‘Very inviting opportunity’: Vancouver Island First Nation gives nod to proposed LNG export facility

VANCOUVER — A First Nation on Vancouver Island has approved a proposed liquefied natural gas export facility on its traditional territories.

Leaders of the Huu-ay-aht First Nation and the CEO of Vancouver-based Steelhead LNG held a joint news conference in Vancouver on Monday to announce what Chief Robert Dennis said was the First Nation’s “official entry into the international business world.”

Members of the small First Nation voted Saturday to approve development of the LNG facility at Sarita Bay, on the west coast of Vancouver Island.

“I feel it is going to be a very inviting opportunity for international investors to come to Canada and say, ‘Hey, there is certainty there and we would be willing to work there,”‘ Dennis said.

Steelhead CEO Nigel Kuzemko said the company has National Energy Board licences to export 24 million tonnes of LNG through the Sarita Bay facility every year, but he said discussions are ongoing about how they’ll get the natural gas from northeastern B.C. and Alberta to Vancouver Island.

Kuzemko said existing pipelines are favoured, and Steelhead has been in talks over the possibility of bringing gas across the Salish Sea from Washington state or piping it across southern B.C.

The company’s plans could even include building a new pipeline linking Vancouver Island and the B.C. mainland, but it is too early to discuss the costs of getting the LNG to market, he said.

“The project size, the scope, the scale and the amount we have to spend to do that will obviously evolve over time. We just don’t have a number to give you,” Kuzemko said.

The company planned to make a final investment decision on Sarita Bay by 2019 or 2020, with first production targeted for 2024, he said.

Steelhead and the First Nation did not offer specifics about job creation but Huu-ay-aht leaders said the First Nation will benefit significantly, as would other workers.

“We are going to make sure that we extend as much of our energy to make sure Huu-ay-aht people are working and also to contribute to the employment sector of other Canadians and other B.C. people who are also working for us,” Dennis said.

Neither Steelhead nor the First Nation would discuss the financial aspects of the agreement.

However, Huu-ay-aht leaders said the First Nation would have an equity stake in the project that they would co-manage to ensure environmental oversight and also have a financial component commensurate with the size of the development.

John Jack, executive councillor with the Huu-ay-aht, said it’s time the First Nation took its place within Canada and British Columbia.

“This is an example of a First Nation working with business and working with the people of B.C. and Canada in order to create value that fits both of our interests.”

The Canadian Press

Total Energy Services’ hostile takeover offer beats out rival friendly deal for debt-laden drilling company

CALGARY – Total Energy Services Inc. has beat out a rival in its acrimonious and drawn-out $444 million hostile takeover bid for heavily indebted driller Savanna Energy Services Corp.

“It’s been a long process, we’re obviously pleased,” Total president and CEO Daniel Halyk said Monday after more than 51 per cent of Savanna shareholders accepted his company’s shares-plus-cash takeover offer in the face of a competing, negotiated deal between Savanna and competitor Western Energy Services Corp.

The $444 million value of Total’s deal is based on Monday’s share price, and includes debt.

Western issued a press release Monday saying its directors were “understandably disappointed with the outcome of the bid.” The company did not respond to a request for comment.

Halyk said the combination of Total and Savanna would create the second largest contract drilling company in Canada – Precision Drilling Corp. is the largest – and would also turn Total into a larger, better-diversified oilfield services player.

“We are in a tough industry right now, it’s uncertain,” Halyk said, referring to the prolonged downturn in oil prices and the resulting slow-down in oilfield activity. Investors and oilfield workers want “a financially stable, strong company,” Halyk said, adding, “Total brings that.”

AltaCorp Capital analyst Aaron MacNeil said in a research note that “Total’s acquisition of Savanna has clearly been a contentious process” and said, “there is potential for continued animosity, however, we hope that both sides can put their differences aside and work together in the best interests of shareholders.”

After Total announced its hostile bid for Savanna, the target company attracted a competing bid from Western and had tried to convince shareholders to ignore Total’s bid over the past several months and as recently as Thursday.

