US President Donald Trump issued a new permit Friday for TransCanada's 830,000 b/d Keystone XL heavy oil pipeline from Alberta, canceling the permit he approved two years ago in an apparent attempt to overcome a legal challenge in Montana.
The order gives TransCanada permission to "construct, connect, operate and maintain pipeline facilities" at the US-Canada border.
The project has been held up since November by a federal judge in Montana who ruled that the 2017 presidential permit was based on an inadequate environmental review.
Judge Brian Morris of the US District Court for the District of Montana blocked TransCanada from most construction activities while he ordered the Department of State to prepare another environmental impact statement.
The new presidential permit does not make any reference to it being contingent on an environmental review, while the 2017 permit said it was based on the State Department's 2014 environmental review.
TransCanada said in a statement that the latest permit "clarifies the national importance of Keystone XL and aims to bring more than 10 years of environmental review to closure."
"The magnitude of the work on this project has been extensive," said Russ Girling, president and CEO. "The Keystone XL pipeline has been studied more than any other pipeline in history and the environmental reviews are clear - the project can be built and operated in an environmentally sustainable and responsible way."
Before Morris' order, TransCanada had hoped to start construction by the second quarter of 2019. In February, the company said it was not sure it could start construction this year.
"It's uncertain at this time when we will have these various legal and regulatory hurdles behind us," Paul Miller, TransCanada's president of liquids pipelines, said during a February earnings call.
The new permit comes as Gulf Coast demand for heavy crude rises as a result of US sanctions blocking imports of Venezuelan grades. Pipeline and rail constraints will likely keep Canadian producers from meeting any more than about one-fifth of the Venezuelan supply disruption.
S&P Global Platts assessed Western Canadian Select crude at Hardisty at a $9.35/b discount to WTI crude Friday, unchanged from Thursday. It traded at a record discount of $51.50/b on October 11, before the Alberta government imposed production curtailments in January.
TransCanada first applied to build Keystone XL from Alberta to the Texas Gulf Coast more than a decade ago. Its southern section from Nebraska to Texas entered service in 2014.
Keystone XL remains one of three pipeline proposals being counted on by Alberta producers to carry their oil to market and shrink the WCS discount. A 370,000 b/d expansion of Enbridge's Line 3 into the US Midwest is at the front of the pack, while Canada's government-owned 590,000 b/d Trans Mountain pipeline expansion to British Columbia has legal and regulatory challenges on par with those of Keystone XL.
