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TD Bank (TD) To Start Selling Shares Of Keystone XL Pipeline After Obama Speech Hints The Project May Not Be Approved.

TD Bank (NYSE:TD) said Friday it will begin selling its $1.6 billion worth of shares in the massive but potentially still-born Keystone XL crude oil pipeline project, citing President Obama's public suggestion this week that Washington may deny the venture the needed permits.

Earlier this week Obama, speaking at Georgetown University, said that if his administration determines that proposed pipeline, which is owned by TransCanada Corp. (TSE:TRP), poses unacceptable environmental risks, the project will not obtain needed permits.

"Citing President Obama's recent statement about potentially denying the permit for TransCanada's Keystone XL pipeline and due to increasing controversies and economic difficulties for Alberta's oil sands, TD will begin selling its shares in Keystone XL and other oil sands related ventures," the bank said Friday in a news release. "TD will gradually sell its $1.6 billion stake in Keystone XL as the first step toward transitioning away from investment in oil sands extraction entirely."

The proposed pipeline aims to ship oil sands bitumen from Canada to the northern U.S. and from there to refineries on the U.S. Gulf Coast. Unlike crude oil, oil sands is extremely heavy petroleum that is extracted with excavators, not drilling rigs. The greasy mud is then blended with lighter petroleum so that, essentially, it becomes crude oil that can then flow through a pipeline.

Alberta oil sands are plagued by a shortage of workers and rising labor costs as well as a discount for the price of Canadian heavy crude as U.S. oil output exceeds expectations, TD said. Earlier this year, Total SA, Europe's third largest oil company, took a $1.65 billion loss by abandoning a joint venture with Suncor Energy Inc. to increase oil sands processing capacity in Fort McMurray, Alberta. Suncor later canceled the project.

"Keystone would help alleviate the lack of pipeline infrastructure but only temporarily," David Bouckhout, senior commodity strategist at TD Securities, said in a statement. "Growth of supply on both sides of the border will outpace what Keystone's capacity will provide in likely two or three years."

Given the uncertainty of the Keystone XL project in the face of increasingly robust environmental protest in the US and Canada, the political viability of additional mega-pipelines in 2015 and beyond is far from assured, the bank said.
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Publication:International Business Times - US ed.
Date:Jun 28, 2013
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