Still, Halyk said he expected a friendlier and more cooperative relationship now that his company had become Savanna’s majority shareholder. “They’re rational business people,” he said.

We are in a tough industry right now, it’s uncertain

MacNeil recommended Savanna shareholders that did not previously accept Total’s offer do so because “this is now the best course of action for the remaining shareholders of Savanna as this will limit the disruption of ongoing operations.”

Despite being Savanna’s largest shareholder, Total still has work to do to fully close the acquisition. It extended the time limit for remaining Savanna shareholders to tender their shares and Halyk said he plans to meet with Savanna’s lenders.

In a release Monday, Savanna said the change in control of the company results in the company being in default with some of its credit facilities, though the company did not expect those lenders to act on the default.

“Total Energy has a balance sheet that is second to none in the Canadian energy services industry,” Halyk said, implying that lenders would be comfortable with Total taking over Savanna’s debt obligations though he said he didn’t want to speak for those lenders.

Savanna was $218 million in debt at the end of 2016, while Total had roughly $45 million in long-term debt in the fourth quarter of last year.

Savanna had also agreed to a $20 million break fee with Western, which is typical in negotiated deals if those deals fail to close but unusual – a Total release called it “disturbing” – in situations with competing offers.

Halyk said, based on his understanding of the contract, Savanna did not need to pay the break fee to Western and that he had instructed Savanna’s board “to take no actions that would result in that break fee becoming payable.”

Financial Post

gmorgan@nationalpost.com

Twitter.com/geoffreymorgan

Total strikes joint venture with Borealis, Nova Chemical to invest $1.7B in U.S. polyethylene market

PARIS — French oil and gas major Total SA said it aims to become a major player in the U.S. polyethylene market as it announced a US$1.7 billion joint venture on Monday with Austria’s Borealis Exploration and Canada’s Nova Chemical Corp.

The new venture plans to build a 1 million tonne per year ethane steam cracker in Port Arthur, Tex., and is also considering building a 625,000 tonnes per year polyethylene unit at Total’s Bayport site, also in Texas, on the U.S. Gulf Coast.

Total will hold a 50 per cent stake in the venture and the new cracker, which will be built alongside Total’s Port Arthur refinery and Total/BASF’s existing steam cracker, is scheduled to start in 2020, it said.

“By joining forces with Borealis and Nova, we aim to create a major player in the U.S. polyethylene market,” Total’s chief executive Patrick Pouyanne said in a statement.

Total said it expects the joint venture to be established in late 2017 and a final investment decision on the polyethylene unit will be taken simultaneously by the JV partners.

© Thomson Reuters 2017

Keystone XL approval in the U.S. signals the end of the line for pipeline politics

For the past decade or so, pipeline activism had a good run. Friday’s approval by U.S. President Donald Trump of the Alberta-to-Texas Keystone XL pipeline, during an extraordinary White House moment for TransCanada Corp. chief executive Russ Girling, confirms that as a movement its heyday has come and gone.

A key reason is that government leaders are no longer caving in, having realized that the majority stands behind them.

“I know the voters appreciate this, some of them expressed it very, very strongly, and the workers definitely appreciate it,” Trump said in approving the long-delayed presidential permit, as Girling, who endured years of personal attacks, lawsuits and political footdragging, stood nearby.

Trump was echoing the findings of countless opinion polls in both the U.S. and Canada that consistently showed support for the project.

Some activists argue Trump’s approval of KXL was expected since he’s so connected to the oil industry.

Yet even in Canada, Prime Minister Justin Trudeau, British Columbia’s Christy Clark and Alberta Premier Rachel Notley have taken the side of pipelines, despite facing enormous pushback from environmentalists to deny permits. Trudeau and Notley, in particular, are no oil lovers.

In a statement after Trump’s announcement however, Notley congratulated TransCanada “for the hard work they put into this approval.

“While Keystone XL progresses, we are also going to continue our work to make sure we can get Alberta’s resources to Canadian tidewater – creating jobs, helping our energy industry grow and diversifying our export markets,” Notley said.

