The Keystone XL pipeline that would bring oil from Canada to the U.S., green-lighted by President Donald Trump in March 2017, is beginning to run into obstacles.
TransCanada Corp., the company that owns the Keystone Xl pipeline, is struggling to find enough consumers for the oil it plans to collect from the Canadian oil fields. According to a report from Fox Business, TransCanada wants to fill 90 percent of its customer load before it begins contruction on the pipeline.
The Keystone XL plan was formed in 2008 when oil prices had skyrocketed to more than $130 per barrel. The proposed project would take Canadian crude oil from Alberta, Canada, to Nebraska, where it would then connect with existing pipelines that extend to the Gulf Coast.
With oil prices stagnating around $45 due to a global supply glut, however, TransCanada is worried that demand for an expensive pipeline has declined. The company has already spent nearly $3 billion in steel pipe and lobbying, and sources within TransCanada are worried it may be years before they begin to see a return on their investment.
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TransCanada continues to profit in the energy sector with the success of its natural gas investments in Mexico. They remain flexible enough to absorb cost overruns, and are still committed to Keystone XL, sources within TransCanada say.
Some oil corporations are opting to sign on with rail companies to ship their Canadian oil rather than use the pipeline, raising further concern about a product that may struggle to turn a profit. With the global oil supply remaining high, demand for Canadian crude oil has fallen as companies find their oil elsewhere. That, combined with companies eschewing the pipeline for rail, has pushed the Keystone XL project further away from profitability.
"A lot of water has gone under the bridge over the last seven or eight years since we proposed that project with respect to where energy prices are today," said TransCanada Chief Executive Russ Girling in May 2017. "So it all sort of complicates the negotiation."
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Keystone XL was blocked by former U.S. President Barack Obama in 2015, but restarted by Trump in March of 2017. When Trump authorized the continuation of the project, he invited Girling to the White House.
"It's going to be an incredible pipeline, greatest technology known to man," Trump said after rolling back Obama regulations prohibiting construction.
The pipeline is expected to break ground in 2018 and finish as early as 2020. It still faces final approval from Nebraska, as well as continuing opposition from advocacy groups inspired by the Dakota Access Pipeline protests.