Corporate executives and Canadian officials pledged their commitments to completing the long-delayed Keystone XL and Trans Mountain crude pipeline projects by 2023.
A series of politicians and midstream energy CEOs said they're determined to capitalize on the need to transport more Canadian crude to the US Gulf Coast and other export markets, despite the increasing regulatory, legal, and environmental roadblocks that stand in their way, officials said Sept. 1 while speaking remotely for an RBC Capital Markets energy conference.
But those difficulties have required more government funding and intervention. Two years ago, the Canadian government bought Trans Mountain from Texas pipeline operator Kinder Morgan and, this spring, the Alberta government pledged billions of dollars in funding and loans to TC Energy to jump-start construction of the Keystone XL pipeline this year.
"We thought it was essential that we step in," said Alberta Premier Jason Kenney. "Construction on Keystone XL would not have started this year had it not been for our investment."
TC Energy made the surprising announcement to quickly proceed with the project in late March and in spite of the coronavirus pandemic after it secured $1.1 billion in taxpayer support from the conservative Alberta government — as well as $4.2 billion in potential government loans.
The $8 billion pipeline project would move up to 830,000 b/d of heavy Canadian crude ultimately to Texas through the entire Keystone system. The 1,200-mile XL pipeline from Alberta to Nebraska would connect to the existing Keystone system.
But the project still has plenty of legal and political hurdles in the US. A key water permit was rescinded from the project by a federal court earlier this year. And, while the US Supreme Court allowed for the re-implementation of a governmental permitting system, for now, the nation's highest court left the Keystone XL permit vacated while the case continues in a lower federal court.
And, if Democratic presidential nominee Joe Biden is elected over President Donald Trump in November, Biden has pledged to kill the permit.
Kenney said he's not convinced Keystone XL is dead on arrival under Biden. "Rather than make it an abstract campaign announcement," Kenney said, he said he believes the demand for the Canadian oil and the smart economics could potentially win Biden over.
In the meantime, TC Energy has delayed its planned completion date to 2023 but is pledging to stick with that timeline because it factors in legal delays.
The Canadian oil industry has gotten past the worst of the pandemic's impacts and that a supply crunch should manifest within two years.
"I am increasingly optimistic," Kenney said. "I believe market economics will swing back in our favor."
Trans Mountain
Kenney said he says Keystone XL is even more critically important if the Trans Mountain pipeline isn't viable.
"TMX is endlessly delayed and KXL is that hedge," Kenney said.
But Trans Mountain CEO Ian Anderson, who works for the Canadian government, said Trans Mountain remains on target to be completed by the end of 2022. Some legal hurdles remain, Anderson said, but they are progressing.
And the Trans Mountain pipeline expansion to the Vancouver area isn't dependent on US elections. The existing Trans Mountain line would move refined products and light crude, while the new line would move the Canadian heavy crudes.
Construction is still in the early goings, Anderson said, but progressing well.
"We're about 13% now complete," Anderson said. "That doesn't sound like much."
But it's better than it seems, he said. Construction is about 80% completed near Edmonton and about 30% done in Burnaby. Calling it the "best of a bunch of bad outcomes," Anderson, a former Kinder Morgan executive, called it imperative that the Canadian government stepped in before his former employer walked away.
"We're making great progress," Anderson said. "We have over 4,000 people working in the field right now."
Replacements of Lines 3, 5 show progress
As for North America's largest midstream firm, Enbridge CEO Al Monaco said he's pleased with the progress of the biggest planned project, despite multiple delays. The $6.75 billion Line 3 replacement project that runs from Canada to Wisconsin, including the largest pipeline segment in Minnesota, would move more crude to the US Midwest and, ultimately, to the USGC.
Enbridge completed the $3.75 billion Canadian portion last year, but the project has continued to face regulatory and legal delays in Minnesota, including the recent regulatory approval deadline delay from mid-August to mid-November. State regulators decided they will hold an upcoming, contested public hearing in late August because of the amount of environmental opposition within the state.
"We're definitely in the late innings on this one," Monaco said, calling the Midwest and USGC the best markets for heavy Canadian crude in the world.
Monaco said the additional scrutiny ultimately should help solidify the regulatory certainty for the project, despite the delays. Construction should take up to nine months once the final approvals ultimately are obtained.
The smaller Line 5 tunnel replacement project under the Great Lakes of Michigan also is progressing despite state opposition, he said, and project completion isn't expected until late 2024.
But the eastern leg of the dual Line 5 crude and NGL pipeline system remains shut after damage was detected in June and the Michigan governor sought a total shutdown.
"We assume everything is going to be challenged," Monaco said. "That's part of how we plan."
