More hurdles ahead for Keystone XL, TransCanada head tells Trump

TransCanada Corp. said there’s more “work to do” before it can start construction of the $8 billion Keystone XL pipeline.

The controversial project, which would help bring crude from Canada’s oil-sands to the U.S. Gulf Coast, was approved by the Trump administration Friday. Other permissions, including from states along the way and the U.S. Interior Department, are still required.

Foes including environmentalists and local landowners have vowed to continue fighting the pipeline, first proposed more than 8 years ago. President Donald Trump, in an appearance with TransCanada CEO Russ Girling at the White House, said the decision represented the start of a new era in energy policy.

The policy is designed “to lower costs for American families and very significantly reduce our dependence on foreign oil and create thousands of jobs,” Trump said. Pipelines are the safest way to transport oil, the president said, adding that Keystone XL was just one of many energy projects he’s planning to approve.

Once built, Keystone XL will run from Canada through Montana, South Dakota and Nebraska, where it connects to pipes traveling to Gulf Coast refineries. Asked by Trump when construction would begin, TransCanada Chief Executive Officer Russ Girling said there remains “work to do in Nebraska” first.

Energized landowners in that state have already forced changes to the project in regulatory reviews. Trump said he would contact Nebraska officials to help TransCanada get the necessary approvals.

Job Creation

Both Girling and Trump in their comments said the project would create thousands of U.S. jobs, though foes say many will be temporary construction positions and that falling oil prices since the project was planned undercut its usefulness. Under President Barack Obama, the U.S. State Department estimated Keystone XL would create about 42,100 jobs for the two-year construction period, including direct and in-direct spending.

Once operational, though, the pipeline would only require about 50 employees in the U.S., including 35 permanent workers and 15 temporary contractors, according to the estimate.

With a nod to Trump’s buy-American drive, TransCanada also said it will acquire 200 miles of pipe made with U.S. steel. The company previously estimated that about half of the 660,000 tons of steel used in the U.S. portion of the pipeline would come from domestic producers, specifically a pipe mill in Little Rock, Arkansas. The remaining 50 percent was to be supplied by pipe mills in Canada, Italy and India.

The new 200 miles of pipe will increase the use of American steel for the project to more than 50 percent, according to Terry Cunha, a company spokesman. The company also said it will end legal claims taken against U.S. after then-President Barack Obama declined to approve it in 2015.

“It’s a great day for our company, and the workers that are going to be put to work,” Girling said at the White House. The company’s shares rose 1 percent in trading in New York.

The federal thumbs-up was expected, but the challenges remaining for the TransCanada project are significant, said Christi Tezak, managing director of research at ClearView Energy Partners LLC in Washington.

“We expect environmental groups and landowners to try to slow down or halt necessary proceedings for TransCanada to begin construction in each state,” she said. While lawsuits arguing the project violated the National Environmental Policy Act are unlikely to be successful, “it’s certainly their prerogative to fight it,” Tezak said by telephone.

Fossil fuel opponents have said Keystone XL will encourage the development of Canadian oil sands crude, which generally requires more energy to extract and process, and that it endangers drinking water resources in America’s heartland. More recently, they’ve pointed to the changing economic backdrop for the project.

Price Drop

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. Meanwhile, the Canadian government has approved other projects carrying crude from its oil sands.

“The Trump administration may be furiously propping up an obsolete energy system at the behest of his fossil fuel cronies, but the majority of people in this country want action on climate change,” said Annie Leonard, Greenpeace USA’s executive director, in a statement. The group urged bankers to refuse to provide financial services to TransCanada that could be used to help construct the pipeline.

The approval comes as another controversial project stalled by the Obama administration, the Dakota Access pipeline, nears completion after legal actions by protesters fell short. Energy Transfer Partners LP, the majority owner, is now filling the pipeline, and has said it will begin shipping oil in the first half.

Both Keystone XL, designed to carry 830,000 barrels of oil a day, and Dakota Access, with a capacity of 470,000 barrels, have been political flash points in Washington.

Differing Views

Former President Obama supported environmental and economic arguments against the projects, rejecting the project after a State Department review found Keystone didn’t serve the national interest. During his campaign, Trump vowed to support energy companies and advocate for new infrastructure, though he specified the work should be done using materials produced in the U.S.

Earlier this month, Secretary of State Rex Tillerson, who formerly served as Exxon Mobil Corp.’s chairman and CEO, recused himself from the agency’s deliberations. Tillerson was a vocal advocate for Keystone while at Exxon, saying it would improve U.S. energy security and competitiveness.

The permit formally approving Keystone XL was signed by Under Secretary of State for Political Affairs Thomas Shannon, according to a statement from the agency.

TransCanada also reapplied for approval in Nebraska, a state that created legal hurdles for the company during the initial project review. Keystone generated heated opposition from landowners in the pipeline’s path who challenged state laws that helped determine the route. TransCanada eventually surrendered to a review by the state Public Service Commission before the project was rejected in its entirety by Obama.

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