The Calgary-based pipeline and utility giant (TSX:TRP) believes a bill to give the state more control over the pipeline route would be rife with legal and constitutional problems. But the company is nonetheless keeping a close eye on a special session that started in Nebraska's legislature on Tuesday.
The route that has been approved was the result of an "exhaustive" review process that took more than three years, chief executive officer Russ Girling told analysts. Girling made his remarks on a conference call to discuss the company's third-quarter financial results, which saw improvements both in earnings and revenue.
While TransCanada wouldn't need to refile its entire application for Keystone XL, a route change through Nebraska would have virtually the same effect on its schedule.
"If the route is arbitrarily moved to another location, we would suspect that we would have to restart that thorough environmental review process of that new route," said Girling.
"And given that this process has taken us approximately 38 months, there's no reason for us to suspect that a review of a new route would take any less time than a review of this route."
Nebraska is one of six U.S. states Keystone XL would traverse as it carries crude from the oilsands and U.S. oil fields to the Gulf Coast. Concerns in that state have centred around what effect a spill could have on the ecologically sensitive Ogallala aquifer, which supplies water to a huge swath of the Western United States.
TransCanada executives cautioned on the call they don't know the details of what legislation may emerge from Nebraska, or how likely it is to actually be implemented.
The company is still planning to break ground on Keystone XL in the new year, assuming the U.S. State Department hands it a long-awaited permit by its year-end target.
Asked about the fate of the pipeline, U.S. President Barack Obama said Tuesday he will play a role in the decision.
"They will be giving me a report over the next several months and my general attitude is: What is best for the American people?" Obama said in an interview with a Nebraska radio station.
"What is best for our economy both short-term and long-term? But also what is best for the health of the American people because we don't want, for example, aquifers that are adversely affected."
It's up to the State Department to decide on the US$7-billion pipeline, since it would cross the Canada-U.S. border. There has been speculation that decision may be delayed, but Girling said he's seen no evidence to that effect.
"There is no reason not to make a decision," said Girling.
A delay would mean a longer wait for Americans looking for construction jobs and refiners looking for new crude sources.
"All of those things are just not good news, so I think everybody is intent on trying to get to a decision as quickly as possible," he said.
UBS Investment Research analyst Chad Friess said in a note to clients he's similarly optimistic on the State Department decision — with one caveat.
"We believe the decision will be on time and favourable but may compel TransCanada to accept some small compromise to appease environmental interests," he said in a note to clients.
TransCanada expects lawsuits will arise should the State Department rule in favour of Keystone XL. But it doesn't expect those to cause delays, based on its own experience building the first phases of Keystone, which currently delivers crude to the U.S. Midwest and Oklahoma.
"Our intent is to start construction immediately, unless we are barred from doing that legally. But that wasn't our experience in our base Keystone project," said Girling.
Critics of Keystone XL say the project would increase U.S. dependence on "dirty" oilsands crude and harm agricultural land along its route.
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.
"The facts are that the contracts that U.S. refiners have with Venezuelans and Mexicans for crude oil are set to expire," said Girling.
"There will be a gap in supply that has to be filled with crude from some place. Keystone XL can fill that gap with Canadian and U.S. oil."
Girling reiterated Keystone XL will create thousands of jobs — an assertion that has been challenged by opponents.
"We're looking to build the largest infrastructure projects on the books in America, and we can't do that with a few hundred people, as some would suggest," said Girling
He said some 9,000 people worked on the first two phases of Keystone.
"We know how many skilled people that effort took, because we signed the cheques," said Girling, adding 13,000 more will be needed to build Keystone XL over the next two years.
"We expect to create another 7,000 direct manufacturing jobs from pipe manufactured in Arkansas, pipe motors made in Ohio, and transformers built in Pennsylvania. Workers from almost every state of the United States benefit from the project, and the ongoing development of the Canadian oilsands."
Also Tuesday, TransCanada said third-quarter earnings were up to $384 million, or 55 cents per share, up from $377 million, or 54 cents per share, in the same three months of 2010. Revenue increased to $2.39 billion from $2.13 billion.
TransCanada is best known as a major North American natural gas shipper with a vast network of pipelines criss-crossing the continent. It also has power generation assets in Canada and the United States.
TransCanada shares dropped 23 cents to $42.12 in afternoon trading on the Toronto Stock Exchange.