TC Energy formally terminates Keystone XL Pipeline project

TC Energy formally pulled the plug on the Keystone XL Pipeline project June 9 after it was placed on life support in January when President Joe Biden revoked the necessary permitting as promised on his first day in the White House.

While the oil sands pipeline project was suspended following Biden’s action, there was always a chance the project could be resuscitated in four years if a Republican succeeded Biden in 2025. However, other Canadian heavy oil projects are expected to be online by then — the Line 3 replacement and Trans Mountain expansion — which could offset any need for TC Energy’s decade-old project, especially considering the ongoing energy transition away from fossil fuels.

TC Energy recorded a roughly $1.8 billion impairment charge for the Keystone XL suspension in May. The roughly $8 billion Keystone XL project was designed to move 830,000 b/d of heavy Canadian crude ultimately to Texas through the entire Keystone system.

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Prior to Biden’s actions, TC Energy had aimed to win his support by joining with Indigenous partners and by pledging the pipeline would be fully powered through renewable energy by 2030.

“Through the process, we developed meaningful Indigenous equity opportunities and a first-of-its-kind, industry-leading plan to operate the pipeline with net-zero emissions throughout its life cycle,” TC Energy said in a June 9 statement. “We will continue to identify opportunities to apply this level of ingenuity across our business going forward, including our current evaluation of the potential to power existing US assets with renewable energy.”

A LONG BATTLE

The Keystone XL project, which became the epicenter of the environmental and fossil fuel fight for much of the past decade, previously was killed by the Obama administration and promptly revived by former President Donald Trump. But court rulings and regulatory holdups kept TC Energy’s pipeline project from progressing, and Biden had long vowed to revoke the presidential permit as one of his campaign promises.

The Alberta government was helping to finance the project, and Alberta Premier Jason Kenney had warned that Biden’s actions could harm the Canada-US relationship. However, while Prime Minister Justin Trudeau expressed disappointment at the decision, he quickly moved past it to play up a strong relationship with Biden.

Even if TC Energy had attempted to bring the project back in four years or later, the company also would need to win back customer support for the pipeline project, analysts said.

OTHER PIPELINE PROJECTS

Pipeline shortages from Canada to the US have long weakened Canadian crude prices, but the construction of the competing Line 3 pipeline replacement project from Enbridge is well underway and expected to come online in late 2021. Line 3 is expected to take care of many of the pipeline needs of Canadian producers, and the pending Trans Mountain Pipeline expansion project would move more heavy Canadian barrels if it is completed. The Trans Mountain project is scheduled to come online by the end of 2022.

However, lawsuits and environmental protests persist in bids to slow or cancel those projects as well, although Biden has chosen to stay out of those fights for now.

“TC Energy just confirmed what we already knew, but it’s a thrilling reality all the same — the Keystone XL pipeline is no more and never will be,” Oil Change International said in a statement. “This is yet another huge moment in an historic effort.”

“The cancellation of Keystone XL is a reminder that this project was never needed and never in the public interest, and that it is time for the fossil fuel era to rapidly come to a close,” Oil Change added.

KEYSTONE SYSTEM EXPANSION

Even without the Keystone XL project, TC Energy could continue to hike capacity within the legacy Keystone system. TC Energy has planned to increase capacity from 590,000 b/d to 640,000 b/d in 2021 through optimization efforts.

But TC Energy does not seem to be in a rush to bring the extra capacity online.

“Our system remains fully utilized, ex-Hardisty out of Western Canada. We continue to focus on improving performance and do not have a timeline to share on any increase in incremental capacity to the current 590,000 b/d,” TC Energy said in a June statement.

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