4 Min Read
CALGARY, Alberta (Reuters) - TransCanada Corp, Canada's No. 2 pipeline company, said on Friday the long wait for U.S. government approval of its controversial Keystone XL project will further delay completion of the pipeline and push its cost above the company's $5.3 billion estimate.
TransCanada, which reported a 27 percent rise in first-quarter profit on Friday, is waiting for the Obama administration to issue a presidential permit for construction of the line, which is designed to carry 830,000 barrels a day of Canadian and U.S. crude oil to refineries on the Gulf of Mexico coast.
That permit, pending now for more than four years, may face further delays after the U.S. Environmental Protection Agency condemned the State Department's draft environmental review of the project earlier this week, saying it didn't properly address a host of issues ranging from increases in carbon emissions to the pipeline's social impact.
TransCanada, which had maintained that the line could be in service in late 2014 or early 2015, said on Friday the wrangling in Washington will delay its completion until the second half of 2015.
"Due to ongoing delays in the issuance of a presidential permit for Keystone XL, we now expect the pipeline to be in service in the second half of 2015 and, based on our pipeline construction experience, the $5.3 billion cost estimate will increase depending on the timing of the permit," the company said in a release.
Environmental groups have exerted considerable pressure on the White House to block the pipeline, saying it will lead to more greenhouse gas emissions, pollute land and water, and plow through the habitats of endangered species.
TransCanada said it has invested $1.8 billion so far in the project.
Despite the delay, the company said its customers still support the line and none of the contracted shippers have backed out of the project.
"Our shippers continue to support this pipeline. They have right from the beginning ... and I expect they will continue to support the pipeline" Russ Girling, TransCanada's chief executive, told reporters.
TransCanada has already started construction on Keystone XL's $2.6 billion southern leg, a 700,000 bpd project that will take crude from the Cushing, Oklahoma, storage hub as far as Houston. Work on the Cushing to Port Arthur, Texas, part of the line is 70 percent complete and is expected to open by year's end.
Construction of the 76-kilometer (47 mile) Port Arthur to Houston portion of the line begins later this year and will be in service by mid-2014.
While it awaits a decision from the Obama administration, the company is proposing a new line that could carry as much as 850,000 bpd from Alberta to Canada's Atlantic coast.
The company launched a process to gauge demand for the line earlier this month. That process runs until June 17 and TransCanada says the line could be in service by late 2017.
In reporting on its quarterly results, the company said net income attributable to common shares rose to C$446 million ($437 million), or 63 Canadian cents a share, from C$352 million, or 50 Canadian cents a share, a year earlier.
Comparable earnings, which exclude most one-time items, were C$370 million, or 52 Canadian cents a share.
Revenue rose 16 percent to C$2.25 billion.
TransCanada shares fell 63 Canadian cents to C$49.14 on the Toronto Stock Exchange on Friday.
Editing by Peter Galloway