British Columbia’s coming provincial election, where environmentalists are mobilizing to defeat Clark for her support of Kinder Morgan’s Trans Mountain pipeline, will be another test of whether the movement has any remaining political capital, or whether voters have become so desensitized to its hyperbole and antics they have moved on.

Like Keystone XL, other major high profile projects targeted for obstruction are moving forward. The Dakota Access pipeline is being filled and Energy Transfer Partners LP, the majority owner, plans to begin shipping oil in the first half of the year.

Enbridge Inc.’s Line 3 replacement program is on track for completion in 2019. Kinder Morgan’s Trans Mountain pipeline has renewed shipping commitments and is aiming for completion in 2019.

To be sure, one project has been shelved, Enbridge’s Northern Gateway pipeline, and one project remains in play, TransCanada’s Energy East, but the pipeline bottlenecks are being removed and a sense of normalcy is returning to the oil business.

In the absence of political influence, activists are being backed into the trenches. Their big platforms now are the courts, protests and social media.

There’s still plenty of room for disruption. Trans Mountain alone is fighting a dozen lawsuits. In the case of Keystone, there are more hurdles in Nebraska, where the pipeline still needs to get state permits, a process expected to take eight months. Activists are promising legal challenges, too. But for activists it’s hard and costly work, compared to pulling strings at the highest political levels.

To be sure, pipeline activism has been successful in delaying projects, increasing costs and bringing uncertainty to the business. It’s also caused divisions that will take years to mend. Canada’s oilsands have seen the departure of important international players.

But as a way to deter fossil fuel production, it’s been a failure. As widely predicted, investment has simply moved to paths with less resistance.

From Canada’s north, capital has poured into tight oil in the United States, which is much close to activists’ own backyards. The assets sold by multinationals have been purchased by Canadian companies, which will continue to grow them.

Financial Post

ccattaneo@nationalpost.com

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What the building of Keystone XL pipeline will mean for Canada and the Canadian energy industry

The U.S. State Department’s approval of the Keystone XL pipeline on Friday concludes a bitter political battle that stretched on for more than eight years. Calgary-based TransCanada Corp. first filed its application to build the project in 2008. Since then, the proposal was met with a slew of lawsuits, regulatory snags, protests and political jockeying.

The project still has several hurdles to clear before the company can actually move ahead with construction. It will need to secure several state-level permits, including in Nebraska where opposition to the project has been most acute.

Whether the project ultimately gets built is an open question. But today there is still discrepancies over what impact, if any, the project would have on the Canadian economy and the oil and gas sector. Below is a snapshot of a few key numbers.

42,100 – Jobs created by Keystone XL, according to U.S. State Department

The number of jobs that would be created by the project is a highly contested figure. Project proponents tend to provide generous job estimates based on “indirect” or “induced” jobs that would be hypothetically created by the expected boost in economic activity. Often, job estimates include any position that lasts for at least one year. Other estimates peg Keystone’s job creation numbers closer to just a few thousand, depending on varying parameters like whether the job is full-time and directly created by the pipeline.

$11 billion – Total compensation for Ontario workers over 25-year period

Most of the employee compensation benefits from Keystone XL would be concentrated in Alberta. But other provinces would also see an uptick in activity. A report in July 2012 by the Canadian Energy Research Institute (CERI) found that worker compensation in Ontario—mostly in its manufacturing sector—would rise nearly $10.68 billion between 2011 and 2035 if the project goes ahead.

US$35 – Spread between WCS and Mexican Maya in January 2013

A central argument for why Keystone XL should be built is the discount suffered by Canadian oil producers relative to its competitors. This is typically measured in the difference in price between two grades of crude. Western Canada Select, which is often used as a benchmark for Canadian heavy oil, has for years sold at a steep discount to other producers. Mexican Maya, which is often compared to WCS due to their similar heavy-sour qualities, sold for around US$30 more than WCS in the period between November 2012 and February 2013. In January the figure was US$35. However, falling oil prices and increased efficiency has substantially closed that differential in recent years, and weakened the argument for Keystone XL according to some opponents. Today, WCS’s discount to Mexico’s Maya is below US$10.

