pipeline route in Alberta, Saskatchewan, Montana and South Dakota — but not Nebraska, where it faces a legal challenge, a TransCanada spokesperson said.
The company is delivering pipe, conducting civil engineering work on pump stations and clearing vegetation ahead of full construction, expected to start next year, though the company has yet to officially announce a final investment decision.
“Later this year, we will start moving equipment to prepare workforce camp and camp modules,” TransCanada spokesperson Matthew John said.
In Canada, John said, there will be some increased truck traffic between Camrose, Alta. and Regina as the company moves pipe.
The long-delayed Keystone XL (KXL) has emerged as a critical lifeline for Canadian oil companies as existing export pipelines have filled up, leading to recordbreaking US$50-per-barrel discounts for Western Canada Select, a heavy oil blend.
Amid the crippling discounts, the Trans Mountain pipeline expansion project to the West Coast has stalled after a Federal Court of Appeal ruling in August went against the federal government, which recently bought the project.
Relief for the oilpatch isn’t expected until Enbridge Inc. completes its 370,000-barrels-per -day Line 3 replacement pipeline to Wisconsin in the second half of next year.
Analysts now expect Keystone XL to be completed before the Trans Mountain project.
“Pipeline capacity will get a boost when Line 3 and then the third Keystone leg (XL) kick in by as soon as late 2019 or early 2020 (Line 3),” said Scotiabank in a note this week. “Two out of three ain’t bad pending future Trans Mountain developments. This too should help ease the pipeline bottlenecks that are causing a discounted glut.”
Proposed in 2008, the Keystone XL pipeline has been delayed multiple times amid opposition by a group of landowners in Nebraska and by former U.S. president Barack Obama, who denied a presidential permit. The southern leg of the pipeline, from Kansas to Texas, which didn’t need a presidential permit, has been built.
U.S. President Donald Trump revived the US$8-billion pipeline project, which would carry 830,000 barrels of oil per day from Alberta to the U.S. Gulf Coast, through an executive order in 2017. Since then, the company has worked through a regulatory process in Nebraska, which is being challenged.
The company has indicated it would begin construction early next year.
“I think they want to try to expedite this as much as they can to get this either completed or sufficiently complete before Trump leaves office,” Raymond James analyst Chris Cox said of the work underway on Keystone XL.
It would take two years to build the project, which is unlikely to be compressed given the sheer quantity of pipe.
Still, the preparatory work is considered a victory in the Calgary oilpatch.
“I’m encouraged that they’re doing these things,” said Dennis McConaghy, a former TransCanada executive who oversaw the Keystone XL pipeline saga for years and has since written a book on the project.
“I think they have a fundamental expectation that they are going to prevail but they are doing it cautiously,” McConaghy said, noting the project still faces a court obstacle.
Opposed landowners in Nebraska challenged the state’s Public Utilities Commission’s decision to approve the pipeline through the state along an alternative to the company’s preferred route.
The challenge, which is before the Nebraska Supreme Court, hinges on whether the PUC had the authority to approve an alternative route.
TransCanada’s John said oral arguments in the case will be made beginning Nov. 1, but couldn’t say when a decision is expected. Analysts have speculated a decision could be made by the end of this year, or in the first quarter of 2019.
I think they want to try to expedite this as much as they can to get this either completed or sufficiently complete before Trump leaves office.