TC Energy to go ahead with US$8B Keystone XL project [UPDATED]
TC Energy said in a company statement that the pipeline is expected to enter service in 2023
CALGARY — A final investment decision on March 31 clearing the way for construction of the long-delayed Keystone XL Pipeline was greeted with relief by an Alberta oilpatch where production has outgrown pipeline capacity.
The decision by Calgary-based TC Energy Corp. to go ahead with the US$8-billion project was widely anticipated after it cleared all major U.S. regulatory impediments earlier this year and had begun site preparation work in Montana, South Dakota and Nebraska.
In a surprising development, however, the Alberta provincial government has agreed to invest about US$1.1 billion as equity in the project, thus substantially covering planned construction costs through the end of 2020.
The remaining US$6.9 billion is expected to be funded through a combination of a US$4.2-billion project level credit facility to be fully guaranteed by the Alberta government and a US$2.7-billion investment by TC Energy.
“We cannot wait for the end of the pandemic and the global recession to act,” said Premier Jason Kenney in a statement.
“Today we are moving forward with a project that is essential to our future prosperity. 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 over $30 billion through royalties and higher prices for Alberta oil in the next 20 years.
The decision is sure to disappoint U.S. environmental groups that have fought against the pipeline in regulatory hearings and the courts for years.
In a statement on March 31, Catherine Collentine, associate director of the Sierra Club’s Beyond Dirty Fuels campaign, took issue with the timing of the announcement during the COVID-19 pandemic and vowed to continue the fight.
“By barrelling forward with construction during a global pandemic, TC Energy is putting already vulnerable communities at even greater risk,” she said.
Production in Alberta is expected to decline this year as oil companies cut billions of dollars in spending due to a global oil market war between Saudi Arabia and Russia that has resulted in sharply slashed prices.
The 1,947-kilometre project will be able to carry 830,000 barrels per day of crude oil from Hardisty, Alta., to Steele City, Neb., where it will connect with TC Energy’s existing facilities.
The company formerly known as TransCanada says the pipeline is expected to enter service in 2023.
Once the project is complete and in service, TC Energy said it expects to acquire the Alberta government’s equity investment under agreed terms and conditions and refinance the US$4.2-billion credit facility in the debt capital markets.
The project was first proposed more than a decade ago but has faced numerous hurdles and had been rejected by the Obama administration.
However, U.S. President Donald Trump has worked to revive the project and been a strong backer of the pipeline.
“We appreciate the ongoing backing of landowners, customers, Indigenous groups and numerous partners in the U.S. and Canada who helped us secure project support and key regulatory approvals,” TC Energy chief executive Russ Girling said in a statement.
“In addition, we thank U.S. President Donald Trump and Alberta Premier Jason Kenney as well as many government officials across North America for their advocacy without which, individually and collectively, this project could not have advanced.”
The Calgary-based Canadian Energy Pipeline Association said building the Keystone XL project provides a “critical boost of confidence” in the economies of Alberta and Canada.
“This decision helps to ensure that Canada will continue to safely deliver our responsibly produced energy resources to the world,” said CEO Chris Bloomer.
In Ottawa, Natural Resources Minister Seamus O’Regan also applauded the news.
“The government of Canada has always been a strong supporter of Keystone XL,” he said in a statement.
“The project increases our market access — safely, responsibly, and sustainably — and fits within Canada’s climate plan.”