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Keystone XL Pipeline Faces Uncertain Future



A federal decision blocking the Trump administration of the Keystone XL pipeline further offsets the future of a project that has faced a decade of delays due to the feverish opposition of environmentalists, landowners and groups of Native Americans.

U.S. District Judge Brian M. Morris delivered President Trump's permission for 2017 for pipeline expansion by Thursday evening

TransCanada Corp
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TRP -2.09%

had not considered all impacts as required by federal law and that construction could not continue until an additional environmental review was completed.

The decision means that the expansion of the oil pipeline to transport oil from Alberta to Nebraska is certain to have to face at least some additional delays, as the sentence is appealed to a higher court, or the Government officials complete the extra analysis.

A TransCanada spokesperson said the company is reviewing Thursday's ruling and reiterated the company's support for the project.

"We remain committed to building this important energy infrastructure project," said the spokesperson.

The US State Department, which issued the presidential permit and the other accused in the case, did not respond to a request for comment.

Keystone XL has already faced numerous legal and political obstacles, and has become a draw for environmentalists who want to keep fossil fuels in the ground. Mr. Trump restored the pipeline after he was blocked by former President Obama, but the project has continued to meet the challenges.

TransCanada said at the beginning of this year that has sufficient support from customers to carry out the project, now expected to cost about $ 8 billion and that job could start the year next one. But it still needs to make a final decision on completing the construction.

Chris Cox, a Toronto-based energy analyst with Raymond James Ltd., said the new ruling could delay construction until 2020 and perhaps turn the pipeline into a problem in the coming US presidential election, increasing ;uncertainty.

"TransCanada is willing to bet $ 8 billion to get another approval from Trump?" He said.

If completed as planned, Keystone XL would bring up to 830,000 barrels of oil a day, mainly from Canada's oil sands, over 1

,000 miles to Steele City, Neb., Where it would connect to existing oil pipelines to Gulf Coast refineries. The proposed route would cross Montana, South Dakota and Nebraska.

The new ruling of Judge Morris, who was nominated by Obama, requires the federal government to update a previous 2014 environmental review of Keystone XL to weigh several additional factors. They include the impact of lower oil prices on project profitability, related greenhouse gas emissions and the modeling of potential oil spills that could result.

The State Department was already drafting an additional environmental review of the potential of the impact pipeline in Nebraska, but this analysis is unlikely to be sufficient, said Matthew Taylor, an analyst for the energy investment bank Tudor Pickering Holt & Co.

If a second additional review is needed, it is unlikely that TransCanada will go ahead with Keystone XL until the end of 2019, he said, questioning the future of the project.

"At what point incremental work is interrupted?" Taylor said.

Zachary Rogers, an energy consulting analyst Wood Mackenzie predicted that the project will continue to move forward, but said delays were a problem for Canadian oil sands producers who struggled to shift their crude onto the market. "While it's definitely an important stop in terms of timing, this is unlikely to be the crux of Keystone XL," he said.

Canadian pipelines have had a series of jokes last year. TransCanada canceled its Energy East project last year after the Canadian government announced it would broaden the scope of an environmental review of the pipeline.

In May,

Kinder Morgan
Inc.

saved on its planned expansion of the Trans Mountain pipeline between the provinces of Alberta and British Columbia, in the face of vocal opposition and several delays. The Canadian government bought the pipeline for 4.5 billion Canadian dollars (3.41 billion dollars) to ensure the construction, only to see an appeal court declare in August that the project had been approved incorrectly and must be re-examined, delaying construction indefinitely.

the construction hit Canadian oil producers, who are having trouble bringing their oil to refiners in the United States. Select Canadian Western crude was traded at a sharp discount for West Texas crude in the United States, largely due to the inability of producers to get their oil to market.

The oil price cut hit the $ 51 record last month, although it has since retreated since crude prices have declined. Canadian heavy crude was trading at $ 43 a barrel below US benchmark prices on Friday, according to Tudor Pickering Holt.

Write to Rebecca Elliott to rebecca.elliott@wsj.com, Vipal Monga to vipal.monga@wsj.com and Miguel Bustillo to miguel.bustillo@wsj.com


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