TC Energy to proceed with Keystone XL pipeline after US$1.1 billion investment from Alberta government – Financial Post

CALGARY — TC Energy Corp. is proceeding with its long-delayed Keystone XL pipeline with a US$1.1 billion “strategic investment” from the Alberta government.

The province is making a preferred equity investment in the 830,000-barrels-per-day pipeline project that would carry oil from Alberta to the U.S. Gulf Coast, which is home to the largest concentration of heavy oil refineries in the world.

This is absolutely critical for our economic future now more than ever

Alberta Premier Jason Kenney

In an interview with the Financial Post, Kenney said the company will begin construction on the long-delayed pipeline export project as early as April 1.

“This is absolutely critical for our economic future now more than ever,” Kenney said on Monday.

As part of the funding plan, the Government of Alberta has agreed to invest approximately US$1.1 billion as equity in the project, which substantially covers planned construction costs through the end of 2020. The remaining capital investment of approximately US$6.9 billion is expected to be largely made in 2021 and 2022 and funded through the combination of a US$4.2 billion project level credit facility to be fully guaranteed by the Government of Alberta and a US$2.7 billion investment by TC Energy.

TC Energy Corp., the Calgary-based pipeline giant that has been trying to build Keystone XL for a decade, has already spent $6 billion advancing the project, Kenney said.

Any cost overruns will be paid by TC Energy, Kenney said, adding the government’s exposure to the project is limited to the $7.5 billion in preferred equity and loan guarantees.

“It’s a real, concrete vote of confidence in the future of the Canadian energy sector. We are in a crisis environment with a crash in prices but the pandemic will end and global demand will return,” Kenney said. “When we reach that point, we absolutely must have a major pipeline in commission.”

Oil prices have crashed in the last month as the coronavirus pandemic has caused a dramatic fall in global demand for oil. At the same time, Saudi Arabia and Russia have flooded the market with crude as they engage in a price war.

However, Kenney said, the price war in the middle of a health crisis “highlights now more than ever why we need energy independence” and an interconnected North American oil and gas market.

“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 as this important energy infrastructure project is poised to put thousands of people to work, generate substantial economic benefits and strengthen the continent’s energy security,” said Russ Girling, TC Energy’s chief executive officer.

“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.”

TC Energy had previously signalled its willingness to sell a stake in Keystone XL as it’s already working on other projects valued at $20 billion.

Company executives said in an earnings call Feb. 13 that TC Energy had acquired all of the land and right-of-ways needed to build the project through the U.S., and had permits in place from the U.S. federal government.

They also have commitments from oil producers to fill the project once it’s complete in June 2023.

“Keystone XL today is fully contracted,” TC Energy executive vice-president and president, liquids pipelines, Paul Miller said on the same earnings call. “It’s fully contracted with the major producers in Alberta, the creditworthy companies.”

In a January court filing, the company indicated it planned to begin work on the section of the Keystone XL pipeline that crosses the Canada/U.S. border in April. At the time, the company said it intended to begin work in Montana and South Dakota in April, followed by work in Nebraska in June.

TC Energy, formerly known as TransCanada Corp., has been looking to build the 830,000-barrels-per-day pipeline – which was rejected by former U.S. president Barack Obama then approved by President Donald Trump – for more than 10 years.

We’re not prepared to bet a huge part of our economic future on one project

Alberta Premier Jason Kenney

As Keystone XL begins construction on April 1, Kenney said the Alberta energy industry needed more assurance for future growth than just one new export pipeline, referring to the federally owned Trans Mountain expansion project, which is currently under construction through British Columbia.

“We’re not prepared to bet a huge part of our economic future on one project. This is our hedge that we get at least one major project built. That will ensure the flexibility for our shippers and the future of the Canadian energy sector,” Kenney said.

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