After 18 years of heartbreak and misery, TC Energy is dumping its foray into oil pipelines.
TC Energy announced on July 27 it is spinning off a new liquids pipelines company from its natural gas pipelines and power generation business. The new, unnamed company will operate two shorter oil and condensate pipelines in northern Alberta. But those are chicken feed. This is all about the half-continent-spanning Keystone System/Marketlink which runs 4,324 kilometres from Hardisty, Alberta, to the U.S. Gulf Coast.
And it’s also about the projects that weren’t built—the Keystone XL expansion and the Energy East pipeline, from Hardisty to St. John, New Brunswick. Each resulted in charges exceeding a billion dollars.
TransCanada PipeLines, as it used to be known for seven decades, had been a gas pipeline system. Its mainline was one of the foundational projects of our country. But by the early 21st century, increasing natural gas production in the northeast United States due to the shale revolution meant the mainline was now operating around half capacity. What to do?
TransCanada decided it could convert one of its six mainline pipes from natural gas to oil service for at least part of the mainline. From near Winnipeg it would head straight south into centre of the United States, eventually tying into the crucial hub at Cushing, Oklahoma (and later to the Gulf Coast).
But the mainline was still running dramatically under capacity. So TransCanada decided to convert the largest pipe in the mainline system, a 42-inch line, to oil service. They would extend it through Quebec to a port on the south shore of the St. Lawrence River and then through New Brunswick to the Irving Oil Refinery at Saint John, and its tidewater port. This, too, would have been a major nation-building project, providing an export outlet for up to 1.1 million barrels of oil per day oil from Alberta, Saskatchewan, and Manitoba, to the Atlantic basin. It would also displace most foreign, imported oil with Western Canadian oil.
Despite two-thirds of the pipe being already in the ground, it failed spectacularly due to opposition from governments of Quebec and Canada. The federal government’s movement of the environmental assessment goalposts ultimately killed the project for TransCanada.
But it was the Keystone XL project, by far, that was TransCanada’s worst setback imaginable. First proposed in 2008, KXL was stalled by President Obama until he eventually killed it in 2015, revived by President Trump in 2017 as one of his first acts, only to be mortally wounded in 2020 by a Montana judge then given a coup de grace by President Biden in 2021 within minutes of being sworn in.
While Obama slow-walked it for seven years before finally saying no, the pipes sat in fields across Saskatchewan, Montana, South Dakota, and Nebraska. They sat so long they became essentially worthless junk. Would you trust pipe that sat in the open for the better part of a decade to not be corroded, then pressure it up and hope it doesn’t leak like a sieve?
If Energy East had been built, if Keystone XL hadn’t been such a dragged out, painful experience, Canadians as a whole would be much better off. But only a fool would try to build a pipeline in this country now.
TC Energy may say this is about creating “shareholder value by unlocking incremental growth and enhancing efficiencies.” But it’s not hard to figure out the real reason.