(Recasts initial 11 paragraphs to include additional detail and executive and analyst comment; updates shares.)
By Julie Gordon and Scott Haggett
TORONTO/CALGARY, Feb 20 (Reuters) - TransCanada Corp said on Thursday that it will not back away from the controversial Keystone XL pipeline despite an unfavorable Nebraska court ruling and more than five years of political wrangling in Washington over the project.
Russ Girling, chief executive of Canada’s No.2 pipeline operator, said there is a clear need for the $5.4 billion project to move rising oil sands and shale oil production to Gulf Coast refineries.
“As long as demand stays there and our customers want this pipeline built TransCanada will be 100 percent committed to getting it done,” Girling said on a conference call. “That’s not to say that I’m not frustrated and disappointed by the continued delays but at some point in time the pipeline has got to get built ... TransCanada will stay in this thing until it gets completed.”
A Nebraska court on Wednesday threw another wrench into the company’s plans, which are awaiting a final presidential approval allowing construction to begin, when it ruled the governor did not have the right to approve Keystone XL’s route though the state.
The ruling, which is being appealed by Nebraska’s attorney general, caused jittery investors to knock down TransCanada’s share price by more than 2 percent. It closed down C$1.07 to C$48.83 on the Toronto Stock Exchange.
“I think the stock is purely down today on the Nebraska situation,” said Carl Kirst, an analyst at BMO Capital Markets. “I still believe that the odds ultimately favor it happening, but boy is it a slog getting there and this is just one more wrench in that process.”
Girling said he was confident the latest decision would not derail the approval process now underway at the U.S. State Department.
“This is a solvable problem and we are undeterred,” he said.
“We’ve dealt with many issues on Keystone XL in the past and we have many options to deal with this latest hurdle.”
The State Department is now conducting a 90-day National Interest Determination following the release of an environmental impact statement for Keystone XL, one of the final steps necessary before the Obama administration makes a decision on the project.
Despite Girling’s confidence in the approval timeline, there are concerns that the ruling by Nebraska’s District Court of Lancaster County will let the Obama administration further delay a final decision on the project.
“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,” Phil Adams, senior investment grade analyst at Gimme Credit, said in a research note.
Supporters say the pipeline, which would transport crude from Alberta’s oil sands to refineries on the U.S. Gulf Coast, would create thousands of jobs and cut U.S. fuel costs, while critics say it would harm the environment and hasten climate change by promoting expansion of Alberta’s oil sands.
U.S. President Barack Obama will have the final say on the 1,179-mile (1,898-km) line, with the project expected to come online two years after the final permit is issued. TransCanada said it has so far spent $2.2 billion on the line.
With Keystone XL potentially facing another indefinite delay, focus may now shift to the company’s other large development project, the $12 billion Energy East pipeline, which will take crude from Alberta and Saskatchewan to refineries in Eastern Canada and a deepwater export port at Saint John, New Brunswick.
TransCanada said it expects to apply for permits for Energy East by mid-2014, with first deliveries anticipated in 2018. The pipeline, the largest ever proposed for Canada, would ship 1.1 million barrels per day (bpd), about 30 percent more than Keystone XL.
“If we see Keystone punted to the next administration, which I don’t think any of us should think is outside the realm of possibility, we look at that as being a case where then Energy East could accelerate,” said David McColl, an analyst with Morningstar. “There’s a possibility for that to happen.”
While Keystone XL would transport oil to existing markets in the United States, Energy East would carry crude to the coast, opening access to valuable new international markets for Canadian oil. TransCanada is also developing smaller oil pipelines in Canada and numerous natural gas projects.
The Calgary-based company’s net income in the fourth quarter was C$420 million, or 59 Canadian cents per share, compared with C$306 million, or 43 Canadian cents per share, a year earlier.
Comparable earnings, which exclude one-time items, rose to C$410 million, or 58 Canadian cents per share, from C$318 million, or 45 Canadian cents per share.
Analysts on average expected net income of 59 Canadian cents per share, according to Thomson Reuters I/B/E/S.
TransCanada also increased its quarterly dividend by 4 percent to 48 Canadian cents. (Editing by Lisa Von Ahn, Jeffrey Hodgson, Alden Bentley, Paul Simao and Meredith Mazzilli)