After Keystone XL rejection, TransCanada Corp looks to beef up U.S. Gulf Coast presence

With its ambitious Keystone XL project rejected by U.S. President Barack Obama, TransCanada Corp. is pursuing more sensible developments in the U.S. Gulf Coast to make inroads in the oil refinery complex.

TransCanada launches US$15B lawsuit against U.S. government for rejecting Keystone XL

TransCanada Corp. said Wednesday it intends to file challenging under the North American Free Trade Agreement (NAFTA) seeking US$15-billion in damages from the United States government over President Barack Obama’s denial of the Keystone XL pipeline

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The company’s US$600 million Houston Lateral pipeline and tank terminal is placed in the future on stream through the second quarter of the year, connecting the existing Keystone pipeline system to refineries in Houston, Paul Miller, president of liquids pipeline said in an interview.

“Today we probably move 300,000 (barrels each day) plus of crude oil from Canada towards the U.S Gulf Coast, and we represent about a third of this,” Miller said.

“As we have seen the connection in our system going to these extra markets within the U.S. Gulf Coast we would look to increase both our share as well as the absolute volume.”

To bolster the Houston Lateral’s link with Gulf Coast markets, TransCanada and Magellan Midstream Partners LP are creating a US$50 million pipeline to ship 200,000 bbd between TransCanada’s under-construction Houston terminal and Magellan’s East Houston terminal.

“It’s small from a dollar perspective, but it is hugely significant from a connectivity perspective, providing connectivity to both Houston and the Texas City refineries,” Miller said.

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The company is planning similar smaller projects through either acquisitions or greenfield developments round the Gulf Coast, Miller noted.

“Louisiana is yet another attractive marketplace for TransCanada, taking into consideration the existing footprint we’ve down to the U.S. Gulf Coast.”

The Houston Lateral project falls under the $14.5 billion price of projects that have secured regulatory approval and are set for completion by the end of the decade. But they will not be enough to fill the Keystone-sized hole in its project pipeline.

As such, the company is not quitting hope of moving ahead using the 1,897-kilometre Keystone project connecting Hardisty, Alta. to Steele City, Neb.

It’s hugely significant from the connectivity perspective

This month, TransCanada filed a case from the U.S. President’s decision to scrap the project, on the grounds he exceeded his constitutional power in rejecting the pipeline. The organization also initiated a US$15 billion claim underneath the United states Free Trade Agreement that the denial was “arbitrary and unjustified.”

Keystone XL was still among the company’s long-term “options,” company CEO Russ Girling told investors in a business conference in Whistler, B.C. on Thursday.

“It’s pretty clear we have been harmed within an arbitrary and discriminatory way,” Girling, noting that he wasn’t discouraged by the U.S.’s perfect record in defending NAFTA challenges.

“I don’t believe there’s anybody that will say this is not an egregious abuse of authority and now we weren’t treated fairly or equitably to whatever standards you select – cross-border pipelines, domestic pipelines, or imports using their company countries.”

Ben Pham, analyst at BMO Capital Markets, believes TransCanada will have a “credible case” in arguing it’s unfairly treated which the pipeline rejection was politically motivated and never assessed according to merit.

“Having asserted, the odds seem to be against TRP (no company continues to be successful having a NAFTA challenge so far with the U.S) and also the process could take years to solve (unless early settlement),” Pham said inside a note to clients.

With Keystone in legal limbo, the business’s long-term “transformative” plan relies upon the Alberta-to-New Brunswick Energy East. However the project has already been facing resistance, with mayors of the greater Montreal area the most recent to voice their opposition on Thursday.

Yhussain@nationalpost.com

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