TC Energy to start building Keystone XL pipeline after Alberta government invests $1.1B US

TC Energy Corp. gave the go-ahead Tuesday for construction of its $8-billion US Keystone XL pipeline project, with help from the Alberta government.

The company said Alberta has agreed to invest approximately $1.1 billion US as equity in the project, which substantially covers planned construction costs through the end of 2020.

The remaining $6.9 billion US is expected to be funded through a combination of a $4.2-billion project-level credit facility to be fully guaranteed by the Alberta government and a $2.7-billion investment by TC Energy.

The 1,947-kilometre project will be able to carry 830,000 barrels of crude oil per day from Hardisty, Alta., to Steele City, Neb., where it will connect with TC Energy’s existing facilities.

The provincial government says the pipeline project will create more than 1,400 direct and 5,400 indirect jobs in Alberta during construction and will reap an estimated $30 billion in tax and royalty revenues for provincial and federal coffers over the next two decades.

Construction will begin immediately in Alberta, at the Canada-U.S. border, and in Montana, South Dakota and Nebraska.

TC Energy — formerly known as TransCanada — says with pre-construction activities underway, the pipeline is expected to enter service in 2023.

In a statement, Alberta Premier Jason Kenney said the project was essential for the province’s future prosperity.

“This investment in Keystone XL is a bold move to re-take control of our province’s economic destiny and put it firmly back in the hands of the owners of our natural resources, the people of Alberta,” Kenney said. “The Government of Alberta is confident that this is a wise investment.”

Once the project is complete and in service, TC Energy expects to acquire the Alberta government’s equity investment under agreed terms and conditions and refinance the $4.2-billion US credit facility in the debt capital markets.

“Strong commercial and financial support positions us to prudently build and fund the project, along with our existing $30 billion secured capital program, in a manner that is consistent with maintaining our strong financial position and credit metrics,” TC Energy chief executive Russ Girling said in a statement.

‘When the industry needs it’

Alberta’s investment in the project has symbolic power, said Warren Mabee, director of the Queen’s University’s Institute for Energy and Environmental Policy.

“This is probably welcome news because it is not just money to support workers and money to keep families going, it is a sign of support for the sector and a vote of confidence in a sector that has really been beat up,” he said.

Federal Natural Resources Minister Seamus O’Regan applauded the Alberta government for investing in the project.

“It comes at a time when the industry needs it. It means thousands of good, well-paying jobs for the highly skilled workers the industry needs now and into the future,” he said in a statement.

“The Government of Canada has always been a strong supporter of Keystone XL. The project increases our market access safely, responsibly and sustainably — and fits within Canada’s climate plan.”

The Canadian Energy Pipeline Association (CEPA) said in a statement that construction of Keystone XL will be a big boost for Alberta’s economy, as well as that of Canada.

“It is essential that Canada can continue to attract major investments like Keystone XL, which will result in billions in government taxes and royalties and improved market access for Canadian resources,” said CEPA president Chris Bloomer.

Project has faced numerous hurdles

The decision is sure to disappoint U.S. environmental groups that have fought against the pipeline in regulatory hearings and the courts for years.

In a statement on Tuesday, Catherine Collentine, associate director of the Sierra Club’s Beyond Dirty Fuels campaign, took issue with the timing of the announcement during the COVID-19 pandemic and vowed to continue the fight.

“By barrelling forward with construction during a global pandemic, TC Energy is putting already vulnerable communities at even greater risk,” she said.

The project was first proposed more than a decade ago but has faced numerous hurdles.

The pipeline was rejected twice by the administration of former U.S. president Barack Obama over worries it could make climate change worse.

But President Donald Trump has been a strong proponent of the $8-billion project and issued it a permit that environmentalists say was illegal.

A court hearing in the permit dispute is set for April 16 before U.S. District Judge Brian Morris in Great Falls, Mont. Morris has previously ruled against the project.

TC Energy has filed status reports with the judge about its intentions to start work.

“We appreciate the ongoing backing of landowners, customers, Indigenous groups and numerous partners in the U.S. and Canada who helped us secure project support and key regulatory approvals,” Girling said.

“In addition, we thank U.S. President Donald Trump and Alberta Premier Jason Kenney as well as many government officials across North America for their advocacy without which, individually and collectively, this project could not have advanced.”

CBC