TransCanada Corp. has lined up shipper support for its Keystone XL project thanks to a commitment from the Alberta government but the future of the controversial pipeline remains uncertain.
The company said Thursday it had secured 500,000 barrels a day of 20-year commitments for the project after concluding an open season, locking up about 60 per cent of the 830,000 barrels of planned capacity.
TransCanada said the numbers showed strong commercial support and it was going ahead with construction preparation, but would continue to try and lock up further support and was not yet ready to made a final investment decision.
TransCanada exec thanks Trump for support
TransCanada chief executive Russ Girling thanked U.S. President Donald Trump for his continued support of the project, as well as the efforts of other U.S. backers and the Alberta government.
"We appreciate Alberta Premier Rachel Notley for her government's commitment to the project which was instrumental to achieving the commercial support needed to proceed," said Girling in a news release.
The Alberta government committed 50,000 barrels a day for the project from some of the royalty payments it accepts as barrels of oil, as a way to help the project and to help industry receive a better price for its oil by avoiding the use of rail, said Notley.
"By ensuring that we can transport our product as cheaply and as efficiently and as safely as possible in all manners, we're able to ensure the greatest return for Albertans."
The province had also committed volumes to TransCanada's now-defunct Energy East project, but not to Kinder Morgan Canada's Trans Mountain expansion or Enbridge's Line 3 replacement.
The Trans Mountain project, which would allow Alberta crude producers to reach new markets, didn't require government support, with Kinder Morgan Canada saying last March that it had locked-up long-term commitments for the maximum 80 per cent of pipeline volume set by the National Energy Board.
Environmental groups say government is misguided
Environmental groups, which have been fighting the pipeline since its proposal almost a decade ago, criticized Alberta's latest support for the project as misguided.
"The government needs to ditch the prehistoric energy positions and start getting Alberta back on track by investing in technologies and energies of the future, not the past," said Greenpeace campaigner Mike Hudema in a statement.
Commercial support for Keystone XL has also still not eased all the concerns analysts have about the project, with Scotiabank analyst Robert Hope saying in a note that he still isn't factoring in the pipeline into his assessment of TransCanada.
"Given the uncertainties related to the regulatory process and cost, we do not include the project in our model or valuation."
Much of that uncertainty resides in Nebraska, where the state approved an alternative to TransCanada preferred route in November, shifting the path away from sensitive ecological areas.
TransCanada (TSX:TRP) said it's working with landowners to obtain the necessary agreements for the approved route, but the company also faces legal challenges regarding how the pipeline was approved.
The company said construction preparation has started and will increase as the permitting process advances throughout this year, with primary construction now expected to begin in 2019 rather than mid 2018.
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