TC Energy Corp (TRP) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TransCanada Corporation 2011 third quarter results conference call. I would now like to turn the meeting over to Mr. David Moneta, Vice President of Investor Relations. Please go ahead, Mr. Moneta

Thanks very much and good morning, everyone. I would like to welcome you to TransCanada's 2011 third quarter conference call. With me today are Russ Girling, President and Chief Executive Officer; Don Marchand, Executive Vice President and Chief Financial Officer; Alex Pourbaix, President of Energy and Oil Pipelines; Greg Lohnes, President Natural Gas Pipelines; and Glenn Menuz, our Vice President and Controller. Russ and Don will begin today with some opening comments on our financial results and other general issues pertaining to TransCanada. Please net that a slide presentation will accompany their remarks and a copy of that presentation is available on our website at www.TransCanada.com. It can be found in the investor section under the heading events and presentations. Following their prepared remarks we will turn the call over to the conference coordinator for your questions.

During the question-and-answer period, we will take questions from the investment community first, followed by the media. In order to provide everyone with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions, please reenter the queue. Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments and key elements of our financial performance. If you have detailed questions relating to some of our smaller operations or your detailed financial models, Terry, Lee and I would be pleased to discuss them with you following the call. Before Russ begins I would like to remind you our remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties please see the reports filed by TransCanada with Canadian Securities regulators and with the US Securities and Exchange Commission.

Finally, I would also like to point out that, during this presentation we'll refer to measures such as comparable earnings; comparable earnings per share; earnings before interest, taxes, depreciation and amortization or EBITDA; comparable EBITDA and funds generated from operations. These and certain other comparable measures do not have any standardized meaning under GAAP and are therefore considered to be non-GAAP measures. As a result they may not be comparable to similar measures presented by other entities. These measures are used to provide you with additional information on our operating performance, liquidity, and our ability to generate funds to finance our operations. With that I will now turn the call over to Russ.

Thank you, David. Good morning, everyone and thank you very much for joining us this morning. Building on the solid results we experienced in the first two quarters of 2011, I'm very pleased to tell you that TransCanada has had another strong quarter. Our Q3 results show comparable earnings for the first 9 months of 2011 at CAD1.71 per share, which is a 20% increase over the same period last year. As I highlighted last quarter, the Company continues to benefit from earnings of new assets recently brought on-line and continued solid performance from TransCanada's diverse energy infrastructure portfolio. Since the spring of 2010, we have brought into service CAD10 billion of long lived energy infrastructure assets which include the first and second phases of the Keystone Pipeline system, the Bison and Guadalajara natural gas pipelines, extensions and expansions of the Alberta gas pipeline system, phase 2 of the Kibby wind farm in Maine, the Halton Hills generating station in Ontario, and the Coolidge generating station in Arizona.

TransCanada is well positioned to complete another CAD11 billion of new projects that will become operational by 2013. That list includes the Keystone US Gulf Coast expansion, or what we call Keystone XL. Additional expansions of the Alberta system, the Bruce Power units 1 and 2 restart program in Ontario, and the final two phases of the Cartier Wind Power project in Quebec. The vast majority of those projects are regulated or they are backed by long-term contracts so we expect them to generate sustainable earnings and cash flow for many years to come as they begin operations over the coming months. As I mentioned earlier this was a very strong quarter for our Company. Comparable earnings for the third quarter were CAD417 million or CAD0.59 per share, an increase of 9% on a per share basis over the same period last year. Comparable EBITDA was CAD1.3 billion, an increase of 25% over the same period last year. And funds generated from operations were CAD971 million, an increase of 13% over the same period in 2010. Today our Board of Directors declared a quarterly dividend of CAD0.42 per common share for the quarter ending December 31, 2011.

Now I would like to share with you some of the details of the progress we have made on several initiatives we are currently working on. Given the media attention and considerable misinformation regarding the Keystone Pipeline expansion, I would like to start there and take a few minutes to provide you with the factual update on both the regulatory and commercial process that is in place for this project. Since I spoke with you last quarter, the major development concerning our Keystone XL project was the release of the final environmental impact statement on August 26. It reaffirmed the findings of two previous environmental impact statements concluding that Keystone XL would have no significant impact on the environment. The review of Keystone XL was by far the most exhaustive and detailed analysis ever conducted of a crude oil pipeline in the United States. Since 2008 more than 100 open houses and public meetings in six states have taken place. Thousands of pages of supplemental information and responses to questions were submitted to state and federal agencies, and the Department of State received over 300,000 public comments on this project.

