Keystone XL: TransCanada getting ready to reapply, needs to consult shippers

TransCanada chief executive officer Russ Girling said the company is very, very pleased Keystone XL has another shot at being approved, but it's too early to speculate as to whether the pipeline will still be economically sound under the new terms the United States is looking to negotiate.

When the Keystone XL directive was signed by U.S. President Trump on Tuesday, he said, "We are going to renegotiate some of the terms. And if they like, we will see if we can get that pipeline built."

Since that statement, there's been lots of speculation about those new terms. Could it be profit-sharing? The use of U.S. steel? An up-front payment?

Could these new terms make the project uneconomic?

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Girling was asked that question at an investor conference in Whistler, B.C., Wednesday afternoon. He said it was premature to speculate, but outlined what he thinks are the benefits of the project — namely job creation, energy security and spending.

"Whenever you spend $8 billion, it creates a heck of a lot of benefit in and of itself," said Girling. "You think of doling out over a two-year construction period $8 billion in terms of employment and those types of things. Those are hardly things that people will think are marginal and need to be enhanced."

Girling said most of the materials for the pipeline have already been purchased and were manufactured in North America. That's important because Trump also signed an order Tuesday that required pipelines in the United States to be manufactured from U.S. steel.

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With Trump's order in hand, TransCanada is now consulting with oil companies that had committed to shipping on Keystone XL.  The economic environment has changed in the years since the pipeline was first proposed and there are now competing projects in the works, such as Kinder Morgan's Trans Mountain project that can carry oil to markets other than the United States.

However Girling thinks energy producers will want space on KXL, given that it ends at the U.S. Gulf Coast where there is a lot of capacity for the heavy oil coming out of the oilsands.

"I believe this still makes sense, we haven't engaged on direct conversations [with shippers] on that issue," said Girling. "If you want to sell heavy, the Gulf Coast is the place to sell heavy."