Still no fi­nal de­ci­sion on pipe­line

Edmonton Journal - - FRONT PAGE - GE­OF­FREY MOR­GAN

CALGARY Tran­sCanada Corp. said Thurs­day it had signed enough 20-year con­tracts to make its pro­posed Key­stone XL pipe­line com­mer­cially vi­able, but stopped short of an­nounc­ing a fi­nal de­ci­sion on the con­tro­ver­sial project.

Calgary-based Tran­sCanada said ship­pers — in­clud­ing the Al­berta gov­ern­ment — had com­mit­ted to send 500,000 bar­rels per day on the pipe­line, which would run from Al­berta to the U.S. Gulf Coast. Critics said the com­mit­ment nonethe­less falls short of a full-throated back­ing by Al­berta’s oil in­dus­try.

Tran­sCanada had spent months ask­ing ship­pers to com­mit their pro­duc­tion to the project un­der long-term agree­ments and suc­ceeded in con­tract­ing roughly 60 per cent of Key­stone XL’s to­tal ca­pac­ity of 830,000 bpd even as other ex­port pipe­lines are full, op­er­a­tors are ra­tioning space and pro­duc­ers are mov­ing more oil out of the province on rail­way cars.

By con­trast, oil com­pa­nies had taken up 80 per cent, or 708,000 bpd, of Kin­der Mor­gan Canada’s ex­panded Trans Moun­tain pipe­line sys­tem be­tween Al­berta and Bri­tish Columbia, de­lib­er­ately leav­ing 20 per cent open for spot ship­ments.

Com­mit­ments from the Al­berta Petroleum Mar­ket­ing Com­mis­sion, a pro­vin­cial agency, make up 10 per cent of the vol­umes an­nounced Thurs­day, with 50,000 bpd com­mit­ted to the line through a roy­alty-in-kind for 20 years.

“We’re pleased to be mak­ing this com­mit­ment to bring more Al­berta oil to the world and we ex­pect it means Key­stone XL will be built,” Al­berta Premier Rachel Not­ley said in an emailed state­ment.

The APMC had pre­vi­ously com­mit­ted bar­rels to Tran­sCanada’s now-can­celled En­ergy East project. It did not com­mit bar­rels on ei­ther Kin­der Mor­gan Canada’s Trans Moun­tain pipe­line ex­pan­sion to the West Coast or on En­bridge Inc.’s Line 3 to the U.S. Mid­west. En­bridge de­clined to com­ment.

Pipe­line op­po­nents, mean­while, said the com­mit­ments to the project so far are “shock­ingly weak” and an in­di­ca­tion the pipe­line lacks sup­port from the Cana­dian oil­patch.

“Tran­sCanada clearly does not have the sup­port nec­es­sary for this project, since the com­pany could se­cure just 500,000 bpd of com­mit­ments from ship­pers on its 830,000 bpd-ca­pac­ity pipe­line — and that’s only with a gi­ant sub­sidy gift di­rectly from the Cana­dian gov­ern­ment,” Bold Ne­braska founder and pipe­line op­po­nent Jane Kleeb said in a state­ment.

Tran­sCanada it­self stopped short of an­nounc­ing a de­ci­sion on the $8-bil­lion project.

“Over the past 12 months, the Key­stone XL project has achieved sev­eral mile­stones that move us sig­nif­i­cantly closer to con­struct­ing

We’re pleased to be mak­ing this com­mit­ment to bring more Al­berta oil to the world and we ex­pect it means Key­stone XL will be built.

this crit­i­cal en­ergy in­fra­struc­ture for North Amer­ica,” Tran­sCanada pres­i­dent and CEO Russ Gir­ling said in a re­lease.

Tran­sCanada had in­tended to make a fi­nal de­ci­sion by the end of 2017 but that date has been pushed back amid le­gal chal­lenges to the route through Ne­braska.

The Ne­braska Pub­lic Ser­vice Com­mis­sion ap­proved a route through the state in Novem­ber but it was dif­fer­ent from Tran­sCanada’s pre­ferred route — which has opened up the project to new le­gal chal­lenges.

Op­posed landown­ers, rep­re­sented by Omaha lawyer David Dom­ina, filed an ap­peal of the ap­provals at the end of De­cem­ber.

“We are pro­gress­ing to­ward a fi­nal in­vest­ment de­ci­sion,” Tran­sCanada spokesper­son Terry Cunha said in an email, adding, “hav­ing route ap­proval in Ne­braska and the nec­es­sary com­mer­cial sup­port for Key­stone XL brings us close to FID.”

“While (Tran­sCanada) had pre­vi­ously noted its con­fi­dence with re­spect to se­cur­ing suf­fi­cient com­mer­cial agree­ments, we be­lieve the an­nounce­ment con­firm­ing sup­port is a mod­est pos­i­tive for the share price,” RBC Cap­i­tal Mar­kets an­a­lyst Robert Kwan said in a note. The com­pany stock ended the day vir­tu­ally flat, clos­ing at $59.84 on Thurs­day.

The Tran­sCanada re­lease noted the firm has be­gun pre­par­ing for con­struc­tion, get­ting per­mits for the line and plans to be­gin con­struc­tion in 2019. It had pre­vi­ously ex­pected to be­gin con­struc­tion in the spring of 2018 and said the line would take two years to build.

Not­ley said the gov­ern­ment com­mit­ted bar­rels to the project to “max­i­mize the re­turn we get for ev­ery bar­rel of oil” be­cause cur­rent Cana­dian oil pro­duc­tion is out­strip­ping to­tal oil ex­port ca­pac­ity.


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