Order to stop Keystone XL construction shows urgent need to get Canadian oil to new markets, energy group says

A U.S. District Court judge in Montana put the $10 billion project on hold in a ruling issued late Thursday, saying the potential impact had not been considered as required by federal law.

CAPP says U.S. judge's granting of injunction against pipeline disappointing

A yard in Gascoyne, N.D., which has hundreds of kilometres of pipes stacked inside that are supposed to go into the Keystone XL pipeline. (Alex Panetta/Canadian Press)

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.

Alberta government reaction

That message was echoed by Alberta Energy Minister Marg McCuaig-Boyd on Friday. 

"This ruling by a foreign court underscores once again the urgent need for Canada to build pipelines within our own borders, including the Trans Mountain expansion," she said.

"Today's differential tells the story. We're giving our resources away cheap. Canada is losing over $80 million a day. We need market access."

McCuaig-Boyd said she spoke with TransCanada officials earlier in the day and that they remain "fully committed to the Keystone XL pipeline."

The Keystone XL pipeline would bring oil from Hardisty, Alta., to Steele City, Neb. (Natalie Holdway/CBC)

She hopes TransCanada, or "anyone who's able to," appeals the court ruling.

United Conservative Party Leader Jason Kenney said an appeal is critical and slammed the court's decision.

"The latest ruling on Keystone XL is a setback to be sure, but I fully expect that the decision will be appealed to a higher court that will actually follow the law. I'm also encouraged that TransCanada has indicated that they remain committed to the project," he said. 

Bottleneck

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.

'It's not surprising'

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.

Environmentalists celebrate

Environmentalists and Indigenous groups celebrated the court ruling as a win.

Dallas Goldtooth, who is part of the Indigenous Environmental Network, said he was flustered because the ruling was "huge news." 

"We keep killing it, and it keeps coming back from the dead," said Goldtooth, who is a Mdewakanton Dakota and Diñe man.

But because the judge's ruling can be appealed, Goldtooth said his activism against the project isn't finished.

"We're just going to keep on going ahead," he said on Thursday.

Greenpeace Canada climate campaigner Mike Hudema said the ruling is a significant setback for TransCanada's Keystone XL project.

"This should also be a huge warning sign to the Liberal government about the inevitable legal hurdles they will face if they continue to rush and curtail the Trans Mountain assessment process," he wrote in a statement. "We can't afford new fossil fuel infrastructure if we want to save the planet." 

Nebraska battle

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.

The company 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.

With files from The Canadian Press and Reuters