Keystone XL pipeline hits another hitch as U.S. judge blocks construction

CALGARY—The Canadian proponent of the $10-billion Keystone XL crude pipeline says it remains committed to the project despite a Montana judge’s ruling that it must pass a further environmental review.

The company has received the judge’s ruling and is reviewing it, said TransCanada Corp. spokesman Terry Cunha in a brief email Nov. 9.

U.S. District Judge Brian Morris put the project on hold on Thursday, ruling that the potential impact had not been considered as required by federal law. Environmentalists and Native American groups had sued to stop it, citing property rights and potential oil spills.

The federal court order blocks a Trump administration permit for the construction of the pipeline. Morris was appointed by President Barack Obama.

TransCanada shares on the Toronto Stock Exchange fell by as much as 2.75 per cent in early trading on Friday.

“This is the world’s longest tug of war, with western Canadian oil prices as the rope,” said Zachary Rogers, a refining and oil markets research analyst at Wood Mackenzie.

“While definitely a major setback in terms of timing, this is unlikely to be the nail in the coffin for Keystone XL. Exact legal recourse options are unclear, but the most likely result is either an escalation through the courts or an additional State Department review and President Trump re-approving the line.”

A shortage of export pipeline space to carry away growing oil production in Alberta has been blamed for recent steep discounts in prices for Canadian oil as compared to New York-traded benchmark oil.

Analysts say as much as 110,000 barrels a day of crude oil is currently being left in the ground in Western Canada rather than being produced and sold at unprofitable prices.

Last January, TransCanada said it had secured shipping commitments totalling roughly 500,000 barrels a day on the line, including a deal with the Alberta government to ship 50,000 barrels a day of provincially owned crude.

Other Keystone XL shippers include major Calgary-based oilsands producers Canadian Natural Resources Ltd., Suncor Energy Inc. and Cenovus Energy Inc.

The 1,897-kilometre pipeline would carry as much as 830,000 barrels of crude per day from Hardisty, Alta., to Steel City, Neb., and on through a half dozen states to refineries on the Gulf Coast.

Becky Mitchell, chairwoman of the Northern Plains Resource Council, a plaintiff in the Montana legal action against Keystone XL, said her environmental organization is thrilled with the ruling.

The company and opponents of the project have been in a decade-long dispute that has spanned several presidencies and involved standoffs between protesters and law enforcement.

In 2008, the U.S. State Department issued a presidential permit for the pipeline and TransCanada filed paperwork to expand the project. After years of legal wrangling, Barack Obama rejected the permit in 2015.

The company responded by seeking $15 billion in damages. Trump signed executive actions to again advance construction of the project in 2017.

—With files from The Associated Press