TransCanada Corp. gave its strongest signal yet that it has enough demand from producers to fill the long-delayed Keystone XL pipeline with oil. Now the ball is in Nebraska's court.
While the company has long said it expected sufficient support from oil producers, TransCanada completed an open season for them to bid for space on the line last month, giving it hard data on demand.
Then, on a conference call to discuss third-quarter earnings on Thursday, Royal Bank of Canada analyst Robert Kwan asked, "Is it fair to say, based on what you're seeing in terms of the submissions, that you pretty much have the volumes that you need but that obviously there are some conditions and other things that you need to work through?"
"Your comment is accurate," replied Paul Miller, head of TransCanada's liquids pipeline business, who added that the company is still evaluating issues raised by potential shippers. "We're quite encouraged by the results we have seen."
With the question of producer support mostly settled, the focus turns to a decision from regulators in Nebraska later this month on whether the pipeline can proceed. While any ruling there will almost certainly be challenged in court, a go-ahead would give TransCanada unfettered authority to begin laying pipe for the first time in its almost decade-long push to build the pipeline, which would bring more crude from Canada's oil sands to U.S. Gulf Coast refineries.
Last month, the company canceled its proposed Energy East pipeline, which would have carried about 1.1 million barrels of oil a day from Alberta and Saskatchewan to refineries and a marine-shipping terminal in eastern Canada. That move has been widely seen as increasing the commercial case for Keystone XL because western Canadian producers, denied access to those new markets, will be eager to ship more oil to the U.S.
TransCanada has pressed Alberta's government to buy capacity on Keystone XL, seeking the same support it had pledged for Energy East. The provincial government has its own oil to sell since it collects barrels of sandy bitumen in lieu of royalties from some producers under a royalty-in-kind program. Alberta had pledged to pay to ship 100,000 barrels a day on Energy East, a commitment projected to have a "minimum" government cost of C$4.6 billion over 20 years, or a higher figure depending on volumes.