Next challenge for Keystone XL is regaining oilpatch support

With pro-pipeline President Donald Trump sitting in the White House, the big challenge now for the Keystone XL proposal is to regain support in Alberta's oilpatch, says the former chief executive of Calgary-based TransCanada.

Former U.S. presidentBarackObamarejected Keystone XL, but the project isenjoying a second life after Trump revived the proposal in January as one of his first acts after taking power.

These are tough things for shippers to do in the best of times.- Hal Kvisle, former TransCanada CEO

Former TransCanada chief executive Hal Kvislesays the nexthurdle will be convincing oilpatch companies that thepipeline still makes sense to export oil and that's why they need to re-commit to lengthy contracts.

"These are tough things for shippers to do in the best of times. The balance sheet commitment it takes to sign a long-term contract to move oil through an expensive pipeline, that's a big financial commitment for any company to make," said Kvisle in an interview.

"It's easier to make when you're at the top of the cycle, oil is $100 a barrel. It's tougher to make today, when oil is $50 a barrel."

The oilpatch has a few different proposed pipelines to choose from, as the Canadian government has approved Kinder Morgan's Trans Mountain project and Enbridge'sLine 3 replacement project. Enbridge's CEO said last month thattwo projects will provide enough capacity to move Canadian oil production until at least the mid-2020s.

TransCanadasaid Tuesdayin an emailthat its discussions with customers"are ongoing." In addition, the company has suspended its$15-billion lawsuit against the United States, which it had launched under the North American Free Trade Agreement afterObama rejected the pipeline.

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Kvisle who conceived the Keystone XL pipelineduring his time aschief executivefromMay 2001 to June 30, 2010 still follows the project closely. He owns shares in the company and has many friends who still work for TransCanada.

"One should never lose sight of the fact that Keystone XL is the lowest-cost way to get Alberta oil to the highest-value market. That's why Keystone XL was conceived in the first place," he said.

Hal Kvisle says TransCanada will continue to face opposition from protesters

7 years ago

Duration 1:18

Environmental activists have targeted the Keystone XL pipeline for several years.

Alberta oil producers want to ship oil to Canada's coastal waters andexported at world prices. Keystone XL does not provide that access, but it would give direct access to the numerous refineries in the Houston area near the U.S. Gulf Coast. The pipeline would ship up to 830,000 barrels of oil per day.

Trump influential

Trump's support for Keystone XLhasn't wavered since he took office, and he reaffirmed his belief in the project in a speech last week.

"Bottom line,Obamadidn't sign it. Could be 42,000 jobs, somewhere around there,alotof jobs, didn't sign it," he said.

Trump's backingshould smooth out some of the hurdles the project faces, according to Kvisle. He points to the controversial Dakota Access pipeline project in North Dakota as an example. The Army Corps of Engineers delayedthe project asObama's support for the project waned. However, once Trump took power, the Corps reversed its decision and said further environmental studies were no longer needed.

"If you have a president who overtly supports these kinds of projects, it changes the mindset of all of the regulators, of all the other politicians, of all of the state governors," said Kvisle.

Trump has been clear he wants TransCanada to use American steel for the project, which Kvisle said isn't a problem since the company always planned to buy steel from a mill in Arkansas.

During construction, Kvisle said,TransCanada will continue to face opposition from protesters. For several years activists targeted Keystone XL and made it a lightning rod for the climate change debate. After Obamarejected the project, the company wrote off nearly $3 billion.

"It was effectively thrown in the ditch by the efforts of activists. So, that's clearly a big issue for a company like TransCanada," said Kvisle.

The U.S. State Department has until late March to review TransCanada'slatest application for Keystone XL.

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