CALGARY — A final investment decision clearing the way for construction of the long-delayed Keystone XL pipeline was greeted with relief on Tuesday by an Alberta oilpatch where production has grown faster than pipeline capacity.
The decision by Calgary-based TC Energy Corp. to go ahead with the US$8-billion project was widely anticipated after it cleared major U.S. regulatory hurdles earlier this year and began site preparation work in Montana, South Dakota and Nebraska.
In a surprise development, however, the Alberta government has agreed to invest about US$1.1 billion (C$1.5 billion) as equity in the project, thus substantially covering planned construction costs through the end of 2020.
The remaining US$6.9 billion is expected to be funded through a combination of a US$4.2-billion project level credit facility to be fully guaranteed by the Alberta government and a US$2.7-billion investment by TC Energy.
At a joint news conference in Calgary on Tuesday, Premier Jason Kenney and TC Energy CEO Russ Girling described the relationship as a partnership.
“This is not a time for timid leadership,” Kenney declared.
“The government of Alberta is launching a partnership with TC Energy in a bold project to re-take control of our province’s economic destiny and put it firmly back in the hands of the women and men who own our natural resources, the people of Alberta.”
Added Girling: “It is imperative that we keep one eye on the future and the responsibility that our company has to build the critical energy infrastructure that society will need for decades yet to come.”
Alberta will be able to sell its shares for a profit after the pipeline is built and it will generate a net return of more than $30 billion through royalties and higher prices for Alberta oil in the next 20 years, Kenney said.
Alberta’s involvement was praised by Suncor Energy Inc. and Canadian Natural Resources Ltd., two of Canada’s largest oilsands producers.
“Access to new markets and expanded connectivity to existing markets is critical, especially the U.S. Gulf Coast through KXL, which will significantly expand access to the largest heavy oil refining capacity in the world,” Suncor CEO Mark Little said in an emailed statement.
Oilsands producer Cenovus Energy Inc. has a contract to move 150,000 barrels per day on Keystone XL and views its construction as “crucial” to the success of the Canadian oil industry, said spokesman Brett Harris.
The decision disappointed U.S. environmental groups that have fought against the pipeline in regulatory hearings and the courts for years.
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