$8 – Per-barrel cost difference when shipping oil via pipeline versus rail

For oil producers, pipelines are a cheaper shipping option than rail. Analyst estimates vary, but shipping oil to the Gulf Coast is about $8 per barrel cheaper by pipeline than rail, which is also more dangerous and prone to spills. As oil prices have fallen in recent years and pipeline constraints have eased, some analysts now put that figure closer to about $5 or $6 per barrel. This is particularly the case as more oil companies begin investing in rail infrastructure as Canada could face another pipeline shortage in coming years.    

3,108 – Days required to approve Keystone XL

TransCanada filed its application for Keystone XL on September 19, 2008. In March of 2010 the National Energy Board approved the Canadian portion of the project, and the U.S. State Department, after initially delaying a decision, eventually recommended the pipeline be approved. A bill approving the construction of the pipeline was passed by the U.S. Senate in February 2015, but was vetoed later that year by former president Barack Obama. In his first week in office in January 2017, U.S. President Donald Trump invited TransCanada to resubmit its application. On Friday the project was approved by the Trump administration.

Behind the pursuit of social licence: How an Alberta band lost a pipeline — and the economic benefits — that it wanted

Codie McLachlan for National Post

Codie McLachlan for National PostRodney Yellowdirt stands next to the re-routed Pembina pipeline near Alexander First Nation, Alta. With the support of residents, including Yellowdirt, a portion of the pipeline was originally going to be built across land owned by Alexander First Nation before meeting with opposition from the community's new chief.

Like many members of the Alexander First Nation in Central Alberta, Rodney Yellowdirt is fed up with years of confrontation led by its chief, Kurt Burnstick, against Calgary-based Pembina Pipeline Corp. over its $2.5-billion oil and gas pipeline expansion from Fox Creek to Namao.

It’s not because Yellowdirt doesn’t like the project. It’s because the community needs it, he said, and its chief has gone too far in waging a costly war against Pembina because the company refused to pay him a bribe, an allegation that emerged during court proceedings last year between the company and the band. 

“First Nation people are not opposed to development,” he said in an interview. “They want to create opportunities and build for themselves. Kurt made the choice to … get the benefits for himself. He did not consult with the community, so we lost that opportunity.”

A three-year regulatory and legal battle between Pembina and Alexander, a reserve with 2,500 band members located about 50 kilometres northwest of Edmonton, came to an end last month, when the company decided after a last-ditch attempt earlier this year to walk away from negotiations and build the final leg of its project around the reserve rather than face more legal delays.

As a result, Yellowdirt, the owner of Pisim Contracting, which employs 25 community members and could have benefited from the project by providing construction and other services, said the community has lost jobs, business opportunities and future taxes that could have alleviated poverty and dependence on government handouts.

The 270-kilometre project is under construction and is scheduled to be completed this summer. Some 2,000 workers are on the job, but none from Alexander.

They are not the only ones who lost. Pembina ends up with a 23-kilometre longer route instead of building near an existing pipeline right of way that would have minimized land disturbance, and Burnstick racked up a pile of legal bills.

Codie McLachlan for National Post

Codie McLachlan for National PostPembina's re-routed pipeline is currently under construction near Alexander First Nation. The pipeline now runs 23 kilometres around the community just outside of Edmonton after originally being designed to run across Alexander's land.

(While taking on Pembina, Burnstick was also in and out of court defending himself against sexual assault charges by women on his reserve. In his defence on the first set of charges, of which he was found not guilty in January, Burnstick said he was simply caring for a friend and band member. A second set is going to a preliminary hearing July 5).

Burnstick turned down requests for an interview. After being asked to respond to the bribe allegations and to explain why he was so opposed to the Pembina project, he responded in a text: “No comment after looking at your questions!”

