© Reuters. File photo: On February 1, 2021, a TC Energy pumping station was idle on the Keystone XL crude oil pipeline near Oyen, Alberta, Canada. REUTERS/Todd Korol
By Niah Williams
Calgary, Alberta (Reuters)-Canadian pipeline operator TC Energy (NYSE:) Corp may spend billions of dollars to implement its use of renewable energy to run its huge U.S. and Canadian oil and gas Pipeline network to reduce emissions.
Calgary-based TC Energy transports oil and gas through nearly 100,000 kilometers (62,140 miles) of pipelines. This is one of the largest networks in North America. The response to requests for information in April was better than expected, which made the company deeply Inspire. Wind power generation in the U.S. project.
“We just started with our liquid pipeline, which makes us very confident that we will be able to quickly switch to our pipeline business in the United States and Canada,” Corey Hessen, president of TC Energy’s power and storage, told Reuters.
TC decided to use wind and solar instead of natural gas to power the pipeline, which is similar to the small-scale plan of rival Enbridge (NYSE:) Inc. It will meet investors’ needs to improve environmental performance to a certain extent.
“This is a big prize and a very big opportunity,” Hessen said.
He said that the project is the best near-term opportunity for TC to play a role in the energy transition.
Energy companies around the world are working hard to reduce the greenhouse gas emissions they emit in the process of producing and transporting oil and natural gas. Canada’s oil and gas industry is the country’s largest emissions sector.
If Canada does not reduce emissions, the rising carbon prices in Canada may increase the cost of TC Energy. Canada has pledged to reduce emissions by 40-45% from 2005 levels by 2030, and will increase the carbon price from the current 40 Canadian dollars per ton to 170 Canadian dollars per ton by 2030. It also bills industrial carbon emitters based on output-based pricing.
According to the company’s website, in 2019, the TC oil and gas pipeline’s Type 1 and Type 2 emissions—that is, emissions generated by it or for its power supply—are close to 14 million tons.
TC said it is still quantifying how much carbon emissions will be saved by converting renewable energy into electricity pipelines.
According to its latest sustainability report, the company’s expenditure under the existing carbon pricing plan in 2019 was 69 million Canadian dollars (54.9 million US dollars), up from 62 million Canadian dollars in 2018. TC expects that most of its assets in Canada, the United States, and Mexico will eventually be subject to regulations designed to manage carbon emissions.
Kevin Birn, an analyst at IHS Markit, said: “It is in their interest to green the portfolio and start this strategy immediately.”
“The world will become more radical in climate policy, which means that carbon will become a cost.”
Francois Poirier, who became CEO in January https://www.reuters.com/article/us-tc-energy-moves/canadas-tc-energy-says-insider-poirier-to-take-over-as -ceo -idUSKCN26C1MU once stated that he hopes to use TC’s power and storage departments (including renewable energy, which he was responsible for overseeing) to develop the company and achieve diversification, while reducing emissions.
Hessen stated that his growing power and storage team’s priority is to ensure that renewable energy supplies power to TC’s pipeline networks in the United States and Canada.
Hessen said that when the company asked renewable energy developers to provide information about 620 megawatts of wind power to operate part of its Keystone pipeline, the company received more interest than expected. He added that the developer submitted a wind power response of 14 gigawatts (GW), which is more than 20 times the demand of TC.
He estimated that it would take 5 to 7 gigawatts to power the entire pipeline network in the United States and Canada. According to data from the U.S. Energy Information Administration, by comparison, the total installed wind power capacity in the United States is 118 GW.
BMO Capital Markets estimated in a report to clients that obtaining 620 MW of wind power would require approximately US$1 billion in capital investment, which means that the cost of converting TC’s entire US and Canadian network will reach billions of US dollars.
Hessen declined to discuss the potential costs of renewable energy investments, but stated that “TC Energy has a history of truly pursuing and successfully deploying large-scale capital for its infrastructure.”
Some shareholders stated that they would prefer TC to invest in new pipelines or return cash to investors instead of spending money to use renewable energy to power the pipeline.
Martin Cobb, senior vice president of Lorne Steinberg Wealth Management, who owns TC shares, said: “Is this as good as investment pipelines, asset acquisitions, or stock buybacks (capital use)? I suspect it might not.”
Due to increasing environmental opposition and government policies aimed at reducing dependence on fossil fuels, building new pipelines is challenging. After Washington withdrew its key license for the $9 billion Keystone XL (KXL) project earlier this year, TC is seeking $15 billion in compensation from the US government. The project had been postponed for more than a decade before TC was cancelled in June.
Tudor Pickering Holt analyst Matt Taylor said it is difficult to replace KXL’s expected revenue. TC once estimated that KXL will bring about 1.3 billion U.S. dollars in pre-tax income each year.
After the KXL legend, some investors welcomed TC’s increasing focus on other parts of its business.
Natural gas pipelines account for 75% of TC’s revenue and will continue to be its main source of revenue. By 2024, the company will spend most of its guaranteed capital plan in the sector.
CEO Poirier believes that the power and storage sector has growth potential, accounting for 5% of the company’s asset value, including a 48.4% stake in Canada’s largest nuclear power plant. TC will invest 2.6 billion Canadian dollars, or 13% of its guaranteed capital expenditure, to extend the life of Bruce Power’s nuclear power plant.
TC is also considering the development of two pump storage projects in Ontario and Alberta to generate new revenue. These projects involve pumping water between reservoirs at different altitudes to generate electricity. If they continue, these projects will be the first such projects built in Canada since the 1950s.
Kipp Horton, CEO of WindRiver Power Corp, who is TC’s partner in the 75 MW Canyon Creek project in Alberta, told Reuters that the two companies are expected to make a final investment decision this summer.
Liberty portfolio manager Brett Girard said: “This is an opportunity. With a new CEO, it can be said that this is the new TC Energy. They will still transport fossil fuels, but they are working to transition to a more environmentally friendly business.” International Investment management company, TC shareholder.
($1 = 1.2563 Canadian dollars)