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Indigenous group to invest in Keystone XL as Biden set to determine pipeline fate

Source: S&P Global, November 17, 2020

National Law Energy would buy stake of up to $764 million in KXL

Biden opposed project as Vice President

TC Energy seeks similar deals with Native Americans in US

Houston — A First Nations group in Canada will invest up to $764 million in the controversial Keystone XL Pipeline as TC Energy continues its effort to win over a Joe Biden administration that has pledged to reject the project.

The decade-in-the-making crude pipeline was rejected under President Barack Obama and then-Vice President Joe Biden before being resuscitated by President Donald Trump. Now, President-elect Biden has said he would deny the project, but TC Energy is continuing to build a case with more Indigenous peoples’ support and promises of 13,000 union jobs.

The latest deal announced Nov. 17 involves the Indigenous peoples-owned Natural Law Energy (NLE) agreeing to acquire an investment stake of up to $764 million in the pipeline project. Importantly, the deal is contingent on NLE securing the necessary financing, and the first phase of the transaction wouldn’t close until the third quarter of 2021.

“This partnership will facilitate important input and guidance from NLE on the project as we make this the most sustainable and safest pipeline ever developed,” said Keystone XL President Richard Prior in a statement.

TC Energy also highlighted its interest in developing similar deals with Native American groups in the US.

Ethan Bellamy, an energy analyst with East Daley Capital, called the NLE deal a savvy maneuver by TC Energy, especially as Native American tribes play a bigger role in fighting new pipeline construction. Bellamy previously said Keystone XL would be dead-on-arrival under a Biden administration. And, while the odds are still against the project, building a broad coalition of support is the only viable path forward, he said.

“TC Energy is making the best available case to President [elect] Biden that he should allow the project to move forward,” Bellamy said. “The weight of the evidence argues that Biden won’t allow a new hydrocarbon pipe across the Canadian border, but this will make a project veto more costly politically given the broader consortium of project backers.”

Long time coming

The decade-long fight to expand the heavy oil corridor from the Alberta oil sands to the US Gulf Coast refining complex is still facing regulatory and legal hurdles in the US. TC Energy CEO Russ Girling, who is retiring at the end of the year, has continued to reiterate the need for Keystone XL and made the case for the long-term fundamentals.

The simple argument is that USGC refiners will still need heavy oil grades for decades to come and that the only options outside of Canada mean relying on Venezuela, which is seeing a collapse of its economy and oil sector, and the Middle East.

The $8 billion pipeline project would move up to 830,000 b/d of heavy Canadian crude ultimately to Texas through the entire Keystone system. The 1,200-mile XL pipeline from Alberta to Nebraska would connect to the existing Keystone system.

After being brought back to life under Trump, TC Energy hoped to build as much of the Keystone XL Pipeline as it could in 2020 before the elections, but court rulings again put it on hold. And Biden could permanently yank the necessary presidential permit after taking office in January.

TC Energy made the surprising announcement to quickly proceed with the project in late March, and in spite of the coronavirus pandemic, after it secured $1.1 billion in taxpayer support from the conservative Alberta government — as well as $4.2 billion in potential government loans. Construction already is completed on the Canadian side of the border, as well as preliminary work in Montana near the border.

TC Energy had delayed its planned completion date to 2023, but is pledging to stick with that timeline because it factors in legal delays.

Other oil sands pipeline projects — the Enbridge Line 3 replacement and the Trans Mountain expansion — are moving forward more quickly and could offset the demand for Keystone XL, Bellamy and other analysts have said.