The draft, the supplemental draft and the final environmental impact statement that were issued for Keystone XL totaled over 10,000 pages. We are now in the midst of a 90-day period where the Department of State will determine if the construction of the Keystone Pipeline is in the national interest of the United States. This part of the process ends on November 25. The State Department has said on numerous occasions it expects to make a final decision on the presidential permit for the project by the end of the year. As I have highlighted for many of you on many occasions, the benefits of this project -- the benefits of this project are central to the national interest determination currently underway. Keystone XL will play an important role in enhancing the energy security of the United States by replacing heavy crude oil from Venezuela, Mexico, and the Middle East with a secure and stable supply of both US and Canadian crude oil. The facts are that the contracts that US refiners have with Venezuelans and Mexicans for crude oil are set to expire. There will be a gap in supply that has to be filled with crude from someplace. Keystone XL can fill that gap with Canadian and US oil.

It's important to remember that the US consumes some 15 million barrels a day of oil and imports 10 million to 11 million barrels a day of oil. And, by all forecasts, this requirement for imported oil will continue for many decades to come. Denial of the Keystone Pipeline will not change the demand for oil in the United States. And one point that's sometimes overlooked is the fact that Americans want their own oil developed, produced, and consumed as well. Keystone XL will help meet that objective. We have set aside 25% of the Keystone XL capacity to bring US oil to US refiners. We have been successful in signing long-term contracts to bring oil from the Bakken field in Montana and the Dakotas and crude from Cushing, Oklahoma onto our system for delivery to US refineries. Another important criterion in the national interest determination is jobs. Keystone will create jobs and it will create thousands of them. We're looking to build the largest infrastructure project on the books right now in America, and we can't do that with a few hundred people as some would suggest.

9,000 Americans benefited from the wages they earned building the first two phases of Keystone. We know how many skilled people that effort took because we signed the checks. 13,000 more will construct the Keystone XL project over the next two years. Pipe fitters, electricians, welders, heavy equipment operators, engineers and many other trades. To manufacture the equipment for such a large multi-billion-dollar project we expect to create another 7,000 direct manufacturing jobs from pipe manufactured in Arkansas, pipe motors made in Ohio and transformers built in Pennsylvania, workers in almost every state of the United States benefit from the project and the ongoing development of the Canadian oil sands. Those who are not scientists and even experts say that the benefits from the Keystone XL pipeline are only temporary. The experts at the Canadian Energy Research Institute forecast that, over the next 25 years, the development of the Canadian oil sands will he create 465,000 jobs in America. For every two oil sands jobs created in Canada one job will be created in the United States. These jobs will be filled by hard working Americans. They are not actors or professional environmentalists, they're just ordinary hard working people. So the benefits of Keystone XL are very clear.

Keystone XL is in the national interest of the United States. One state where the volume of misinformation has been most pronounced is in Nebraska. I was there last week and had a chance to sit down with the editorial boards of the major dailies in both Omaha and Lincoln. And one point that I made was that our opponents scared the public into believing that our pipeline is different somehow than the 200,000 miles of petroleum pipeline that currently exists in America and that somehow the Keystone XL pipeline would contaminate all of their drinking water and all of their irrigation water. I can understand why those folks would be concerned. If someone told me that all of my water was at risk, I would also be concerned. But nothing could be further from the truth, and, as I stated earlier, the conclusion of the comprehensive Department of State environmental impact statement is that the water resources in Nebraska are not at risk. The University of Nebraska, Lincoln professor emeritus and hydrologist, Jim Goeke, who has studied the aquifer for 40 years and has testified during the Department of State review process, has indicated that any leak would travel a maximum of 300 feet and would not harm the aquifer. This misinformation in Nebraska has played a role in the governor calling a special session of the legislature which begins today.

We expect the -- we expect to see legislation introduced that would attempt to govern the siting of pipelines and to look to change the route of the Keystone XL pipeline through Nebraska. Speaker Flood did some thorough and legal analysis which indicated that the pipeline siting legislation would raise some significant concerns. We'll continue to monitor the special session and react accordingly. And to concludes my thoughts on the regulatory process, we believe that this project, as I said, is very much in the national interest of the United States. It will be the safest crude oil pipeline ever built in North America. It will enhance US, national, and energy security. It will create jobs, and we do expect to receive a presidential permit by the end of the year. By way of commercial update, I mentioned earlier the 25% of the capacity of the Keystone XL has been set aside for delivery of US domestic crude.

