Why Is TransCanada’s CEO So Confident?

Russ Girling boldly predicts that Keystone will get approved.

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The Motley Fool

A Reuters report on Tuesday quotes TransCanada Corp (TSX:TRP)(NYSE:TRP) CEO Russ Girling confidently predicting that Keystone XL will be approved. As he put it, “It is the next pipeline that is going to be built” in the United States, adding that “it’s the right thing to do.”

Why is he so confident? The project has become a political lightning rod, and President Obama’s (lack of) actions suggest that this is a decision he does not want to make at all. Opposition from environmentalists is still very passionate – this past week saw hundreds of anti-Keystone protesters arrested after strapping themselves to the White House fence.

But there has also been some good news for Keystone supporters. A report from the U.S. State Department issued in January largely downplayed environmental impacts of the pipeline, arguing that the oil sands would be developed either way. Another report later cleared the State Department of any conflicts of interest. The Wall Street Journal reported that President Obama will make his final decision on the pipeline by early summer (even if he doesn’t want to).

Not as critical?

With the growth of crude by rail, many are arguing that the Keystone pipeline isn’t as necessary as it once was. And that trend looks set to continue. Mr. Girling said that TransCanada is open to building railcar loading hubs, based on what his customers are asking for. As he put it, “If we need to bridge the gap between growing production and the time we bring pipelines online, we’ll definitely do that.”

Foolish bottom line

A previous article made the case that oil producers such as Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ), MEG Energy (TSX:MEG), and Blackpearl Resources (TSX:PXX) will actually benefit more from Keystone’s approval than TransCanada. So perhaps Mr. Girling himself should consider owning these companies’ shares, as should anyone else who thinks the pipeline will be approved. And even if the pipeline is rejected, the prospects for transporting oil still look brighter than they did a year ago.

But investing based on political predictions is still a dangerous game to play. No matter how confident Mr. Girling is.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds a position in the shares of MEG Energy and Blackpearl Resources.

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