Alberta raises output quota despite never-ending delays in new pipeline construction

Alberta raises output quota despite never-ending delays in new pipeline construction

The Alberta government raised its crude production quota by 25,000 bbl/day in May, and another 25,000 bbl/day in June, bringing the province's production cap to 3.71 million bbl/day. 

By June, the limit would have been increased by 150,000 bbl/day since the curtailment program started at the beginning of January. Including diluent volumes required for blending, Alberta's total crude production capacity is just over 4 million bbl/day. 

The NDP government continues to walk a fine line between the non-integrated producers, who have largely benefited from the output cuts, and the integrated majors, who will see revenues decline this year due to lower output and a weakening crack spread. Drillers are also getting hit hard in Western Canada, as producers are forced to scale back on their capital spending plans.


Earlier this month, Enbridge warned its Line 3 Replacement (L3R) project likely won't be operational until the second half of next year, up to a year later than planned. Minnesota’s Court of Appeals began hearings into the adequacy of L3R's Environmental Impact Statement (EIS) this week, which could potentially throw another wrench into Enbridge's timeline. Various advocacy groups are arguing that the existing EIS missed impacts on Lake Superior in the event of a catastrophic breach. The courts have until the middle of June to decide if the existing EIS is adequate. 

Enbridge has promised to release a more detailed schedule on L3R later this year. If completed, the project would increase export capacity out of Western Canada by 370,000 bbl/day.


Meanwhile over in Montana, a US Court of Appeals has ruled that TransCanada should hold-off on progressing any construction work, while it awaits a new environmental assessment on Keystone XL.

Several weeks back, TransCanada warned that any further delays would cause it to miss the 2019 construction season, resulting in the cancellation of US$2.5 billion in contracts, and several thousand job losses. The court concluded TransCanada had not made a strong enough case that the pipeline would ultimately be approved. The company must now wait for a new environmental assessment to be completed before continuing with construction. 

Two other lawsuits are pending in Montana, launched by two Native American tribes last fall. Last November, Nebraska's Supreme Court also heard oral arguments on the validity of the pipeline's routing through the state. The company is hoping for a decision on that case sometime in the next few months.

If completed, Keystone XL would increase Western Canada's crude export capacity by 830,000 bbl/day. TransCanada has yet to provide a revised timeline for construction, or a projected in-service date. 


Fate of the Trans Mountain Expansion Project (TMEP) still sits with the federal government. The National Energy Board concluded its original recommendation for approval of the line was adequate. Federal Natural Resources Minister Amarjeet Sohi says he expects to complete "meaningful consultations" with Indigenous communities sometime in June. Sohi says his department has met with over 100 different groups so far. A federal decision on project restart is therefore unlikely to occur before the summer.

If completed, TMEP will add 590,000 bbl/day of export capacity from Alberta to the West Coast.


Premier Rachel Notley had been banking on more pipeline capacity and a ramp-up in crude-by-rail to ease the province's bottlenecks and keep a lid on pricing discounts for Alberta crude. However, it's becoming fuzzy when any of the promised pipelines will be ready for action.

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