US judge halts Key­stone XL oil pipe­line in blow to Trump, Trudeau

Clogged pipe­lines have made dis­counts on Cana­dian oil even steeper than they were ear­lier this year when Sco­tia­bank warned they may cost coun­try’s econ­omy C$16 bil­lion.

The Sunday Guardian - - Business - WIN­NIPEG/NEW YORK REUTERS REUTERS

AUS judge in Mon­tana has blocked con­struc­tion of the Key­stone XL pipe­line de­signed to carry heavy crude oil from Canada to the United States, draw­ing praise on Fri­day from en­vi­ron­men­tal groups and a re­buke from Pres­i­dent Don­ald Trump.

The rul­ing of a US Court in Mon­tana late on Thurs­day dealt a set­back to Tran­sCanada Corp, whose stock fell 1.7% in Toronto. Shares of com­pa­nies that would ship oil on the pipe­line also slid.

Tran­sCanada said in a state­ment it re­mains com­mit­ted to build­ing the $ 8 bil­lion, 1,180 mile (1,900 km) pipe­line, but it has also said it is seek­ing part­ners and has not taken a fi­nal in­vest­ment de­ci­sion.

The rul­ing drew an an­gry re­sponse from Trump, who ap­proved the pipe­line shortly af­ter tak­ing of­fice.

It also piles pres­sure on Cana­dian Prime Min­is­ter Justin Trudeau to as­sist the coun­try’s ail­ing oil sec­tor by ac­cel­er­at­ing crude ship­ments by rail un­til pipe­lines are built. Clogged pipe­lines have made dis­counts on Cana­dian oil even steeper than they were ear­lier this year when Sco­tia­bank warned that they may cost the coun­try’s econ­omy C$16 bil­lion.

US District Court Judge Brian Mor­ris wrote that a US State De­part­ment en­vi­ron­men­tal anal­y­sis of Key­stone XL “fell short of a ‘hard look’” at the cu­mu­la­tive ef­fects of green­house gas emis­sions and the im­pact on Na­tive Amer­i­can land re­sources.

“It was a po­lit­i­cal de­ci­sion made by a judge. I think it’s a dis­grace,” Trump told re­porters at the White House.

The rul­ing was a win for en­vi­ron­men­tal groups who sued the US gov­ern­ment in 2017 af­ter Trump an­nounced a pres­i­den­tial per­mit for the project. Tribal groups and ranch­ers also have spent more than a decade fight­ing the planned pipe­line.

“The Trump ad­min­is­tra­tion tried to force this dirty pipe­line project on the Amer­i­can peo­ple, but they can’t ig­nore the threats it would pose to our clean wa­ter, our cli­mate, and our com­mu­ni­ties,” said the Sierra Club.

The State De­part­ment is re­view­ing the judge’s or­der and had no com­ment due to on­go­ing lit­i­ga­tion, a spokesman said.

The pipe­line would carry heavy crude from Al­berta to Steele City, Ne­braska, where it would con­nect to re­finer­ies in the US Mid­west and Gulf Coast, as well as Gulf ex­port ter­mi­nals.

Shares of Cana­dian oil pro­duc­ers Cana­dian Nat­u­ral Re­sources Ltd and Cen­ovus En­ergy lost 2.7% and 2.2% re­spec­tively.

Canada is the pri­mary source of im­ported US oil, but con­gested pipe­lines in Al­berta, where tar-like bi­tu­men is ex­tracted, have forced oil ship­pers to use costlier rail and trucks.

Two pipe­line projects have been scrapped due to op­po­si­tion, and the Trans Moun­tain line project still faces de­lays even af­ter the Cana­dian gov­ern­ment pur­chased it this year to move it for­ward.

“You have to won­der how long in­vestors will tol­er­ate the de­lays and whether the Cana­dian gov­ern­ment will in­ter­vene again to pro­tect the in­dus­try,” said Morn­ingstar an­a­lyst Sandy Fielden.

En­sur­ing at least one pipe­line is built is crit­i­cal to Trudeau’s plans, with a Cana­dian elec­tion ex­pected next au­tumn.

“I am dis­ap­pointed in the court’s de­ci­sion and I will be reach­ing out to Tran­sCanada later on to­day to show our sup­port to them and un­der­stand what the path for­ward is for them,” Nat­u­ral Re­sources Min­is­ter Amar­jeet Sohi told re­porters in Ed­mon­ton, Al­berta.

Al­berta has felt the fi­nan­cial pres­sure, and an in­dus­try source said the pro­vin­cial gov­ern­ment last month so­licited pro­pos­als from com­pa­nies on ways to move crude faster by rail. The source said pro­pos­als in­cluded ideas such as buy­ing rail cars and in­vest­ing in load­ing ter­mi­nals.

“I’ve never seen (the Al­berta gov­ern­ment) so ac­tive on this front,” said the source, who asked not to be iden­ti­fied be­cause the mat­ter is po­lit­i­cally sen­si­tive. “That is a shift.”

Al­berta En­ergy Min­is­ter Mar­garet McCuaig-Boyd said the prov­ince has sent a pro­posal to Ot­tawa to move crude faster by rail that in­cludes mak­ing more tank cars avail­able.

“We’re giv­ing away our re­sources cheap,” she told re­porters. “We need mar­ket ac­cess.”

Neigh­bour­ing Saskatchewan stands to lose C$500 mil­lion in an­nual roy­al­ties if the dis­count for Cana­dian crude re­mains steep, Saskatchewan En­ergy Min­is­ter Bron­wyn Eyre said.

“Peo­ple have placed quite a lot of hope in that (Key­stone) project, so it’s a ma­jor set­back,” she said in an in­ter­view.

Mor­ris, in his rul­ing, or­dered the gov­ern­ment to is­sue a more thor­ough en­vi­ron­men­tal anal­y­sis be­fore the project pro­ceeds. He said the anal­y­sis failed to fully re­view the ef­fects of the cur­rent oil price on the pipe­line’s vi­a­bil­ity and did not fully model po­ten­tial spills and of­fer mit­i­ga­tion mea­sures. The rul­ing likely sets Key­stone back by up to one year, said Dan Ripp, pres­i­dent of Bradley Woods Re­search. Fol­low­ing Net­flix’s Oc­to­ber earn­ings an­nounce­ment, chief prod­uct of­fi­cer Greg Peters said: “We’ll ex­per­i­ment with other pric­ing mod­els, not only for In­dia, but around the world that will al­low us to broaden ac­cess by pro­vid­ing a pric­ing tier that sits be­low our cur­rent low­est tier.” That was widely un­der­stood to sig­nal that a low-price plan was com­ing to In­dia. But Hast­ings said that was not the case.

Don­ald Trump

Justin Trudeau

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