The tale of Pembina’s pipeline expansion and its dealings with Alexander provides a rare window into what energy companies must navigate in their pursuit of a social licence for projects amid growing aboriginal compensation expectations and the growing need for pipeline transportation.

Pembina originally proposed the project — its biggest ever — in 2013 and quickly started approaching hundreds of landowners, eight aboriginal communities and one Métis settlement to discuss its plans.

With a capacity of 420,000 barrels a day, the project was designed to meet the transportation needs of 38 companies producing oil and gas from the Montney, Duvernay and Wilrich formations.

These three areas are the only ones in Alberta that have seen continuing levels of activity during the oil price downturn because of low costs, advancements in technology and prolific finds. Investment in other areas, particularly the oilsands, has dramatically dropped.

Once built, the pipeline will receive products from existing Pembina pipeline systems located west of Fox Creek and deliver them to the Namao Junction pump station, facilitating delivery to the Fort Saskatchewan and Redwater areas.

All told, Pembina held hundreds of meetings to discuss concerns and negotiate opportunities for benefits.

In the early days of the project, when Alexander had a different chief, the First Nation was supportive. The community even asked whether the pipeline could be built inside its reserve so it could collect taxes. Pembina looked into the request, but decided it would be too risky because of the proximity to residences, waterways and difficult terrain.

Instead, the company stuck to its preferred route, which was adjacent to the existing Alliance pipeline, a major gas pipeline built in 1997 located just outside the reserve. Yellowdirt said he took a look at Pembina’s proposed right of way, located largely on farmland, and concluded it would have had minimal impact on the reserve.

Pembina offered Alexander many benefits: jobs, opportunities for businesses to provide construction and other services, and community investments.

Yellowdirt said trouble with the project started when Burnstick was elected chief in mid-2013.

In his first meeting with Burnstick at the Tim Hortons in Morinville, Alta., John Young, Pembina’s head of aboriginal relations, said the chief demanded that all business available to Alexander from the pipeline’s construction be directed to his companies, rather than to the reserve’s many entrepreneurs.

Worried about the potential for kickbacks, Young refused, he said in an interview.

Chris Colbourne/St. Albert Gazette

Chris Colbourne/St. Albert Gazette Kurt Burnstick is the chief of Alexander First Nation in Alberta.

“I said, ‘I won’t do any business with you that way, because you are taking their margins and that would make them unprofitable,’” said Young, who was once a police officer specializing in aboriginal policing with the Calgary Police Service and then with the federal government.

More meetings were held where Burnstick asked for benefits and Young refused.

Meanwhile, the community was kept in the dark.

“We had no idea of Pembina approaching Alexander with these types of opportunities and this project,” Yellowdirt said. “We only recently found out about this in the past few months.”

Even some members of the council weren’t aware that Burnstick was in talks with Pembina, said councillor Allan Paul. “We didn’t know what was going on,” he said.

Undaunted by Young’s response, Burnstick asked to meet with Pembina’s vice-president and chief legal counsel, Harold Andersen.

The private session occurred in November 2014, when Pembina staff, Burnstick and council members had a previously scheduled meeting at a hotel in northeast Calgary near the airport.

What happened at the meeting is documented in testimony as part of proceedings before the Alberta Court of Queen’s Bench in Calgary on April 8, 2016.

During questioning by Alexander’s lawyer, Caroline O’Driscoll, Andersen said the meeting started with some introductory pleasantries about how things were going for the new chief and a few updates about Pembina.

And then, “Kurt did ask me for a gratuitous payment, and I didn’t ask him what it was for. What I did say was that Pembina was prepared to … work with Alexander First Nation Band-owned companies, we’re prepared to work with their individual-owned contractors, we are prepared to hire people on the job, we are prepared to hire qualified individuals to work for Pembina, we are prepared to do the environmental technical program. But I could not do that.”

Handout Pembina Pipelines

Handout Pembina Pipelines John Young is head of aboriginal relations for Pembina Pipelines.

