TORONTO (Reuters) – TC Energy Corp on Tuesday said it would proceed with its $8 billion Keystone XL pipeline with financial backing from the oil-rich province of Alberta, pushing the long-delayed project forward amid a global oil market collapse.
Alberta’s investment shows how Canadian governments are stepping up financial support for the industry despite a crash in oil prices and climate-change concerns.
Alberta said it would invest $1.1 billion in Keystone XL and back TC Energy’s $4.2 billion credit facility. TC Energy shares gained 4.8%.
Ottawa has also pledged federal financial relief for the sector.
“There’s more risks associated with bringing these projects online and that means it’s harder to find capital that will provide backing for them,” said ARC Energy Research Institute Vice President Jackie Forrest.
Alberta, home of the world’s third-largest oil reserves, has struggled for years as congested pipelines weakened prices and forced the provincial government to curtail production.
Producers have cut spending to cope with the Saudi-Russia oil price war and the coronavirus outbreak.
Keystone XL, which would carry 830,000 barrels per day of crude from Alberta to the U.S. Midwest, has been delayed for more than a decade by opposition from landowners, environmental groups and tribes.
Alberta said pipeline construction could start this week. “We cannot wait for the end of the pandemic and the global recession to act,” Alberta Premier Jason Kenney said.
Asked if the project was still necessary, Kenney said oil prices will eventually return to normal and that the price war between Russia and Saudi Arabia showed the importance of “North American energy independence.”
Alberta’s support will cover construction costs through 2020, TC Energy said, with the balance funded through a $2.7 billion investment by the company.
Environmental groups decried the provincial backing for the project, which still faces legal challenges.
“This $1 billion gift to TC Energy from the Alberta government in the midst of a worldwide pandemic is an environmental disgrace,” said Jared Margolis, senior attorney at the Center for Biological Diversity.
TC Energy expects to buy the Alberta government’s stake once the project enters service in 2023.
Shares in Canadian producers rose, also helped by higher oil prices. Canadian Natural Resources gained 22.5% and Suncor Energy rose 18%.
($1 = 1.4116 Canadian dollars)
Reporting by Jeff Lewis in Toronto; additional reporting by Rod Nickel in Winnipeg and Arathy S Nair in Bengaluru; Editing by Denny Thomas, Steve Orlofsky and Dan Grebler