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Calgary-based TransCanada said it has written off billions of dollars in losses in recent months, in the wake of the White House rejection of its Keystone XL pipeline, but said it hasn't given up on the project to ship crude oil from U.S. and Canadian producers down to Texas.
The energy company, which operates a large network of pipelines as well as clean energy infrastructure, reported losses of $2.5 billion in the last three months of 2015, including a $2.9 billion write-off related to the pipeline expansion project, rejected in November by U.S. President Barack Obama.
Grassroots communication plan on Energy East
At the same time, it admitted it was having trouble convincing some Canadians about the merits of its Energy East project, but said it would focus on a “grassroots” communications plan to get its message out.
Keystone XL — once described by former prime minister Stephen Harper as a “no-brainer” — was supposed to link Alberta oilsands producers to refineries on the gulf coast of Texas, giving Canadian oil companies access to new markets that would fuel expansion.
Although the rejection has now created some losses on TransCanada’s books, the company said that its customers still want to see the pipeline built in the future.
“But as a result of the denial, we are in a situation where we have to take the write down as well as look to recover those amounts that what we called an arbitrary denial has cost us,” TransCanada’s president and chief executive officer Russ Girling told a conference call on Thursday. “But make no mistake, the need for the project is unchanged and as long as our shippers remain interested in the project and committed to doing it, TransCanada will look for a way to make that project work, sometime in the future.”
Company officials also downplayed recent news that Canada’s pipeline regulator, the National Energy Board, was having trouble understanding its Energy East project submission, asking for clarification.
“This is more of a housekeeping kind of activity,” said TransCanada’s chief operating officer Alex Pourbaix. “The original application was over 30,000 pages. Since that time, we’ve made amendments and what the NEB, I think in essence, is asking us (to do) is to really kind of put those various documents together into one easily read document. I think it’s a reasonable request. It will take us a bit of time and a bit of effort to do it. But it’s just really pretty simple stuff.”
First Nations opposition and communication
The larger challenge for TransCanada is mounting opposition from First Nations and other communities along the proposed route of Energy East from Alberta to Atlantic Canada, including the opposition from all the mayors in the Greater Montreal region.
"We obviously have some work to do in the province," Pourbaix said. "I think the people of Quebec have some very legitimate concerns about the environmental impact, the economic impact of the project."
The company was criticized in 2014 after an embarrassing leak revealed it had considered a U.S.-style public relations strategy designed to attack its critics. But Pourbaix said it still believes that better communications are the key to getting communities to accept the project.
He explained that the company would focus on promoting local jobs announcements and other benefits at a grassroots level, directly with communities, to get its message across.
“I think a big part of this is communication,” Pourbaix said. “We have spent a lot of time communicating with stakeholders, with landowners. We’ve had many, many thousands of meetings. We’ve had 130 open houses. We’ve met with 7,000 landowners. I think the perspective really that we view is we just need to continue to get our message out. We need to do it at a grassroots level. (With) the kind of announcements you see, and the kind of engagement we’re doing, we’re very confident that over time. People in all the provinces are going to see the benefits of the project and how seriously we take our commitment to transport the commodity safely.”
Pourbaix’s comments came a few days after the NEB issued a safety order, requiring companies to correct deficiencies and “substandard” parts that the regulator had also identified in a TransCanada pipeline that ruptured in 2013.
The company said it had addressed problems that led to the 2013 failure and continues to aim for a goal of having no incidents.
TransCanada said it is still aiming to complete Energy East and bring it into service by the end of 2020, but added that it was also evaluating whether tougher requirements, introduced in January by the federal government, would delay its schedule. Company officials also told investors during a conference call that it was still pursuing efforts to cut its costs, even after significant layoffs announced in 2015.