EDMONTON, ALTA. – The Keystone XL pipeline is moving ahead thanks to a $1.5 billion investment agreement from the province of Alberta.
Government officials announced they finalized an agreement with Calgary-based TC Energy Corporation to provide financial support to accelerate construction of the Keystone XL pipeline starting April 1. This investment will include $1.5 billion in equity investment in 2020 followed by a $6 billion loan guarantee in 2021. The project is expected to be completed and in service in 2023.
Officials stated the agreement came after months of negotiations, as well as thorough vetting by government officials and outside industry experts to ensure the success of this project, while minimizing risk to taxpayers.
The government is backstopping the project to allow TC Energy immediately start construction on the Alberta portion of the pipeline so it can be finished as fast as possible. The project will create over 1,400 direct and 5,400 indirect jobs in Alberta during construction and will generate an estimated $30 billion in tax and royalty revenues in the next 20 years.
“We cannot wait for the end of the pandemic and the global recession to act. There are steps we must make now to build our future focused on jobs, the economy, and pipelines,” said Premier Jason Kenney. “Today we are moving forward with a project that is essential to our future prosperity. This investment in Keystone XL is a bold move to re-take control of our province’s economic destiny and put it firmly back in the hands of the owners of our natural resources, the people of Alberta.”
Kenney said he believes it is a wise investment and that after construction is complete, the province will be able to sell its shares at profit.
The province explained that once completed, Keystone XL will provide North America with a stable, secure supply of crude oil, reducing reliance on supply from OPEC. The pipeline will carry at least 830,000 barrels per day of Alberta crude, significantly increasing the province’s takeaway capacity and helping to protect the value of its energy resources.
“Right now, Alberta’s oil export capacity is limited by the lack of pipelines,” read a statement from the province. “Without the ability to export more oil, there is no incentive for producers to invest in more production in Alberta. Completing Keystone XL will signal to the oil and gas industry, and to investors around the world, that they have a future in Alberta. Without more pipelines, the future of our oil and gas industry is capped; with today’s announcement, employers and investors should have the confidence to maintain existing projects and to spend new money on new projects.”
Construction will begin immediately in Alberta, at the Canada-US border, in Montana, South Dakota and Nebraska.
The Keystone XL Pipeline will deliver crude oil from western Canadian oil fields to Gulf Coast refineries in the U.S. The project will run from Hardisty, Alberta, to Steele City, Nebraska and will cover 1,947 kilometres.
Government is expected to present a related motion for debate and vote in early April.
The investment comes as oil prices are plummeting around the world due to reduced demand. Fewer planes, cars and boats are burning fuel as borders have closed and travel plans have been cancelled due to the COVID-19 pandemic. On top of reduced demand, Russia and Saudi Arabia are engaged in a price war that could last years.
This week the benchmark price for a barrel of North American oil dipped below US$20 on Monday morning for the first time in nearly 20 years.
Western Canada Selected, oil from Alberta’s oil sands, has also plummeted to US$3.82 a barrel, its lowest price on record.