Energy Ink

Keystone decision wouldn’t affect TransCanada’s plans

January 18, 2012

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Look on the bright side, at least some aspect of the review of TransCanada Corp.’s proposed Keystone XL pipeline appears to be happening ahead of schedule.

Although it hasn’t been confirmed yet, (an announcement is expected at 3 p.m. Eastern time today) several news stories this morning are saying the U.S. State Department will reject Keystone XL. (Update: it did reject the pipeline.)

This isn’t unexpected. U.S. President Barack Obama had already indicated he wouldn’t be forced into approving a permit to build the controversial conduit just because the Republican Party was able to pass a payroll tax cut bill and include a rider in it that forced Obama to make a decision on Keystone XL by February.

But who wins and loses if Obama does reject Keystone today?

The president sort of wins. The decision would boost his environmental street cred during an election year and it allows him to stick with the gameplan, which is to punt the decision on Keystone XL until 2013 when he will be serving his second and final term as president and won’t have to worry about alienating voters.

The Republicans win as well. It would allow them to continue to demonize Obama as the anti-energy security and anti-jobs president. It would also keep Keystone XL alive and well as an election issue. (Which I believe was the GOP’s goal all along in passing the payroll tax cut bill).

As for TransCanada? Well, it wouldn’t be good news to have a major project rejected, and its stock price would take a hit. But my view is a rejection of Keystone XL by the State Department won’t change much for the Calgary-based pipeline firm. The big news regarding Keystone XL had already been made in November when the State Department announced it wouldn’t issue a decision on the pipeline until at least the first quarter of 2013.

With TransCanada having the ability to re-apply for a permit, and with it still working on a new route that avoids the Sand Hills region of Nebraska, the company can still aim for an approval of Keystone XL by 2013.

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Comments

  • Gord Olson

    It actually is a good thing for TransCanada. They have been using the freed up Capex(7B$) budget to build Cogens that are burning cheap Natural Gas and are making big contributions to their bottom line selling electricity. Hence you do not see TransCanada making a big thing out of it. If the line does not go ahead in the future they will just make sure every new line they build will be 30″ and use up all the valves and pipe they have on the ground now.

    • Darren Campbell

      Gord:

      Thanks for the comment, although I’m very late replying. “Good” is stretching, but the decision isn’t the deathknell the headlines would have had us believe.