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How Do I Live (Without You)? - TC Energy Refocusing Growth Plans After Keystone XL Setback

U.S. presidential transitions often bring policy changes, but few have been as dramatic and swift as the shift in energy policy that came with President Biden’s inauguration in January. Among his first acts after being sworn in was the signing of an executive order that revoked the Presidential Permit for TC Energy’s long-planned Keystone XL crude oil pipeline. Among other impacts, the move put on ice more than one-third of the Canadian midstream giant’s C$37 billion capital spending program for the 2021-24 period and unraveled TC Energy’s plan to balance its natural-gas-weighted pipeline portfolio with more crude oil pipes. So, what’s next for the midstreamer now that KXL is a no-go? In today’s blog, we’ll discuss highlights from our new Spotlight report on TC Energy which lays out how the company arrived at this juncture and where it goes from here.

Spotlight is a joint venture of RBN Energy and East Daley Capital. With the support of Oil & Gas Financial Analytics, Spotlight reports provide “deep dives” into the fundamentals that shape the outlook for midstream energy companies and are included as part of our Drill Down report series, which is available to RBN Backstage Pass members. Spotlight should not be viewed as investment advice.

Calgary, AB-based TC Energy (TSX, NYSE: TRP) is one of the largest North American midstream firms, with a market cap of $45 billion and a substantial asset base in Canada, the U.S., and Mexico. Back in 2008 the company — then known as TransCanada Pipelines — and then-partner ConocoPhillips first proposed the 830-Mb/d Keystone XL (KXL) as an expansion of the 591-Mb/d Keystone Pipeline, which was then under construction. The original Keystone Pipeline runs from Hardesty, AB, to Steele City, NE, and then bifurcates, with pipes running to hubs in Patoka, IL, and Cushing, OK.

KXL was originally planned to come online in 2013, a couple years after the original Keystone Pipeline, to carry growing Western Canadian and oil sands production to U.S. refineries. It would have taken a more direct route from Hardisty to Steele City. But the project created a storm of environmental opposition, which led President Obama to reject a cross-border Presidential Permit and veto a congressional bill authorizing construction in 2015. President Trump heralded his new oil-friendly approach by approving the permit in January 2017. After garnering the support of Canadian First Nations, the Alberta government, and U.S. construction unions, TC Energy announced a final investment decision (FID) in March 2020 and commenced construction, only to have it abruptly halted again this year, on January 20.

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