Feb. 21 (Bloomberg) -- TransCanada Corp. is reviewing ways to avoid costly delays on the Keystone XL pipeline after a Nebraska judge ruled the project’s route illegal.
“This is a solvable problem and we are undeterred,” TransCanada Chief Executive Officer Russ Girling said yesterday on an earnings conference call. “We will work to minimize any potential impact on the project’s schedule.”
Nebraska’s attorney general filed a notice to appeal the court’s decision on the pipeline, which would supply U.S. Gulf Coast refineries with crude from Alberta’s oil sands. The state judge ruled this week that the governor didn’t have authority to approve a revised route, a decision that may delay a U.S. ruling on the project until after the November midterm elections.
Delays are pushing up costs for Keystone XL, which can be built in two years once it receives the necessary permits, Girling said. TransCanada won’t update its $5.4 billion estimate for the pipeline until a decision from President Barack Obama, who controls the fate of the northern portion of the pipeline because it crosses an international border.
“The saga will continue and this gives Obama an excuse to delay again the decision until late this year and after the November midterms,” John Stephenson, a portfolio manager at First Asset Investment Management Inc. in Toronto, said in an e-mail.
The pipeline became snarled in politics after the project turned into a lightning rod for oil-sands development, a focal point in the debate about climate change for environmentalists including billionaire pipeline opponent Tom Steyer.
TransCanada proposed Keystone XL in 2008 and scheduled the line’s startup for 2012. The company split the project to first build the southern leg that didn’t require a presidential permit after Obama rejected the line in 2012, citing concerns with its path through ecologically sensitive lands in Nebraska. The company is now seeking approval to build the 1,179-mile (1,897-kilometer) rerouted northern portion.
The U.S. State Department’s review of the pipeline shouldn’t be affected by the Nebraska ruling, Girling said.
The State Department released a Jan. 31 report finding Keystone XL wouldn’t dramatically increase carbon-dioxide emissions because the oil sands would be developed even without the pipeline. The report started a 90-day review of whether Keystone XL is in the U.S. national interest.
Judge Stephanie Stacy in Lincoln on Feb. 18 invalidated legislation that let Nebraska’s Republican Governor Dave Heineman approve the route and bypass the state Public Service Commission. TransCanada now needs commission approval, according to the ruling, a process that by law can take seven months.
The commission is a regulator of telecommunications carriers, natural gas utilities and railroads that consists of four Republicans and one Democrat who are elected to six-year terms. Anne Boyle, the lone Democrat on the panel, is the only member whose term expires this year and Boyle has announced she will not seek re-election.
The Nebraska Department of Environmental Quality in 2013 found that Keystone would have minimal environmental impact, and Stacy said her decision should not be “misconstrued as an indictment” of that work.
TransCanada is weighing how the attorney general’s appeal proceeds as it considers whether to apply with the commission, Girling said. The regulator could accelerate its review by considering the state’s existing environmental study, he said.
“A cautious path would be to apply at the PSC while you’re undergoing appeal,” said Christine Tezak, an analyst with ClearView Energy Partners, LLC, a financial research group in Washington, noting the regulator is supposed to require reports from other state agencies.
The Nebraska ruling may hinder TransCanada’s ability to secure access to land along the pipeline’s path through the state. The company has agreements with 75 percent of the landowners along the route in Nebraska and may now require approval from the commission to determine fair rates it can pay the remaining property owners who don’t voluntarily agree to provide access, Girling said.
Stacy’s ruling comes in a case pressed by three Nebraska property owners who sued to block the proposed path.
“To me it seems off that individual landowners now can essentially say no to a pipeline,” said Michael Formuziewich, a money manager at Leon Frazer & Associates Inc. in Toronto. “I can’t see it standing, but it’s definitely another delay in the Keystone process.”
TransCanada yesterday reported a 37 percent rise in fourth-quarter profit as output from nuclear and coal-fired power plants in Canada increased. Net income climbed to C$420 million ($379 million), or 59 cents a share, from C$306 million, or 43 cents, a year earlier, the company said.
Quarterly results were helped by the restart of electricity generating units at Sundance, Alberta’s largest coal power plant, and Bruce Power, the world’s biggest operating nuclear plant in Ontario.
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