TransCanada launched a pair of open seasons in August to gauge interest from shippers in signing long-term contracts on the pipeline system. And those open seasons closed a couple of weeks ago, and we're currently analyzing the results. The first open season was for interest in shipping oil from Alberta to Houston through the 50-mile extension from the proposed Keystone XL pipeline system. The second open season is looking to attract additional volumes from Cushing, Oklahoma to Port Arthur or Houston using the new lateral pipeline. These initiatives to attract additional supply to Keystone system in additional -- in addition -- are in addition to the previous successful open seasons that we've held. Interest from all over have been very strong, and we expect to sign additional contracts for crude oil from both Canada and US source points. We currently have firm binding contracts on the Keystone Pipeline system for approximately 975,000 barrels a day out of the 1.3 million barrel a day capacity on the system. And I would expect that over the coming months long-term contracts for shipments from both Canadian and US crude locations will approach the available capacity of this pipeline system.

Moving over to our natural gas pipeline business, TransCanada filed a rate application for the Canadian Mainline on September 1st with the National Energy Board that addresses tolls for 2012 and 2013. This application essentially restructures services and tolling on the Mainline. It also responds to significant changes that have occurred over the last few years in the natural gas supply, demand, and transportation in North America. What our application proposes is significantly reduce long haul tolls for 2012 and 2013 compared to existing levels. Under the proposal, the long haul toll from NIT, which is the Nova Inventory Transfer point, on the Alberta system to Dawn would be CAD1.29 per gigajoule compared to the current rate of about CAD2.08 per gigajoule. That is equivalent to a rate from Empress to Dawn of about CAD1.10 per gigajoule. The Mainline remains a very important component of the North American gas delivery system. Total deliveries on the system averaged 5.4 billion cubic feet a day for the first 9 months of this year making it the largest long haul gas transportation system on the continent.

Receipts from the Western Canadian Sedimentary Basin continue to make up the majority of volumes averaging 3.3 billion cubic feet a day for the first 9 months of the year, peaking at 5.4 BCF a day last winter. The NEB has announced it will hear all of TransCanada's application, including the cost of capital, in one proceeding before making a decision. The oral portion of the hearing is scheduled to begin June 4, 2012, and run through August and September if needed. As we move towards a resolution on the Canadian Mainline, TransCanada continues to enhance other areas of its natural gas gathering network. We are now a year and a half into the construction of our Horn River natural gas pipeline into northeast British Columbia. The completion date of the CAD275 million project is expected in the second quarter of 2012. In addition, we will extend the Horn River line by about 100 kilometers at a cost of CAD230 million. This extension means an additional 100 million cubic feet per day of new gas contracts beginning in 2014 increasing to 300 million cubic feet a day by 2020. Including the extension Horn River now has contracts for 900 million cubic feet of natural gas by 2020.

Construction of the Groundbirch natural gas pipeline extension started this past summer, and we expect to be finished in the spring. The CAD60 million extension has contracted volumes of 250 million cubic feet a day. There are a number of further pipeline development projects we are currently working on in British Columbia and Alberta as customers continue to make requests for service to ship their natural gas to market. As of September 30, 2011, the NEB had approved CAD750 million of Alberta system natural gas pipeline projects and a total of CAD640 million in projects is currently waiting NEB approval. On the energy side of the Company, progress continues on our Bruce restart project in Ontario, fueling the unit one reactor is expected to begin this month. The final phases of commissioning for unit 2 are planned to begin later in the fourth quarter of this year. Bruce Power expects to begin synchronizing unit 2 to the electric grid early in the first quarter 2012 with the start of operations targeted for later in the first quarter. Synchronization of unit 1 is expected to start in the second quarter of the year with the reactor expected to begin producing power in the third quarter of 2012. TransCanada's share of total capital costs is still expected to be CAD2.4 billion.

