By Rebecca Elliott, Vipal Monga and Miguel Bustillo
A federal ruling blocking the Trump administration's approval of
the Keystone XL pipeline further clouds the future of a project
that has faced a decade of delays due to fevered opposition from
environmentalists, landowners and Native American groups.
U.S. District Judge Brian M. Morris ruled Thursday night that
President Trump's 2017 cross-border permit of the pipeline
expansion by TransCanada Corp. hadn't considered all impacts as
required by federal law, and that construction couldn't move
forward until a supplemental environmental review is completed.
The decision means the pipeline expansion to carry oil from
Alberta to Nebraska is certain to face at least some additional
delays, as the ruling is either appealed to a higher court, or
government officials complete the extra analysis.
A TransCanada spokesman said the company is reviewing Thursday's
ruling and reiterated the company's support for the project.
"We remain committed to building this important energy
infrastructure project," the spokesman said.
The U.S. State Department, which issued the presidential permit
and was the other defendant in the case, didn't respond to a
request for comment.
Keystone XL has already faced numerous legal and political
hurdles, and has become a rallying cry for environmentalists who
want to keep fossil fuels in the ground. Mr. Trump revived the
pipeline after it had been blocked by former President Obama, but
the project has continued to face challenges.
TransCanada said earlier this year that it has sufficient
support from customers to move forward with the project, now
expected to cost around $8 billion, and that work could begin next
year. But it has yet to make a final decision on whether to
complete construction.
Chris Cox, a Toronto-based energy analyst with Raymond James
Ltd., said the new ruling could delay construction into 2020 and
possibly turn the pipeline into an issue in the next U.S.
presidential election, increasing uncertainty.
"Is TransCanada willing to bet $8 billion on getting another
approval from Trump?" he said.
If completed as planned, Keystone XL would carry up to 830,000
barrels of oil a day, mostly from Canada's oil sands, more than
1,000 miles to Steele City, Neb., where it would link to existing
pipelines to Gulf Coast refineries. The proposed route would cross
through Montana, South Dakota and Nebraska.
The new ruling by Judge Morris, who was nominated by Mr. Obama,
requires the federal government to update a prior 2014
environmental review of Keystone XL to weigh several additional
factors. They include the impact of lower oil prices on the
project's viability, its related greenhouse-gas emissions and
modeling of potential oil spills it could cause.
The State Department was already in the process of drafting a
supplemental environmental review of the pipeline's potential
impact in Nebraska, but that analysis is unlikely to be sufficient,
said Matthew Taylor, an analyst for energy investment bank Tudor
Pickering Holt & Co.
If a second supplemental review is required, it is unlikely
TransCanada would be able to move forward with Keystone XL until
late 2019 at the earliest, he said, putting the project's future in
doubt.
"At what point does the incremental work stop?" Mr. Taylor
said.
Zachary Rogers, an analyst for energy consultancy Wood
Mackenzie, predicted the project would continue to move forward,
but said the delays were a problem for Canadian oil-sands producers
struggling to move their crude to market. "While definitely a major
setback in terms of timing, this is unlikely to be the nail in the
coffin for Keystone XL, " he said.
Canadian pipelines have had a string of setbacks in the past
year. TransCanada canceled its Energy East project last year after
the Canadian government said it would widen the scope of an
environmental review of the pipeline.
In May, Kinder Morgan Inc. bailed out on its planned expansion
of the Trans Mountain pipeline between the provinces of Alberta and
British Columbia, in the face of vocal opposition and several
delays. Canada's government bought the pipeline for 4.5 billion
Canadian dollars ($3.41 billion) to ensure construction, only to
see an appeals court declare in August that the project had been
wrongly approved and must be reviewed, delaying construction
indefinitely.
The lack of pipeline construction has hit Canadian oil
producers, which are having trouble getting their oil out to
refiners in the U.S. Western Canadian Select crude has been trading
at a steep discount to the West Texas Intermediate crude in the
U.S., largely because of producers' inability to get their oil to
market.
The oil price discount hit a record $51 last month, although it
has since retreated as crude prices have fallen. Heavy Canadian
crude was trading for $43 a barrel below U.S. benchmark prices
Friday, according to Tudor Pickering Holt.
Write to Rebecca Elliott at rebecca.elliott@wsj.com, Vipal Monga
at vipal.monga@wsj.com and Miguel Bustillo at
miguel.bustillo@wsj.com
(END) Dow Jones Newswires
November 09, 2018 12:26 ET (17:26 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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