WHISTLER, B.C. — The CEO of TransCanada Corp. says the company will be talking with shippers to determine if they still support the Keystone XL pipeline project after it was given a new lease on life by U.S. President Donald Trump earlier this week.
In his first comments since Trump invited the company to reapply to build the conduit to bring Canadian oil to the U.S. Gulf Coast, Russ Girling said he thinks the economic case for it can still be made.
“I believe this still makes sense but we haven’t engaged in direct conversation (with shippers) on that issue,” he said during a webcast presentation from a CIBC Capital Markets investor conference in Whistler, B.C. on Wednesday.
“I can tell you this wasn’t in our planning horizon in the middle of last year so we’ve only just re-engaged with our shippers again.”
He added he expects access to the “biggest heavy oil refining market in the world in the U.S. Gulf Coast” will remain attractive for TransCanada’s customers.
The $8-billion Keystone XL project would move oil 1,900 kilometres through a 36-inch-diameter crude oil pipeline beginning in Hardisty, Alta., and extending south to Steele City, Neb., where it would link with other lines already leading to refineries along the Gulf Coast.
TransCanada said in a statement on Tuesday it was preparing its application for a presidential permit after Trump endorsed the project.
Trump directed the State Department and other agencies to make a decision within 60 days of a final application and declared that a 2014 State Department environmental study satisfies required reviews under environmental and endangered species laws.
Miles Pittman, a partner in the energy group for Calgary law firm Borden Ladner Gervais, said the pipeline must still obtain a permit for construction through Nebraska.
“Assuming that regulatory hurdle can be overcome, it becomes a question now of economics for TransCanada and whether or not the pipeline can be shown to generate the kind of returns that TransCanada would expect,” he said.
He pointed out that Keystone XL made economic sense when it was proposed in 2008 but crude oil markets have changed since then.
In a note to investors, RBC Dominion Securities analyst Robert Kwan said Nebraska permits could take seven to 12 months to obtain, suggesting construction would be delayed until 2018, putting the pipeline in service by late 2019 or early 2020.
He said unknowns include Trump’s demands for better terms from the company, changes in capital costs, changes in contracting and whether there will be any court challenges.
Girling said he thinks the economic benefits of spending $8 billion on the line will be sufficient to win support.
TransCanada still faces bitter opposition from environmentalists, landowners and native Americans who are determined to block Keystone XL.
Former president Barack Obama rejected Keystone XL in late 2015, declaring it would undercut U.S. efforts to clinch a global climate change deal that was a centrepiece of his environmental agenda.
In response, TransCanada filed notice to launch a $15-billion claim under the North American Free Trade Agreement. It also filed a lawsuit in the U.S. Federal Court in Texas alleging that Obama exceeded his power under the U.S. Constitution by denying construction of the project.
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