(Corrects name in paragraph 11 to Adam Scott not Adam Smith)
By Nia Williams
CALGARY, Alberta, Nov 6 (Reuters) - TransCanada Corp said on Friday it will keep pressing to build the Keystone XL oil pipeline from Canada to the United States despite the Obama administration’s rejection, but skeptical investors suggested it focus on a controversial all-Canadian alternative.
TransCanada is also developing the Energy East pipeline, designed to move 1.1 million barrels per day of western crude to Canada’s East Coast, although it too faces opposition from environmentalists trying to halt industry expansion.
“Although (TransCanada has) been trying to keep the Keystone pipeline alive, really their attention is diverted onto other projects; there is more emphasis on Energy East and other elements,” said Julie Brough, vice president at investment managers Morgan Meighen & Associates, which owns TransCanada stock.
President Barack Obama said he rejected Keystone XL because it would not make a meaningful long-term contribution to the U.S. economy.
The rejection caps a rocky week for TransCanada, which on Monday requested that Washington suspend consideration of its Keystone bid and on Thursday scrapped plans for a second Energy East marine terminal.
U.S. rejection of Keystone gives TransCanada a “more focused argument” for needing Energy East, said FirstEnergy Capital analyst Steven Paget, as the company seeks to win over Canada’s two most populous provinces, Ontario and Quebec.
Keystone’s rejection boosts the case for Energy East “volumetrically,” said Wood Mackenzie analyst Skip York.
“It provides clarity to the industry about what options are going to be there and helps the Canadian government move forward on what their position is going to be.”
Without Keystone, oil producers may face a pipeline capacity crunch.
Energy East faces no lighter scrutiny however, and environmentalists are preparing for a fight.
“The victory with Keystone XL really energizes the already very substantial movement against (Energy East),” said Adam Scott, climate programme director for Environmental Defence Canada. “The arguments for rejecting Keystone XL apply to Energy East even more so - there’s more oil and the risk of tankers (transporting oil) on the east coast of Canada.”
Canada’s newly elected Liberal government reiterated it was prepared to support domestic pipelines like Energy East, but only if there was buy-in from local communities.
TransCanada Chief Executive Russ Girling said the company and its shippers “remain absolutely committed” to Keystone and that “misplaced symbolism was chosen over merit and science.”
Girling said one option is a new application for a U.S. presidential permit for a Canada-U.S. pipeline.
TransCanada shares, which sank on news of the rejection, closed down 4.3 percent at C$43.32 in Toronto.
“It’s not good for any company to lose a project that represents more than 10 percent of its current EBITDA (earnings before interest, taxes, depreciation and amortization) and that it has already invested C$2.8 billion into,” Paget said. “There will probably have to be a writedown.”
David Cockfield, portfolio manager at Northland Wealth Management, which owns TransCanada shares, said investors shouldn’t be surprised.
“If anybody thought it was somehow going to get approved, boy, I don’t know what planet they were on,” he said. (Reporting by Nia Williams in Calgary, Alastair Sharp and John Tilak in Toronto and Bengaluru newsroom; Writing by Rod Nickel in Winnipeg, Manitoba; Editing by James Dalgleish)