* West-East pipeline could start up in 2017
* Keystone XL approval now seen in first half
* Comparable earnings fall 13 pct to C$318 mln
* Raises quarterly dividend by 5 percent
By Jeffrey Jones
CALGARY, Alberta, Feb 12 (Reuters) - TransCanada Corp's plan to ship Alberta oil to Eastern Canada through a converted natural gas pipeline is quickly gaining traction, executives said on Tuesday, as the company's wait for a U.S. decision on its long-delayed Keystone XL project drags on.
TransCanada, which reported a 19 percent drop in fourth-quarter profit, expects to file an application by the end of this year for its mainline conversion project, which could allow up to one million barrels a day of oil sands-derived crude to flow to Quebec and the Atlantic provinces by 2017.
Last week, the premiers of Alberta and New Brunswick made an enthusiastic show of support for the made-in-Canada concept, partly as a way to avoid the cross-border regulatory delays that have engulfed the $5.3 billion Keystone XL project.
Chief Executive Russ Girling said TransCanada will hold an open season, or call for commercial support, for the as-yet unnamed West-East project shortly, and stressed he expects a "very favorable response" from oil producers and refiners.
"We have determined that the project is both technically and economically feasible and that we will be able to continue to meet the needs of our natural gas customers," Girling said in a conference call. "Discussions with potential shippers and other stakeholders are well under way to determine if it is a project that the market wants, and I would say to date those discussions have been very, very encouraging."
The project would involve converting one of the company's mainline gas pipelines to Quebec from Alberta to oil use, then building a new pipeline to the Maritimes; Saint John, New Brunswick, site of the 300,000 barrel a day Irving Oil Ltd refinery, has been discussed as a potential terminus.
From there, some crude could also be exported to refineries along the U.S. Eastern Seaboard.
Girling pointed out that Eastern Canadian refineries buy about 600,000 barrels a day of pricey imported oil. Meanwhile, land-locked Alberta crude, which currently has no pipeline access to Quebec, is being slapped with deep discounts due to limited export capacity and a glut of supply in its traditional U.S. Midwest market.
That discount is straining both oil producers' bottom lines and the Alberta government's revenues.
Rival Enbridge Inc is also planning to get Western Canadian crude to Montreal and points East by reversing the flow direction of a pipeline that runs to Sarnia, Ontario.
Alex Pourbaix, president of TransCanada's energy and oil pipelines division, said the regulatory process for the project would likely take 18 to 24 months, which would be more than two years shorter than the U.S. review of Keystone XL so far. Construction would take another two years.
Girling said he now expects U.S. regulatory approval for the contentious Keystone XL project in the first half of this year, representing a longer timeline than earlier expected.
The next step is for the U.S. State Department to issue a supplemental environmental impact statement, expected shortly.
Once that happens, it could be two to three more months before TransCanada finally gets a decision, executives said.
U.S. environmental groups opposed to the 830,000 barrel a day project have complained that the impacts of increasing Canadian oil sands development are not being factored into the equation more.
New Secretary of State John Kerry said last week he hopes his department can make a decision in the near future. He stressed the importance of the Canada-United States energy relationship.
Ottawa, Canada's energy industry and green groups will be listening to U.S. President Barack Obama's State of the Union speech closely later Tuesday for clues into the project's fate, though Girling said he would focus on the regulatory process.
"That's where we'll take our cue from as to what the next steps in the process are and how long they'll take," he said.
The oil pipelines are among C$12 billion of projects TransCanada aims to complete within the next three years.
In the fourth quarter, net income fell to C$306 million, or 43 Canadian cents a share, from year-earlier C$376 million, or 53 Canadian cents a share.
Excluding unusual items, profit fell 13 percent to C$318 million, or 45 Canadian cents per share, lagging an average estimate among analysts by 4 Canadian cents a share, according to Thomson Reuters I/B/E/S.
The company blamed the lower profit on reduced returns from its power business and from some natural gas pipelines.
However, it raised its quarterly dividend by 5 percent to 46 Canadian cents per share.
TransCanada shares fell 69 Canadian cents to C$47.56 on the Toronto Stock Exchange, representing a gain of about 15 percent in the past year.