November 19, 2014 / 4:28 PM / in 3 years

TransCanada sees crude-by-rail investment even if Keystone built

A TransCanada Keystone Pipeline pump station operates outside Steele City, Nebraska March 10, 2014. REUTERS/Lane Hickenbottom

VANCOUVER (Reuters) - TransCanada Corp is in talks to get into the crude-by-rail business and will probably do so even if its long-delayed Keystone XL pipeline gets its U.S. permits next year, its chief executive said on Wednesday.

While Canada’s No. 2 pipeline operator has not yet signed any definitive agreements, it is in active negotiations with producers and other shippers on opportunities, CEO Russ Girling said on a conference call.

“If I were to put a probability one it, I’d say there’s a better than 50-50 chance that we will be in that business in some form or fashion in the future,” he said.

Girling added that with Canadian and U.S. oil production rapidly expanding, TransCanada expects rail will be a larger part of the transportation mix going forward, “so it’s likely a business that we’re in long-term irrespective of Keystone.”

Earlier this year, TransCanada said it would consider a rail bridge option across the Canada-U.S. border if Keystone XL failed to gain U.S. approvals. Oil moved across the border by train could then be loaded on the pipeline.

On Tuesday, a bill to force approval of the pipeline project failed in the U.S. Senate. A State Department review is still underway.

On Wednesday, Canadian Ambassador Gary Doer told Reuters he still expects project to be approved at some point.

The scale of TransCanada’s investment in crude-by-rail will depend on if and when Keystone XL and other major pipeline projects are approved, Girling said, adding he is hopeful this will happen.

Indeed, the bulk of the company’s major growth through 2020 is pegged to five major oil and natural gas pipelines yet to be built, including Keystone XL and Energy East.

TransCanada shares closed up 2.68 percent at C$57.50 in Toronto.

Earlier in the day, TransCanada unveiled plans to double its dividend growth rate through 2017 as it brings about C$13 billion ($11.47 billion) worth of small and medium-size projects on line over the next five years.

TransCanada also addressed new calls from activist investor Sandell Asset Management Corp for an overhaul of its business, including a breakup of the pipeline and power segments.

Girling said the company looked at the proposals but decided it is better off diversified and should stay the course on its existing strategy.

(1 U.S. dollar = 1.1337 Canadian dollar)

With additional reporting by David Ljunggren in Ottawa and Nicole Mordant in Vancouver; Editing by Lisa Von Ahn, Leslie Adler, Jeffrey Hodgson and David Gregorio

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