Nebraska approves new Keystone XL route
TransCanada reviewing decision while opponents vow to continue pipeline fight
CALGARY Groups opposed to the Keystone XL oil pipeline vowed to continue fighting its construction through appeals, but their options appear limited after TransCanada Corp. earned a final regulatory approval Monday for its long-delayed project.
In a 3-2 decision, the Nebraska Public Service Commission voted to allow the 830,000-barrel-perday oil pipeline from Alberta to cross through the state, albeit along an alternative to TransCanada’s preferred route. The new route would shift its path slightly eastward in parts of the state so that 60 per cent of the line parallels TransCanada’s existing Keystone system.
Dissenting commissioner Crystal Rhoades said she voted against approvals because the alternate route would still cross environmentally sensitive areas and the U.S. State Department had not extensively reviewed the alternate route.
TransCanada, which has already secured a federal clearance after U.S. President Donald Trump signed an executive order in January, said it was assessing the Nebraska commission’s decision.
“As a result of today’s decision, we will conduct a careful review of the Public Service Commission’s ruling while assessing how the decision would impact the cost and schedule of the project,” TransCanada president and CEO Russ Girling said in a release.
TransCanada did not immediately respond to a request for comment on whether a new application would be needed before it could begin working on Keystone XL.
In the hours that followed the decision, business groups supporting Keystone XL touted the approval as a major win, but environmentalists and opposed landowners seized on the dissenting view and potential legal questions arising from the alternative route as grounds to block the project.
“The alternate route, we understand, adds about five miles to the overall length of the pipe, but doesn’t change where it comes into or out of the state,” said Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, noting that the decision was the last step in a prolonged nine-year regulatory process.
Since the alternative route doesn’t change the entry or exit points for Keystone XL in Nebraska, McMillan said it shouldn’t require other states, such as South Dakota, to reconsider the project.
Opposition groups, however, sensed an opportunity for appeals and potentially new delays.
“There’s a legal argument that TransCanada may have to re-apply (for the public service commission for approvals),” said Domina Law Group attorney Brian Jorde.
He said the commission is required to either approve or deny a route, not consider a secondary option, which creates a legal question that even lawyers in the state are trying to understand.
Jorde represented landowners opposed to KXL before the commission.
He said he did not know yet whether they would appeal the decision but added an appeal could be based on the lack of study for the alternate route. The groups have 30 days to file an appeal of the decision with the courts.
“It is one of the many complexities that is up in the air based on the legal decision that came down today,” he said.
Bold Nebraska president Jane Kleeb, vowing that “Keystone XL will never be built,” said in a statement that her environmental organization would continue to fight the pipeline. She tweeted that the alternate route would add more years of reviews and legal challenges.
Other environmental groups, including the Rainforest Action Network, said they would pressure banks such as JPMorgan Chase that have provided TransCanada with financing in an effort to stop the project.
Nebraska was the last state to formally approve the pipeline and the commission’s decision states that it had consulted with other statelevel authorities, “and no agency expressed any concerns or opinion regarding approval, denial, or relocating of either the preferred or mainline alternative routes.”
Commission chairman Tim Schram said during Monday’s meeting that commissioners would not discuss the project “as legal challenges to the decision remain a possibility.”
TransCanada has yet to officially sanction the project’s construction and has been dealing with a leak on its existing Keystone system in South Dakota that started just days before the Nebraska decision was due.
TransCanada had previously said construction on Keystone XL could begin in early 2018 and end with the line in service by 2020 – 12 years after the company initially proposed the project in 2008.
Gavin MacFarlane, a vice-president at Moody’s Investors Service and the lead analyst on TransCanada, said that the Nebraska decision did not provide certainty the project will ultimately be built.
“Pipeline construction would negatively affect TransCanada’s business risk profile through increased project execution risk, and would likely put pressure on financial metrics,” MacFarlane said in a statement.
Despite concerns over the alternate route and possible appeals, the commission’s decision is considered by many business leaders and politicians to be the last step in a drawn-out regulatory process.
“With Nebraska’s decision, the project has now secured all the required approvals in both Canada and the U.S.” Natural Resources Minister Jim Carr said in a statement.
The market also responded positively, as TransCanada shares traded up 97 cents, or 1.55 per cent, to $63.51 on the day.
“The Keystone XL pipeline project has unfortunately become the poster child for the need to reform our permitting process so that we may fully realize North America’s energy potential,” Karen Harbert, the U.S. Chamber of Commerce’s Global Energy Institute president and CEO, said in a release.
Harbert said she was “pleased that the project has cleared this final hurdle” after multiple delays.
Similarly, Wood Mackenzie analyst Zachary Rogers said in a release the decision “greatly diminishes the political risk for the project, likely clearing the way for increased volumes of West Canada heavy crude to reach the Gulf Coast.”
The business case for the pipeline had strengthened because heavy oil production from Venezuela and Mexico had declined, opening a bigger opportunity for Canadian heavy oil to be refined in Texas and Louisiana refineries.
“Assuming Keystone XL gets built, the biggest winners will likely be West Canadian producers. By ensuring a cheaper, more efficient route to the U.S. Gulf Coast, (Canadian heavy crude) would likely not need to be discounted to the extent we’ve seen over the past few years,” Rogers said.
The Keystone XL pipeline project has unfortunately become the poster child for the need to reform our permitting process so that we may fully realize North America’s energy potential.