Andersen continued: “I said, any of those things we are interested in, and we are interested in partnership. And the conversation went to where Kurt asked — and this is Chief Burnstick — asked a couple more times, and ultimately I think he said, I just need three or 400 grand. And I said, I’m sorry chief, but I cannot do this.”

Burnstick asked for the payment “to make the issue go away,” according to a transcript of the proceedings.

Andersen said he explained to Burnstick that such payments would have put his company, which is listed on the New York Stock Exchange, offside laws such as the Foreign Corrupt Practices Act, Sarbanes-Oxley Act requirements, the company’s fiduciary obligations and its ethics policy, which “prohibits making any type of payments that are just gratuitous.”

During the same proceedings, O’Driscoll pressed Andersen on what specific benefits the Alexander First Nation would get from the project, such as equity or revenue sharing, and expressed skepticism about the bribe allegation.

“Why did it take six or seven months before Pembina made any indication this had happened back to Alexander, if that’s what you allege happened?” O’Driscoll asked, referring to the bribe.

Andersen said the issue was handled discreetly because Burnstick was a new chief and “no one wanted to make a big deal of it.” He also said Pembina wanted to continue to have good relations with the band over the long term.

Young said that he’s not aware of Burnstick disputing the allegation.

Burnstick also took his opposition to the Pembina project before the Alberta Energy Regulator. It was the first hearing in the company’s 60-year history. In previous projects, the company was able to reach amicable agreements with all those impacted and avoid the costly procedure.

Alexander said it opposed the project because it wasn’t adequately consulted and that it wanted to protect its community so it had a viable future.

A three-week hearing occurred in October 2015, and the regulator in March 2016 decided to approve the pipeline with 11 conditions. It found that adverse effects on aboriginal communities, including Alexander, could be mitigated.

“The proposed project would be adjacent to and parallel the Alliance (right of way) in the vicinity of the Alexander reserve,” the regulator found. “There is no evidence before us to suggest that if approved, the construction and operation of Pembina’s project on the applied-for route will impair Alexander’s aspirations for its community.”

But Burnstick didn’t buy it and Alexander, under his direction, appealed to the Court of Queen’s Bench, where the bribe testimony emerged. The litigation was resolved with Pembina and Alexander agreeing to re-route the pipeline around the band’s lands, as well as lands that the band plans to acquire in the future.

News of the bribe request spread through Alexander. Burnstick was asked by band members at a community meeting to explain himself and he responded that it was Pembina that offered to bribe him, Yellowdirt said in the interview.

Meanwhile, the chief was fighting a separate legal battle over allegations of sexual assault by several women in his community. Many of the band’s women were so outraged that they held widely publicized protests against him.

Burnstick was found not guilty of sexual assault in January, but he will face a second set of sexual assault and break-and-enter charges. This week, a court in Morinville scheduled a preliminary hearing on July 5. The latest charges have not been proven in court.

Pembina made a last-ditch effort earlier this year to explain the upside of building the pipeline along the existing Alliance right of way by holding an information session for the First Nation hosted by its chief executive, Mick Dilger. Burnstick didn’t attend. Many members of the community did and were supportive of the project, Yellowdirt said.

A quorum of the band’s council then decided to side with Pembina.

“Some other First Nations on the pipeline route, they got some pretty good arrangements,” Alexander councillor Paul said, and some councillors wanted to see if they could still capture some benefits from the project.

But Burnstick remained opposed and appealed in Federal Court. At a hearing last month between Pembina, the council’s quorum and Burnstick, the chief sought and was granted more delays.

In reaction, Young said his company decided to end the legal fight, build the route around the community that was agreed upon, and advised Alexander of its decision.

Yellowdirt said Burnstick has not provided an accounting of the legal bills incurred so far to fight the Pembina project. He estimates they are likely in the range of $500,000 and he believes Alexander doesn’t have the means to pay them. Alexander councillor Paul confirmed the estimate.

