CALGARY, Alberta (Reuters) – Shares in Keystone XL TC Energy oil pipeline owner fell Monday after US President-elect Joe Biden canceled a permit for the long-delayed project, a major blow to the Canadian energy sector and Prime Minister Justin Trudeau.
TC Energy opened more than 5% less on the Toronto Stock Exchange. Biden reportedly intends to cancel the $ 8 billion project as one of his first acts as president.
However, the stock quickly trimmed losses, dropping 3.6% to CAD $ 54.54 in Toronto, underlining that some of the impact has already been discounted by investors. The project suffered numerous setbacks, including Biden who repeatedly reported that he would cancel KXL’s permit if he was elected.
KXL is intended to transport 830,000 barrels per day of oil sands crude oil from from the Canadian province of Alberta to Nebraska, but has met with fierce opposition from US landowners, tribes and conservationists.
RBC Capital Markets analysts said investors will be watching closely to see if TC Energy abandons the project altogether or if it re-applies for authorization.
“We believe the market will see TC Energy move away from KXL as the best result for the stock, particularly because we believe the stock currently reflects little, if any, value for KXL, ”RBC analyst Robert Kwan wrote in a note to clients.
Biden’s refusal of KXL could be a setback to his relationship with Canadian Prime Minister Justin Trudeau, whose government has urged the president-elect not to halt construction. KXL was first proposed 12 years ago, when tar sands seemed to rapidly grow larger than pipeline export capacity.
Two other export pipeline projects, the Canadian government-owned Trans Mountain Expansion and Enbridge Inc’s Line 3 replacement, are however progressing, reducing the need for KXL.
U.S. Gulf refineries have increasingly turned to Canada over the past year, with production declining in Venezuela, another heavy oil producing nation.
Reporting by Nia Williams; Editing by Steve Orlofsky