The Calgary-based pipeline company's efforts to connect oilsands crude to U.S. Gulf Coast refiners hit its latest snag on Wednesday when a county judge tossed out a 2012 Nebraska law that allowed Gov. Dave Heineman to approve the line's route through the state. The law could have forced landowners to allow the pipeline to cross their property.
"While we're clearly disappointed and disagree with the decision, we'll now analyze the judgment and determine what our next steps may be," TransCanada CEO Russ Girling told a conference call Thursday to discuss the company's fourth-quarter financial results, which included a bump in profits and dividend.
"But first let me say, this is a solvable problem and we are undeterred."
The court ruling came in the midst of a 90-day period in which the U.S. State Department is to hear from other government agencies on whether the $5.4-billion project is in the U.S. national interest. That process began last month with the release of a final environmental report which concluded that growth in oilsands development — and its accompanying rise in greenhouse gas emissions — does not hinge on a single pipeline.
"It is our view that the current 90-day National Interest Determination process that is now underway with the Department of State should not be impacted by this ruling and we will work to minimize any potential impact on the project's schedule," Girling said.
"That said, there's always potential for delays in the process. We would hope that doesn't occur, but that's yet to unfold here over the coming days."
TransCanada first applied to build the Alberta-to-Texas line five and a half years ago. Last month, it started pumping crude through the southern portion of the system between Oklahoma and the Texas coast, which did not require a federal permit to proceed.
U.S. President Barack Obama faces a tricky decision with the project, which has been staunchly opposed by environmental groups and some landowners, but supported by others who tout its economic and national security benefits.
Possible solutions to the Nebraska issue include that the state successfully appeals the decision or Nebraska's Public Service Commission approves the route.
Both of those options "would take a lot of time," said Phil Adams, an analyst with bond research firm Gimme Credit.
"The Obama Administration is unlikely to feel compelled to decide on the Presidential Permit for the project until the legal issue in Nebraska is cleared up, which could take the rest of this year," he said.
TransCanada needs two full construction seasons to build the pipeline.
Brian Ferguson, CEO of oilsands producer Cenovus Energy Inc. (TSX:CVE), says his company isn't relying on Keystone XL alone to get its crude to market. In a recent interview, he said his company has committed to ship crude on proposed pipelines to Canada's east and west coasts, in addition to the U.S. Gulf of Mexico.
Cenovus is also using rail to move its crude — a business Girling said TransCanada is "seriously" looking at.
Meanwhile, Ferguson says fighting for Keystone XL remains a "matter of principle."
"This should be matter of national pride. Some of the absolutely erroneous and outrageous misrepresentation of facts that have appeared from special interest groups — and a handful of celebrities — are really misleading the people and that really is the thing that is important about Keystone XL now," he said.
Girling said despite the frustrations, TransCanada will keep forging ahead with Keystone XL.
"The market demand for this pipeline hasn't gone away, in fact it's increasing," he said.
"As long as the demand stays there, and our customers want this pipeline built, TransCanada will be 100 per cent committed to getting it done."
Earlier Thursday, TransCanada reported higher fourth-quarter profits and a quarterly dividend hike of two cents per share to 48 cents.
Comparable earnings, which the company deems the best measure of its underlying performance, were $410 million, or 58 cents per share, up from $318 million, or 45 cents per share a year earlier.
Analysts had expected. on average. for TransCanada to earn 59 cents per share, according to estimates compiled by Thomson Reuters.
In the fourth quarter ended Dec. 31, TransCanada earned $420 million in net income, or 59 cents per share on $2.33 billion in revenue, up from a profit of $306 million or 43 cents per share on $2.09 billion in revenue a year ago.
Keystone XL is only one of the major projects for TransCanada, which has one of North America's largest networks of pipelines and investments in the power generation sector, including a stake in Bruce Power.
Desjardins Securities analyst Pierre Lacroix said the outlook for TransCanada "remains substantially unchanged."
"With $38 billion of ongoing long-term growth projects, including Keystone XL, Energy East as well as proposed B.C. natural gas pipeline expansion projects and contracted Alberta regional oilsands pipeline initiatives . . . most projects continue to progress in line with expectations," he said.
TransCanada shares (TSX:TRP) closed down about two per cent or $1.07 at $48.83 on the Toronto Stock Exchange.
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