TC Energy has announced it is moving forward with construction of the Keystone XL pipeline, even as a legal suit by environmental and tribal groups seeking to stop the pipeline continues.
The company said in a media release that it has 20-year transportation service agreements for the pipeline that total 575,000 barrels per day with what it described as strong, credit-worthy counterparties expected to generate about $1.3 billion in earnings before interest, taxes, depreciation and amortization on an annual basis. Once Keystone XL is operational, an existing contract for 115,000 barrels per day from Hardisty to the Gulf Coast on the company’s existing Keystone pipeline will also shift to the new line under a renewed 20-year contract.
Terry Cunha, spokesman for TC Energy, told the Williston Herald he could not say if any of the contracted barrels will be for Bakken oil due to confidentiality agreements. He did not confirm whether an on-ramp at Baker, Montana for Bakken crude is still part of the project’s design.
“We appreciate the ongoing backing of landowners, customers, Indigenous groups and numerous partners in the U.S. and Canada who helped us secure project support and key regulatory approvals as this important energy infrastructure project is poised to put thousands of people to work, generate substantial economic benefits and strengthen the continent’s energy security,” TC Energy’s President and Chief Executive Officer Russ Girling said in a media release. “In addition, we thank U.S. President Donald Trump and Alberta Premier Jason Kenney as well as many government officials across North America for their advocacy without which, individually and collectively, this Project could not have advanced.”
Montana Sen. Steve Daines, who has been a vocal proponent of the Keystone XL pipeline, released a statement praising the announcement.
“This is great news for Montana jobs and for our nation’s energy security,” Daines said. “Construction of the Keystone XL pipeline will create good paying jobs for working Montanans in our energy and construction sectors. I look forward to seeing this important project completed.”
American Petroleum President and CEO Mike Sommers said the pipeline advances American energy security at a vital time.
“This project has been studied for well over a decade, and will bring billions of dollars in investment to the American economy as well as thousands of high-paying jobs,” he said. “Even during this challenging and unprecedented time, our industry is leading the way and showing just why we are and will continue to be the backbone of our economy.”
Keystone XL’s cost estimates are now at $8 billion for a 1,210-mile long pipeline that will deliver 830,000 barrels per day of crude oil from Alberta in Canada to Nebraska in the United States. From there, the line can connect with existing TC Energy structures to reach Gulf Coast refiners where it will be processed into transportation fuel and other products.
The government of Alberta has agreed to invest $1.1 billion of equity into the project, and is guaranteeing $4.2 billion in credit for the project. TC energy meanwhile will invest $2.7 billion from internally generated cash flow, hybrid securities, and common equity from activation of its dividend reinvestment program in 2021 and 2022. The company will also file a $1 billion equity shelf that will allow an at-the-market equity issuance program if needed.
Once the project is completed and in service, TC Energy will refinance and acquire Alberta’s $4.2 billion credit facility.
“Strong commercial and financial support positions us to prudently build and fund the Project, along with our existing $30 billion secured capital program, in a manner that is consistent with maintaining our strong financial position and credit metrics,” Girling said. “Once completed, approximately 98 per cent of the Company’s consolidated EBITDA is expected to come from regulated or long-term contracted assets.”
Preconstruction activities have already been under way for Keystone XL, and were filed in a status report with the Ninth District Court in Montana. The company’s projected timeline is for the pipeline to be in service in 2023.
The company will be mindful of COVID-19 during construction of the pipeline, Girling added.
“We will continue to take guidance from all levels of government and health authorities to determine the most proactive and responsible actions in order to ensure the safety of our crews and community members during the COVID-19 situation,” he said. “Construction will advance only after every consideration for the health and safety of our people, their families and of those in the surrounding communities has been taken into account.”