CAD2.2 billion was invested in the project as at September 30, 2011. Once both reactors are restarted, units 1 and 2 at Bruce will produce 1500 megawatts of emissionless, cost-effective, safe, and reliable nuclear power for the residents of Ontario for decades to come. TransCanada owns 49% of these 2 new units. So to conclude my comments today, TransCanada continues to benefit from positive earnings generated by new assets that have gone into service in the past 18 months alongside of our existing and diverse asset base. Comparable earnings for the first 9 months of 2011 were CAD1.71 a share, 20% increase over the same period last year. And funds generated from operations were CAD2.8 billion, a 10% increase over the same period last year. We're well positioned to complete another CAD11 billion of new projects that will begin operations by 2013. Projects such as the Keystone XL, additional expansion of the Alberta system, the Bruce Power restart program in Ontario and the final two phases of the Cartier Wind project in Quebec.

Our team is very focused on preparing for the final steps of the Keystone XL regulatory process and the start of the US construction. Focused on enhancing the competitiveness of the Canadian Mainline through our toll application with the National Energy Board, and we are moving to the final stages of the Bruce A restart initiative. The Company's strategy is working. TransCanada has an enviable portfolio of long-lived assets that are critical to the supply and delivery of energy across North America. Our focus remains on maximizing the long-term value of these assets, reinvesting our free cash flow in new high-quality long-term projects provided by our 3 core businesses, creating long-term shareholder value through stable and steady growth of cash flow, earnings and dividends. I will now turn the call over to Don, who will provide additional details on the third quarter 2011 financial results. Don?

Thanks, Russ, and good morning, everyone. Earlier today we announced our third quarter results, and I would like to start by highlighting the following. TransCanada had another strong quarter well ahead of third quarter 2010 driven by earnings from both our new and existing set of high quality assets. CAD10 billion of new assets now in service are contributing highly predictable earnings and cash flow underpinned by long-term contracts with strong counterparties or regulated cost of service business models in the case of the Alberta system extensions and expansions. The Company continues to successfully advance the remainder of its unprecedented capital program. The Bruce A restart, the last two phases of Cartier Wind, and further Alberta system extensions and expansions are all on track and, upon receipt of the remaining permits, Keystone XL is (inaudible) construction. These project will further contribute sustainable earnings, cash flow and dividend growth in the future. And last, we are well positioned to fund the remainder of our current capital requirements without issuing additional common equity. Our growing internally generated cash flow, continued access to capital markets and liquidity underpinned by an excess of CAD4 billion of committed credit facilities will provide us with numerous financing options. The Company's financial flexibility is further bolstered by opportunities for portfolio management including an ongoing role for TC Pipelines, LP.

I would now like to take the next few minutes to expand on the details of our third quarter. Comparable earnings in the third quarter were CAD417 million, or CAD0.59 per share, compared to CAD374 million or CAD0.54 per share in 2010, an increase of 9% on a per share basis. Contributions from reasonably commissioned pipeline and power generation assets, combined with improved results from Western Power were the key factors behind the year-over-year increase. This was partially offset by higher interest expense and lower contributions from the US Power and Alberta gas storage businesses. New assets contributing incremental earnings in the quarter included Keystone phases 1 and 2; the Guadalajara, Bison, and Groundbirch natural gas pipelines; the Halton Hills and Coolidge generating stations; and the second phase of the Kibby Wind farm. Comparable earnings in third quarter 2010 included the positive impact of recognizing the Alberta system. 2010 to 2012 revenue requirements settlement retroactive to its January 1, 2010, effective day. As a result, third quarter 2010 included approximately CAD0.03 per share related to the first 2 quarters of 2010. I will now briefly review the business segment results at the EBITDA level. Natural gas pipelines recorded another solid quarter. The business segment generated comparable EBITDA of CAD721 million in third quarter 2011 compared to CAD714 million in the same period last year. The increase includes incremental EBITDA from Guadalajara and Bison as well as Alberta system extensions and expansions. A weaker US dollar, higher A&R operating and maintenance costs and an increase in business development expenses had a negative impact on EBITDA year-over-year.

