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Alberta Premier Jason Kenney delivers a statement on the construction of the long-delayed Keystone XL crude oil pipeline project, in Calgary, on March 31, 2020.

TODD KOROL/Reuters

The Alberta government is standing by its investment in the controversial Keystone XL oil pipeline to the United States, despite a U.S. court ruling against the project on Wednesday and continuing legal challenges to the pipeline’s presidential permit.

Late last month, Alberta agreed to invest US$1.1-billion in the US$11.5-billion TC Energy Corp. pipeline, which will transport oil from the province to Nebraska, from where it will then be sent to refineries on the U.S. Gulf Coast.

The province plans to sell its equity stake back to the company after commercial operations begin. Alberta will also guarantee US$4.2-billion of debt related to the 1,947-kilometre pipeline.

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Calgary-based TC Energy said the cash injection would kickstart work on the project more than a decade after the company first applied to regulators in Canada and the United States to build it.

But on Wednesday, a Montana judge ruled against the U.S. Army Corps of Engineers’ use of a national permit that allows new energy pipelines throughout the country to cross water bodies.

The case centred on a complaint from the Northern Plains Resource Council, an activist group in Montana, and other groups that challenged the Army Corps’ reissuance of a nationwide permit in 2017. Such permits can streamline the approval process for some projects, although the Army Corps can also issue permits case by case.

Nationwide Permit 12, which governs projects such as pipelines and utility lines, must be reissued every five years or left to expire.

Montana Chief District Justice Brian Morris ruled that the Army Corps violated federal law by failing to adequately consult on risks to endangered species and habitat, and it must comply before it can apply the nationwide permit to any project.

Kavi Bal, press secretary to Alberta Energy Minister Sonya Savage, said Thursday Keystone XL has been the target of a significant amount of activist opposition in the past, and the latest challenges are not surprising.

“We cannot surrender development to those who seek to kill projects with endless court challenges,” Mr. Bal said. “This additional consultation and review can take place while TC Energy proceeds with construction on the many other segments of the project.”

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The decision doesn’t scuttle current work on the pipeline across the Canada-U.S. border. However, it raises questions about securing permission for water crossings along the rest of the route, said Jared Margolis, senior lawyer with the Center for Biological Diversity, one of the plaintiffs.

TC Energy spokesperson Terry Cunha said the company remains committed to the project, although he called the judge’s decision “disappointing" and said it could have implications far beyond Keystone.

The ruling affects various utility and infrastructure projects, he said, including natural gas, gas liquids, television cable, electrical transmission, telephone and internet, and hampers the ability to build or maintain projects that cross wetlands or water bodies across the U.S.

As for the continuing court action, Alberta Premier Jason Kenney said Wednesday he has been assured the second presidential permit “was completely lawful and fully compliant” with the President’s power to permit a pipeline project. The legal risk posed by the challenge to that permit is “very low,” he added.

Mr. Kenney has estimated the pipeline will bring a net return to the provincial treasury of $30-billion through royalties and higher oil prices over two decades. The government will take on debt to fund its investment.

Keystone XL will ship 830,000 barrels of crude a day to Steele City, Neb., from Hardisty, Alta., giving Alberta oil companies a long-sought new route to Gulf Coast refineries.

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With files from Reuters

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