Keystone, Trans Mountain and Line 3 — Alberta's oil patch remains hopeful for progress on at least one stalled pipeline

Keystone, Trans Mountain and Line 3 — Alberta's oil patch remains hopeful for progress on at least one stalled pipeline

Buried in a slew of earnings reports this week were several bright lights in the battle to build more export pipelines.

Keystone XL moves forward on the federal front, but ...

The company formerly known as TransCanada, TC Energy, appears to making progress on Keystone XL, despite missing out on this winter's construction season.

Attorneys for the US State Department have committed to completing another environmental assessment for Keystone XL, as requested by a Montana judge last November. President Trump issued another Presidential Permit for the pipeline late last March, superseding the original permit, and attempting to circumvent the Montana court ruling. 

Government lawyers stress that Trump's permit is not subject to the National Environmental Policy Act and Endangered Species Act. The new environmental assessment is being submitted just for good measure.

Despite progress on the federal front, TC Energy is still awaiting resolution on another court case in the Nebraska Supreme Court. The company says a decision is expected sometime in the second quarter. Two other lawsuits are pending in Montana, launched by two Native American tribes. Both TC Energy and the US government are seeking to have those cases dismissed.

The US$8 billion Keystone XL would add 830,000 bbl/day of crude export capacity from Alberta to the US Gulf Coast.

Still waiting on a decision for Trans Mountain Expansion

According to various media reports, the federal government is poised to green-light, once again, the Trans Mountain Expansion project. The project was halted last summer after the Federal Court of Appeal ruled consultations with Indigenous peoples were insufficient, and impacts on marine life weren't adequately considered. 

An announcement is expected on the morning of June 18, during PM Trudeau's cabinet meeting. If completed, the project will add 590,000 bbl/day of crude export capacity from Alberta to the BC’s Lower Mainland, primarily destined for export to the US West Coast and Asia.

Northern Gateway not coming back any time soon

Despite calls from Alberta Premier Jason Kenney to resurrect Northern Gateway, Enbridge CEO Al Monaco says he has no plans to revisit the project, whose approval was also overturned by the Federal Court of Appeal in 2016. Aside from continued uncertainties around the regulatory review process, the federal government's tanker ban on BC's northern coast would render the pipeline useless.

Northern Gateway was intended to transport 525,000 bbl/day of crude from Alberta to Kitimat, BC, also for export to markets on the US West Coast and Asia. 

Line 3 Replacement moving ahead, although slower than planned

Monaco says he'd rather stay focused on smaller expansions and completion of the Line 3 Replacement Project, which has been pushed from the end of this year to the latter-half of 2020 due to permitting delays in Minnesota.

Line 3 forms part of the massive Mainline network, Canada's largest crude export line, with a capacity of 2.9 million bbl/day. Once Line 3 is replaced, capacity will increase to about 3.2 million bbl/day.

The company is looking at ways to squeeze more barrels out of the Mainline, potentially adding 50,000 to 100,000 bbl/day of additional capacity in the near term, through a number of small tweaks.

Enbridge is also looking at changing shipping arrangements on its Mainline network, moving away from its current practice of monthly allotments, and instead booking long-term agreements. According to Reuters, the company is asking producers to sign 8-year take-or-pay contracts, a move that worries smaller producers who aren’t big enough to sign on to that deal. Larger producers like Canadian Natural Resources have also voiced opposition, since heavy oil prices in the Midwest aren't as lucrative as the Gulf Coast.

Take-or-pay agreements require producers to pay for contracted volumes, regardless of whether or not those volumes are shipped. Enbridge is expected to launch open season in mid-July.

 

MAP COURTESY THE CANADIAN ASSOCIATION OF PETROLEUM PRODUCERS

 

Opposition to Bill C-69 grows louder

The Trudeau Liberals promised to dismantle the National Energy Board (NEB), the body currently responsible for pipeline approvals. During the last election campaign, the Liberals accused the NEB of being biased towards the energy sector and too Alberta-focused. 

Dubbed the “No More Pipelines bill,“ Bill C-69 would nullify the Canadian Environmental Assessment Act and the National Energy Board Act, two pieces of legislation that currently govern regulatory approvals for the natural resources sector. A new regulatory body would oversee environmental, health, social and economic impacts of natural resources projects. Under the new rules, any group would be allowed to oppose a project for almost any reason, regardless of whether or not they are directly impacted.

Opposition isn't limited to the oil and gas sectors. Representative of Canada's mining, nuclear and even hydroelectric industry have asked for a major rewrite of the bill. Most agree the bill, in its current form, creates more confusion and regulatory uncertainty, making future pipeline approvals almost impossible.

After a series of cross-Canada hearings, an independent Senate committee has put forward 192 pages of amendments, warning that the bill would have long-term implications for resource development projects, including pipeline construction.

The Trudeau Liberals are largely expected to pass the legislation before the upcoming federal election. The Senate technically has the power to amend, delay, or even refuse to pass bills introduced in the House of Commons. However, it is rare for the Senate to exercise those powers.

There are only five weeks left in this Parliamentary session before the next federal election in the fall.

Friday Five: What's moving oil markets this week

Friday Five: What's moving oil markets this week

Ramp-up continues at BlackGold as SAGD facility gets closer to nameplate capacity

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