Key water permit withdrawn for Keystone XL pipeline

HOUSTON — A critical water permit for the $8 billion Keystone XL pipeline was withdrawn by a federal US judge late Wednesday, endangering TC Energy's plans to commence heavy construction this summer.

With a court hearing scheduled Thursday in Montana, US District Judge Brian Morris yanked the 2017 permit issued by the US Army Corps of Engineers, contending the permitting process didn't properly consider the pipelines effects on endangered species.

TC Energy said Thursday it remains fully committed to the project to move up to 830,000 b/d of heavy Canadian crude oil ultimately to US Gulf Coast markets. Preliminary construction that began in early April in Montana near the Canadian border will continue, said TC spokesman Terry Cunha, but its next steps are unclear.

"As we determine our next course of action, we will continue with our construction activities currently underway at the border crossing as the ruling doesn't impact our current activities in any way," Cunha said in a statement.

The ruling applies to construction activities across rivers and streams along the route, but does not interfere with the work that has begun near border, noted analyst Matthew Taylor of Tudor, Pickering, Holt & Co.

The 1,200-mile pipeline from Alberta to Nebraska would connect to the existing Keystone system.

MOVING FORWARD

Energy analysts contend Calgary-based TC Energy wanted to get as much construction work as possible done before pipeline-friendly US President Donald Trump comes up for reelection in November.

TC Energy made the surprising March 31 announcement to quickly proceed with the $8 billion project after it secured $1.1 billion in taxpayer support from the conservative Alberta government -- as well as $4.2 billion in potential government loans -- even though Canadian crude grades are currently valued near all-time lows because of the collapse in global demand as a result of the coronavirus pandemic.

The decade-old project became the epicenter of environmental protests and the so-called "keep-it-in-the-ground," anti-fossil fuel movement during the Obama administration. And that opposition is not going away. Obama ultimately rejected the pipeline, but it was quickly revived under Trump in 2017.

"The judge's ruling is disappointing in relation to Keystone XL, but the impacts of his ruling are broad-reaching and could have societal implications far beyond our project," Cunha said in a statement. "The ruling directly impacts various utilities constructing and maintaining infrastructure projects, including natural gas, liquids, television cable, electrical transmission, telephone, internet, among others. This decision hampers their ability to build or maintain infrastructure projects that cross wetlands or water bodies across the US."