DALLAS (Reuters Breakingviews) - The market will trump politics on the future of TransCanada’s Keystone XL pipeline. Nebraska regulators’ green light for the controversial project is a victory for U.S. President Donald Trump, but it doesn’t guarantee the conduit’s construction. Years-long delays have let rivals steal a march while low prices sap drillers’ interest in the Canadian oil sands.
Nebraska’s Public Service Commission gave the go-ahead Monday by a 3-2 vote in what had become a pet project for the president. The administration of his predecessor, Barack Obama, had rejected the company’s proposal in 2015 on environmental grounds. Four days after taking office in January, though, Trump fast-tracked federal approvals, and the U.S. State Department issued a permit two months later.
It has been nearly 10 years since TransCanada first proposed the project, though, and the landscape has dramatically changed in the meantime. The pipe starts in the oil sands of Alberta, Canada, home to some of the richest bitumen deposits in the world. But as oil prices have fallen, companies from Royal Dutch Shell to ConocoPhillips have abandoned projects there because of their high cost.
The years of delays have provided an opportunity to competitors. Enbridge has embarked on its biggest project ever to expand and replace pipes that overlap with Keystone, while Kinder Morgan is investing $7 billion in the Trans Mountain Expansion Project. Research outfits Thomas Pickering Holt and Wood Mackenzie say only two of these three pipelines will be needed to accommodate supply over the next several years. Last month a pipeline project owned by Plains All American, Marathon Petroleum and BP Oil Pipeline, which takes oil from Louisiana to Illinois, said it might reverse course to run south, adding to concerns about a potential glut of capacity.
TransCanada reacted cautiously to Monday’s announcement. The approval by Nebraska requires costly changes to the original plan, and the company said it needed to study the ruling before making a final decision. Moody’s Investors Service gave executives grounds for pause on Monday, warning that forging ahead with construction could threaten TransCanada’s risk profile. Keystone ultimately must find its footing on economic, not political, grounds.
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