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Varcoe: With Keystone XL decision, there s a little more optimism for ending pipeline paralysis

Varcoe: With Keystone XL decision, there s a little more optimism for ending pipeline paralysis
Business
The Keystone XL project received a positive ruling Friday from the Nebraska Supreme Court that could clear the way for a final investment decision by Calgary-based TC Energy.

It came only two days after Trans Mountain Corp. issued notices to some of its prime contractors to start hiring construction workers to expand the federally owned pipeline that runs from Edmonton to Burnaby, B.C.

However, the news came less than 24 hours after the Alberta government announced it would extend oil production cuts into 2020. The decision was made primarily because of recent delays to Enbridge’s Line 3 replacement project — the most-advanced pipeline development that will ship more oil out of Western Canada.

“There is a cautious optimism building for the pipelines … that after an incredibly long wait, these things may inch to completion,” said analyst Kevin Birn of energy consultancy IHS Markit.

“These are unambiguously good news stories, but the carpet has been pulled out on people too many times. This is Charlie Brown and the football story.

“Will you actually get to kick the ball this time?”

It’s easy to become skeptical because of the incessant delays.

FILE – In this Aug. 6, 2017, file photo, demonstrators against the Keystone XL pipeline march in Lincoln, Neb. Nati Harnik / AP

After I wrote earlier this week that politicians should hold off on holding a ticker-tape parade for Trans Mountain, one reader told me to prepare to swallow some humble pie once the line is built, albeit using more colourful language than can appear in this newspaper.

“Give some credit when due. The sky is NOT always falling!”

That’s true. Some headway is being made to solve Canada’s pipeline paralysis.

The pipeline company formerly known as TransCanada Corp. could soon give the green light to the US$8-billion Keystone XL project and begin construction south of the border.

But we can’t ignore the fact the project was first proposed back in 2008 and — as TransCanada’s former executive vice-president Dennis McConaghy pointed out Friday — it was initially supposed to be operating in 2012.

As well, the average time since regulatory filings were made on these three pipeline projects now averages more than 7.5 years, with completion still several years out for some of them, according to Birn.

iles of unused pipe, prepared for the proposed Keystone XL pipeline, sit in a lot on October 14, 2014 outside Gascoyne, North Dakota. Andrew Burton / Getty Images files

However, Keystone XL is one step closer to proceeding, as the company moves like a minesweeper to clear the field of legal problems that could sidetrack progress.

After an appeal was heard last year, the Nebraska court affirmed an earlier decision from the Public Service Commission that approved the pipeline’s route through the state.

“This was a good week,” said McConaghy, who is set to release a new book about Canada’s pipeline debate.

“This should be the last hurdle for Trans Canada to unequivocally say we’ve made a final investment decision (to) go to the finish line on Keystone XL.”

Like Trans Mountain, Keystone XL would be a strategically important piece of infrastructure for the industry and the province.

If built, the project would transport 830,0000 barrels of per day of oil from Western Canadian to Nebraska, where it would connect with the existing pipeline system. It would move Alberta crude all the way down to U.S. Gulf Coast refiners, while Trans Mountain would ship oil to the west coast for export.

Either one would help unclog a constrained pipeline network out of Alberta.

The company didn’t respond to questions Friday, but in a statement, TC Energy chief executive Russ Girling called the ruling “another important step” as the company advances towards building the project.

TransCanada CEO Russell K. Girling speaks to President Donald Trump in the Oval Office of the White House in Washington, Friday, March 24, 2017, during an announcement on the approval of a permit to build the Keystone XL pipeline, clearing the way for the $8 billion project. Evan Vucci / AP

Earlier this spring, Donald Trump reissued a presidential permit for Keystone XL, giving the project new momentum, although the company said it had missed the 2019 construction season.

Building any new export pipeline would be significant, as the oilpatch desperately needs a shot of confidence. It also comes as the province has extended its curtailment program to restrict oil output into 2020, which could lead to another slow-growth year for the sector.

At the risk of becoming one of the nattering nabobs of negativism, it’s worth pointing out several challenges must be resolved.

As GMP FirstEnergy wrote in a note Friday, environmental groups have asked a Montana court to review and cancel existing approvals by the U.S. Army Corps of Keystone XL, meaning the legal matters aren’t done yet.

Pipeline opponents pledged Friday to keep up the fight.

Demonstrators, celebrating U.S. President Barack Obama’s blocking of the Keystone XL oil pipeline, rally in front of the White House in Washington, D.C. on November 6, 2015. Andrew Caballero-Reynolds/AFP/Getty Images files

Missing this year’s construction season also opens up the question of whether construction on the project can be completed before the November 2020 U.S. election, and what a potential change in the presidency might mean for the venture.

In recent weeks, Democrats Bernie Sanders, Elizabeth Warren, Jay Inslee, Julian Castro and Tom Steyer have agreed to revoke the pipeline’s permit if they win the party’s nomination and become president, according to a report in The Hill.

“The project still does face some risk, in the sense that TC Energy has yet to give a final investment decision,” said analyst David Galison of Canaccord Genuity.

“And the longer that it takes — if the project is not complete before there is a change in the executive office in the U.S. — that could introduce risks.”

Given the project’s history, the danger of starting construction and not being able to complete it has to be carefully considered as the company weighs its next move.

“There is some progress, that’s great,” Alberta Energy Minister Sonya Savage said in an interview.

“We have seen this project being delayed over and over again … we know that opposition is not going away.”
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