The latest legal setback for Calgary-based TransCanada’s $10-billion Keystone XL pipeline through the United States is yet another reminder that Canada needs to export its oil and natural gas to new global markets, says an industry association.
A U.S. District Court judge in Montana put the project on hold in a ruling issued late Thursday, saying the potential impact had not been considered as required by federal law.
Judge Brian Morris granted an injunction to stop construction of the 1,900-kilometre pipeline, ruling that the U.S. State Department was obligated to “analyze new information relevant to the environmental impacts of its decision” to issue a permit for the pipeline last year.
Environmentalists and Native American groups had sued to stop the project, citing property rights and potential oil spills.
Canadian Association of Petroleum Producers spokesperson Tonya Zelinsky told CBC News the group is disappointed with the ruling.
“This decision further reinforces the need for Canada to export its oil and natural gas to new global markets — ensuring fair market value for our natural resources, helping to meet growing global demand and expanding our customer base beyond the U.S.,” she said.
The Keystone XL pipeline would bring oil from Hardisty, Alta., to Steele City, Neb. (Natalie Holdway/CBC)
Crude production in Alberta’s oilsands has expanded faster than pipeline capacity, creating a bottleneck that has driven down prices.
Canadian heavy crude, traded as Western Canada Select, has been selling at a steadily worsening discount compared with Brent oil, the global benchmark, and West Texas Intermediate in the United States.
On Friday, WTI was trading at $59.98 US compared with $17.75 US for WCS. The steep discount has stripped billions of dollars from the Canadian economy, by some estimates.
State Department reviewing ruling
TransCanada says it remains committed to the project despite the Montana judge’s ruling.
The U.S. State Department told CBC News that officials are reviewing the order and that there will be no further comment since there is ongoing litigation.
James Coleman, a former professor at the University of Calgary who now specializes in energy law in Dallas, says the ruling could be appealed or the government could try to address the concerns raised by the judge.
“Keep in mind, this isn’t suggesting TransCanada did anything wrong. This is a lawsuit that challenges the U.S. government’s approval of this. So, it’s up to the United States government what happens from here,” he said.
U.S. President Donald Trump called the ruling a disgrace and says it will be appealed.
Warren Mabee, director of the Queen’s University Institute for Energy and Environmental Policy, says the ruling could spell a six- to 12-month delay of the project, given how long it would take to complete another environmental assessment.
“Certainly it’s another delay. And it’s a project that has been fraught with delay over the last five, six, seven years now. It is something I think that the company probably anticipated,” he said.
“It’s not surprising that this is happening, but I don’t think it’s necessarily a nail in the coffin. It’s not the end of the project, it’s just another thing to go through.”
TransCanada shares on the Toronto Stock Exchange fell by as much as 2.75 per cent in early trading on Friday.
Keystone XL would carry up to 830,000 barrels of crude oil per day from Canada through Montana and South Dakota to Steele City, Neb., where it would connect with the original Keystone pipeline that runs south to Texas Gulf Coast refineries.
There is also ongoing legal wrangling over the pipeline in Nebraska.
The Nebraska Public Service Commission issued an approval late last year for an alternative route, a ruling that
environmental groups are challenging.
TransCanada has said it expects a decision on routing from the Nebraska Supreme Court by the first quarter of 2019.
TransCanada has yet to make a final investment decision to proceed with the project, even though it had started construction. It said last week that it is also seeking partners to finance KXL’s construction.
With files from Meegan Read and Tony Seskus.