TransCanada Corp. announced Thursday it had won a commitment of 500,000 barrels of oil a day to be shipped on Keystone XL, positioning the proposed US$8-billion project to move ahead, though a final investment decision hasn’t been made.
That amount includes 50,000 barrels a day for 20 years from Alberta’s NDP government through the Alberta Petroleum Marketing Commission (APMC), a provincial Crown corporation.
In its news release, TransCanada Corp. CEO Russ Girling thanked Notley and said the Alberta government’s commitment “was instrumental to achieving the commercial support needed to proceed.”
The NDP has had a fraught relationship with Keystone XL, which will connect Alberta’s oilsands with refineries on the United States Gulf Coast. During the 2015 provincial election, Notley said as premier she would halt Alberta’s lobbying for the project.
She said at the time that there was “no realistic objective” to backing the project, since the pipeline was caught up in U.S. domestic politics, and she wanted to see a greater focus on shipping refined crude products rather than raw bitumen.
But Notley told reporters Thursday that the government’s decision to commit barrels to Keystone XL was driven by economics, noting in particular the current wide differential between the prices of Canadian heavy oil and benchmark U.S. crude.
“Oil and gas production is going up and pipeline capacity is significantly going down,” she said at an announcement at Calgary’s Minhas brewery.
“We do have a market in the States and if we can put that product on pipeline as opposed to on rail, then that means more returns for Albertans.”
Notley said pushing Keystone XL forward doesn’t mitigate the need for other pipeline projects, such as the overhaul and expansion of Enbridge’s Line 3 and Kinder Morgan’s expansion of its Trans Mountain line to the British Columbia coast.
“The capacity demands of the projected oil and gas production are going to require Kinder, they’re going to require Line 3, they’re going to require Keystone XL,” she said.
The Keystone XL commitment is half of the 100,000 barrels per day that Alberta had committed to TransCanada’s proposed Energy East pipeline, which was shut down by the company last year.
While the Energy East amount was valued at nearly $5 billion, the province says it can’t put a dollar figure on the Keystone XL commitment for confidentiality reasons. More details will be released in the APMC annual report.
The Alberta government collects some of its energy royalties as production through its Bitumen Royalty-in-Kind (BRIK) program.
Bob Skinner, an executive fellow at the University of Calgary’s School of Public Policy, said Alberta’s commitment of barrels to Keystone XL likely enhanced confidence among other shippers but he doubted it was a tipping point for the project.
The commitment was a no-brainer for the province, especially with the demise of Energy East, said Skinner, adding that Notley’s transition to supporting Keystone is also not surprising given the potential economic value of the project to Alberta.
“Once she got into the job … it probably became quite stark for her and the finance minister, given the market,” he said.
Alberta is emerging from two years of recession spurred by low oil prices that have battered the government’s finances.
Keystone XL was rejected in the U.S. by the Obama administration in 2015 in the face of a mammoth campaign by environmental groups against the project. However, it was revived after the election of Donald Trump as president in 2016 and the U.S. president also received a shout-out from Girling in the Trans Canada news release.
Environmentalists vowed Thursday to keep up the fight against Keystone, with some taking aim at Alberta’s decision to back the pipeline.
“The Alberta government’s decision to work with the Trump administration to push through a pipeline that endangers the water supplies and climate of millions of people is both disappointing and reckless,” Greenpeace Canada said in a statement.
“The government needs to ditch the prehistoric energy positions and start getting Alberta back on track by investing in technologies and energies of the future, not the past.”
United Conservative Party Leader Jason Kenney, meanwhile, tweeted that he was “glad to see that the Alberta Govt has finally come around to recognizing the importance of Keystone XL, after years opposing the project.”