Keystone gets funding nod
CALGARY — A final investment decision clearing the way for construction of the long-delayed Keystone XL Pipeline was greeted with relief on Tuesday by an Alberta oilpatch where production has grown faster than pipeline capacity.
The decision by Calgary-based TC Energy Corp. to go ahead with the $8-billion US project was widely anticipated after it cleared major U.S. regulatory hurdles this year and began site preparation work in Montana, South Dakota and Nebraska. In a surprising development, however, the Alberta government has agreed to invest about $1.5 billion Cdn as equity in the project, thus substantially covering planned construction costs through the end of the year.
The remaining $6.9 billion US is expected to be funded through a combination of a $4.2-billion US project level credit facility to be fully guaranteed by the Alberta government and a $2.7-billion US investment by TC Energy.
“We cannot wait for the end of the pandemic and the global recession to act,” Premier Jason Kenney said Tuesday. “This investment in Keystone XL is a bold move to re-take control of our province’s economic destiny and put it firmly back in the hands of the owners of our natural resources, the people of Alberta.”
He said Alberta will be able to sell its shares for a profit after the pipeline is built and it will generate a net return of more than $30 billion through royalties and higher prices for Alberta oil in the next 20 years.
Alberta’s involvement was praised by CEO Mark Little of Suncor Energy Inc., one of Canada’s largest oilsands producers and refiners.
“Access to new markets and expanded connectivity to existing markets is critical, especially the U.S. Gulf Coast through KXL, which will significantly expand access to the largest heavy oil refining capacity in the world,” Little said.
Oilsands producer Cenovus Energy Inc. has a contract to move 150,000 barrels per day on Keystone XL and views its construction as “crucial” to the success of the Canadian oil industry, said spokesman Brett Harris.
The decision disappointed U.S. environmental groups that have fought against the pipeline in regulatory hearings and the courts for years. Catherine Collentine, associate director of the Sierra Club’s Beyond Dirty Fuels campaign, said: “By barrelling forward with construction during a global pandemic, TC Energy is putting already vulnerable communities at even greater risk.”
Canadian opponents were also critical. Environmental Defence called the Alberta investment a “reckless use of public money” and the Pembina Institute suggesting public dollars would be better spent to reduce oilpatch greenhouse gas emissions and support workers.