The Calgary-based pipeline giant said Friday it has obtained all three approvals required from the Army Corps of Engineers, and the way is now clear to begin construction on the US$2.3-billion pipeline between Cushing, Okla., and the Gulf Coast.
That should put the pipeline on track to start up in mid- to late 2013, as expected, CEO Russ Girling told a conference call with analysts and reporters.
"U.S. crude oil production has been growing significantly in states such as Oklahoma, Texas, North Dakota and Montana and producers do not have access to enough pipeline capacity today to move that production to the large refining market on the U.S. Gulf Coast," said Girling.
"The Gulf Coast project will address that constraint and at the same time allow Gulf Coast refiners access to lower cost domestic production and avoid paying premium to foreign oil producers."
He added there should be about 4,000 jobs created during construction, plus the spinoff employment from companies that will provide pipe and other materials to TransCanada.
A supply glut at Cushing has dampened U.S. oil prices, which has hurt the bottom lines of North American producers. TransCanada's proposal — along with rivals' similar projects — aims to lessen that discount by connecting Cushing crude to the lucrative Gulf Coast refining market.
The Gulf Coast pipeline was initially part of TransCanada's $7.6-billion Keystone XL proposal, which would have sent Alberta crude to the Gulf via six U.S. states.
The U.S. State Department denied a permit for that project in its entirety in January. It said it rejected the pipeline because of Republican manoeuvring to speed up the process, not based on the merits of the project itself. The administration said it needed more time to review a new route through Nebraska to address ecological concerns in that state.
After the decision, TransCanada opted to go ahead with the southern part of Keystone XL first, since it doesn't cross an international border, and therefore doesn't need a federal permit to go ahead.
In May, TransCanada submitted a new application with the revised Nebraska route to the State Department for the northern part of the pipeline, which would run from the Canada-U.S. border in Montana to Steele City, Neb. Approval for the Canadian portion has been in-hand for years.
TransCanada expects the U.S. government to approve the northern pipeline, which has a pricetag of US$5.3 billion, in early 2013, with an in-service date of late 2014 or early 2015.
Critics of Keystone XL argue the project would increase U.S. dependence on "dirty" oilsands crude and cause harm to the American heartland in the event of a spill.
Supporters, however, say the project will offer a big boost to the U.S. economy and reduce the amount of crude the United States has to import from unfriendly regimes.
TransCanada executives also said Friday that in addition to Keystone XL and the Gulf project, the company is looking at other pipeline proposals to expand North American producers' market reach.
It's "looking pretty hard" at potentially turning part of its gas mainline from Alberta to central and eastern Canada to oil service.
Depending on how eager customers are to ship Western Canadian crude eastward, the pipeline could carry between 400,000 and 900,000 barrels of crude a day.
"I would say at this point we're getting a lot of inbound interest from potential shippers on the project, but we have a fair bit of work to do to lock all of that down," said Pourbaix.
TransCanada is also looking at building regional oil pipelines within Alberta — an area in which rival Enbridge Inc. (TSX:ENB) is currently dominant.
"We don't have anything to announce now, but we're working hard and we think we're going to have some good results down the road."
Also Friday, TransCanada said its profits dropped nearly 23 per cent during the second quarter as the company faced lower natural gas prices.
Net income attributable to common shares was $272 million, or 39 cents per share, compared to $353 million, or 50 cents per share, during the same period a year earlier.
Comparable earnings dropped to $300 million, or 43 cents per share, from $355 million, or 51 cents per share.
Analysts polled by Thomson Reuters were on average expecting earnings of 48 cents per share.
Revenue was more-or-less flat at $1.8 billion.
TransCanada shares closed up five cents to $44.85 on the Toronto Stock Exchange.Suggest a correction