TC Energy Corp. unveiled a construction timeline for its controversial Keystone XL crude oil pipeline project to link Canada's oil sands region with a pipeline hub in the U.S. Midwest, but the company has yet to provide essential details of how it will proceed.
In a Jan. 14 court filing, the Calgary, Alberta-based pipeline giant laid out plans to start moving heavy equipment and pipe to construction sites in February, with construction on the estimated C$8 billion-plus project in full swing by August.
The filing acknowledged gaps in regulatory approvals, the largest of which is the unresolved path that the line will take through the Canada-U.S. border in eastern Montana. The filing did not mention TC Energy's own reluctance to announce a formal final investment decision on the project. These issues have raised some skepticism that construction of the project, which the Trump administration supports, will begin before the 2020 U.S. presidential election.
"We view Keystone XL being one step closer to construction as a positive for incremental [Western Canadian oil] egress, but expect news of plans to begin development this spring to be viewed slightly negatively by equity investors without clarity on mitigation of financial risk [equity requirements] and U.S. election risk [permitting] to offset inherent legal/construction risks," analysts at Tudor Pickering Holt & Co. said in a Jan. 15 note. "We currently exclude the unsecured project in our modeled estimates with our base case assuming construction would be delayed until after the election, with the earliest in-service in late 2022."
While some speculated that the most recent construction commitment is another chapter in a decadelong regulatory saga that has been plagued by false starts, TC Energy insisted that the planned construction start would be the real thing.
"Having successfully reached several key milestones on the project, today we filed a status report with Judge [Brian] Morris in Montana outlining our plan to commence pre-construction activities and pipeline construction this spring in Canada and parts of the U.S. as we continue to advance this vital energy infrastructure project," TC Energy spokesman Terry Cunha said in a Jan. 14 email.
The company said in its filing that work would include moving pipe and heavy equipment to construction sites and activity on pumping stations by August. It did not provide a cost estimate for the work it plans to do in 2020.
TC Energy's Cushing, Okla., terminal would see a large upswing in deliveries of heavy crude from Canada's oil sands region with the completion of the Keystone XL pipeline.
The project, which at one point seemed so certain that TC Energy ordered the pipe for the 1,179-mile proposed conduit, was sidelined in 2015 when the Obama administration denied a key license known as a presidential permit, which is required for construction of trans-border infrastructure. Newly elected President Donald Trump approved the permit in January 2017. When environmental and regulatory approvals for that permit were challenged in a U.S. district court in Montana, which led to an injunction against construction, the Trump administration withdrew the permit and issued a new one in March 2019.
While the new permit has also been challenged by environmental and Native American groups, U.S. District Judge Brian Morris — who issued the injunction in the case of the first permit — on Dec. 20, 2019, denied a bid to block construction under the new permit. In his ruling, reported by Omaha, Neb., television station WOWT 6, Morris allowed challenges to the permit to continue through the courts.
If completed, Keystone XL would have capacity of 830,000 barrels per day and link a major oil sands hub in Hardisty, Alberta, with a hub in Steele City, Neb., that connects with lines to the U.S. Midwest and Gulf Coast.
The possible start of construction is viewed as good news in McCone County, Mont., where TC Energy would become the biggest taxpayer once Keystone XL is completed. The pipeline would traverse the 2,683-square-mile county, which has a population of fewer than 1,700. James Moos, the presiding officer of the county's commissioners, said the region has been hit hard financially in recent years and support is high for the project.
"A large majority of the people in our county support it and are looking forward to it," Moos said in a telephone interview. "We're a strictly agricultural county, and it's been tough to take care of our taxpayers without raising our taxes a bunch. When you have nothing but agriculture to speak of, it's tough. We don't have oil, and we don't have anything else."