Codie McLachlan for National Post

Codie McLachlan for National PostRodney Yellowdirt looks across land where a pipeline was going to be built before meeting opposition from Chief Kurt Burnstick on Alexander First Nation, Alta.

“We the members are left with the costs of Kurt Burnstick’s actions,” Yellowdirt said.

Pembina’s Young said it’s not easy to build long, linear projects such as pipelines that impact multiple aboriginal communities with overlapping traditional territories, all saying they have a better claim than the next, and all wanting a piece of the opportunity.

“Frankly, there are so many trees to cut down and so much land to clear, we need the wisdom of Solomon to try to divvy up that pie and still ensure we are meeting all of our criteria, such as competitiveness and safety,” he said.

But the confrontation experienced with Burnstick was in a league of its own, he said.

“All those folks at Alexander hoping for the original route, the long-term tax base, near-term opportunities and community benefits, were very disappointed,” Young said. “I, too, am disappointed.”

Financial Post

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It looks like the Keystone XL is finally ready to be approved by Trump — but the fight isn’t close to over

President Donald Trump is making good on his promise to approve the Keystone XL oil pipeline — but the fight is far from over.

Instead, it shifts to courtrooms, a Nebraska agency and congressional town hall meetings, where environmental activists and landowners have plotted ways to keep blocking the pipeline TransCanada Corp. has been trying to build for more than eight years. Just winning Nebraska regulators’ approval for Keystone XL’s route through the state could take TransCanada another six months.

“A federal approval of the permit is not the end of the line for this project; there’s still many obstacles,” said Anthony Swift, an attorney with the Natural Resources Defense Council that opposes Keystone. “There’s legal challenges, there’s the Nebraska issues and, frankly, there are the economic and market obstacles.”

The State Department said Friday it had issued a presidential permit authorizing TransCanada to construct, connect, operate and maintain the project — a decision TransCanada President Russ Girling called “a significant milestone.”

The decision reverses former President Barack Obama’s rejection of the $8 billion project in 2015, after a State Department review concluded Keystone XL did not serve the national interest. The pipeline is slated to carry as much as 830,000 barrels of oil per day from Alberta, Canada, crossing 1,897 kilometres and cutting through Montana and South Dakota on its way to Steele City, Nebraska. From there it will join a southern leg that flows to Gulf Coast refineries.

Keystone has long been a flash point for fossil-fuel opponents who argue it will encourage the development of Canadian oil sands crude, which generally requires more energy to extract and process. Landowners also say it endangers drinking water resources in America’s heartland.

Those same opponents who chained themselves to bulldozers, rallied at the White House and forced route revisions in Nebraska now are plotting a multipronged legal attack as well as protests in the pipeline’s path. 

Oil Sands and the Environment

Sara Shor, a campaign manager for the climate advocacy group 350.org, vowed to “raise hell at the national level” and recruit millions of people to fight the project, including by highlighting their concerns during lawmakers’ town halls during a planned congressional recess next month.

“We’re going to continue to make Keystone XL a political issue and push every elected official to come out against this project if they care about communities, local rights, eminent domain, air, water and climate,” Shor said by phone. “It just touches so many issues.”

Environmental groups are slated to file at least one legal challenge right away — arguing that the State Department violated the National Environmental Policy Act by approving Keystone on the basis of a three-year-old analysis of the project that was issued when oil prices were nearly double what they are now.

West Texas Intermediate crude oil, the U.S. benchmark, traded near $100 a barrel when the State Department’s final environmental study was issued in January 2014 but has slumped by roughly half, now hovering near $50 a barrel. That comes after a prolonged rout that sent crude plummeting to nearly $26 in 2016.

Prior story: Trump Pins Keystone, Dakota Pipeline Fate on Renegotiation

“The oil market has shifted and will always be shifting, and it’s really not adequate to rely on old analysis to approve this pipeline,” said David Turnbull, campaigns director with Oil Change International.

That earlier analysis was built around assumptions about prices and the availability of rail transport and alternatives for moving Canadian oil sands crude that have not come to pass, Swift said.

“The weaknesses of an approval at this stage and the legal vulnerabilities of that approval are apparent,” Swift said by phone. “Moving forward solely on the basis of an objectively outdated environmental review on a pipeline that doesn’t have a full route does pose a lot of problem for the legality of the approval.”

Energized Landowners

Other legal challenges will play out in Nebraska, where energized landowners have already forced changes to the project during previous reviews. At least 40 groups or individuals have filed intervenor applications with the state’s Public Service Commission ahead of a March 22 deadline, seeking to participate in the review. At least one of the petitions came from a law firm representing 92 people. All of them are subject to review and approval by the hearing officer assigned to the case.

TransCanada submitted an application to the commission last month, triggering a 210-day period for the agency to decide whether the company demonstrated the project serves the public interest. That points to a decision in September — if the Public Service Commission’s review is not extended for an additional five months.

If TransCanada wins state approvals and invokes eminent domain to claim land for pipeline construction, the activist group Bold Alliance will file a lawsuit challenging the action, said Jane Kleeb, president of the organization.

Separate challenges may play out in South Dakota, where opponents earlier this month asked a judge to reverse an authorization critical to its path through the state.

Sand Hills

All of the activity means that Keystone’s “best-case scenario for coming online” is the second half of 2019, Bloomberg Intelligence analysts said.

TransCanada is making its third attempt to carve a path across Nebraska. After the company encountered opposition from landowners with its initial proposed route, which sliced through the state’s environmentally sensitive Sand Hills region, lawmakers passed and then-Governor Dave Heineman signed legislation enabling him to work closely with TransCanada to chart a course for the project. Successive landowner legal challenges over the legality of that maneuver brought the project to a standstill. 

TransCanada eventually surrendered to a review by the commission instead of waging further court battles — shortly before Obama’s rejection.

All the concerns about land, water and using foreign steel remain, Kleeb said. “It’s going to be a long process — very much into the weeds,” Kleeb said in a phone interview, noting that “the courts are the only fair and viable path for us,” given Trump’s support for Keystone XL.

The Public Service Commission’s review will not encompass design and safety considerations, according the agency. Rather it will be limited to how it impacts the environment, including soil, plant life, groundwater and wildlife.

Legal opposition is already mounting. Attorneys David Domina and Brian Jorde, who led the fight previously, last month reiterated their view that there is no public use whatsoever for this private pipeline company’s project.

Changed Conditions

Opponents have argued that the economic backdrop has changed since TransCanada first pursued the project — and the numbers no longer work in its favor. Pipeline capacity from the Canadian oil sands is expanding, so producers have more options to send their crude to market. The Canadian government approved Kinder Morgan Inc.’s Trans Mountain line to the Pacific and Enbridge Inc.’s expansion of Line 3 to the U.S. Midwest. With the addition of Keystone, the combined capacity of 1.8 million barrels a day would be enough to handle Western Canada’s growing oil production for nearly two decades, according to National Energy Board oil projections.

TransCanada officials have said the company is committed to build a state-of-the-art pipeline system that will be monitored around the clock using satellite technology and aerial patrols. The company has stressed that pipelines are safer than trains for transporting crude and has vowed to work with all stakeholders in Nebraska.

Native Americans

Native Americans have battled the Dakota Access Pipeline in South Dakota and are set to reprise the activity against Keystone XL.

The activism will spill over into local debates over other pipelines proposed to ferry oil and natural gas across the country, Shor said. Her group, 350.org, is planning to “use Keystone to fight hundreds of other projects” nationwide. 

“People are going to be mad at Trump for bringing Keystone back because it’s going to cause resistance for every single pipeline project across the country and it’s going to cause pressure for the banks that fund all these projects,” Shor said. “We are building an army of resistance. This fight is not over. And we’re going to have to keep on fighting this for probably years to come.”

 

The U.S. State Department approves TransCanada’s Keystone pipeline

The U.S. Department of State has signed and issued a presidential permit to construct the Keystone XL Pipeline, TransCanada Corp said this morning.

 

More to come …