Turning to oil pipelines, Keystone generated CAD156 million of EBITDA in the third quarter and CAD400 million on a year-to-date basis. As indicated last quarter, Keystone's available capacity was expected to decline by approximately 20% in July and August to allow for further maintenance work. That work was completed as planned, and, through September and October, Keystone has operated as expected. Keystone remains on track to generate approximately CAD580 million of EBITDA in 2011. In energy, comparable EBITDA was CAD399 million in the third quarter compared to CAD311 million for the same period last year. The CAD88 million increase was primarily due to higher realized power prices in Alberta, new earnings from Halton Hills in Ontario, Coolidge in Arizona, and the second phase of Kibby Wind in Maine and increased generation volumes at Bruce A and Bruce B. This was partially offset by lower natural gas storage revenues in Alberta, lower realized power prices at Bruce B and a reduced contribution from US Power which included a net decrease in capacity revenues at Ravenswood. As highlighted in our quarterly report, since July, spot prices for capacity sales in the New York Zone J market have settled at materially lower levels than prior periods, as a result of the manner in which the New York ISO applied pricing rules for a new power plant that recently began service in this market. TransCanada and other parties have filed formal complaints with FERC that are currently pending. As a result, the outcome and longer term impact on Ravenswood is unknown at this time.

During the third quarter the demand curve reset process was completed following FERC's acceptance of the New York ISO's compliance filing. This resulted in increased demand curve rates that apply going forward to 2014 and positively impacted capacity prices in October. The impact on upcoming winter prices is, however, expected to be negligible, due to excess capacity in winter months, exacerbated by the previously mentioned New York ISO actions relative to new unit pricing. Also in energy, as outlined previously, TransCanada continues to fully record revenues and costs under the Sundance A power purchase arrangement, or PPA, and at third quarter recognized CAD48 million in comparable EBITDA, bringing the total to CAD99 million on a year-to-date basis. TransCanada does not believe TransAlta Corporation's claims meet the test of force majeure or disruption as specified and therefore continues to record revenues and costs as though this event is an interruption in supply in accordance with the terms of the PPA. The dispute arising out of this matter will be heard through a single binding arbitration process in March and April of 2012. Assuming the hearing concludes within the time allotted, TransCanada expects to receive a decision in mid-2012. Finally, in energy, I would like to bring to your attention that Bruce A will commence a 6-month outage known as the West Shift Plus program on Unit 3 later this month. While EBITDA from Bruce will be down in fourth quarter 2011 and first quarter 2012, as a result of this outage, the work is expected to extend the life of Unit 3 to 2021.

Now turning to the other income statement items on slide 21, comparable interest expense in the third quarter was CAD242 million compared to CAD159 million last year. The 83 million increase reflects decreased capitalized interest related primarily to Keystone, Halton Hills and Coolidge as well as incremental interest expense on US $1 billion of new debt issued in September 2010. These increases were partially offset by the positive impact of the weaker US dollar, on US dollar denominated interest expense, realized gains in 2011 compared to losses in 2010 from derivatives used to manage the Company's exposure to rising interest rates and Canadian dollar denominated debt maturities in 2011. In the third quarter CAD66 million of interest was capitalized to assets under construction compared to CAD160 million for the same period in 2010. Capitalized interest has decreased as new projects have been placed into service, somewhat offsetting the impact of higher EBITDA associated with these new assets.

Comparable interest income and other for third quarter 2011 decreased by CAD32 million to a loss of CAD5 million from income in 2010 of CAD27 million. The decrease reflects realized losses on derivatives used to manage the net exposure to foreign exchange fluctuations on US dollar income in 2011, versus gains on derivatives and the translation of the US dollar working capital in 2010. In conjunction with US dollar denominated interest expense, this program largely offsets the currency impact of translating US dollar pipeline and energy income reported in the business segments. Comparable income taxes of CAD147 million in third quarter 2011 were CAD28 million higher than third quarter 2010, primarily due to higher pretax earnings. Moving on to cash flow and capital expenditures on slide 22, cash flow was strong in the third quarter and continues to grow for many of the reasons already discussed in my review of EBITDA. Funds generated from operations increased by CAD110 million, or 13% to CAD971 million.

The Company is on track to generate in excess of CAD3.5 billion of funds from operation for the full year 2011. Capital expenditures were CAD696 million in the third quarter 2011, principally related to construction of Keystone, refurbishment and restart of Bruce A Units 1 and 2 and expansion of the Alberta system. As we close out the year, we expect to spend just over CAD3 billion on capital projects in 2011. Now looking at slide 23 -- our liquidity and access to capital remains solid. At the end of third quarter, our consolidated balance sheet consisted of 43% common equity, 4% preferred shares, 3% junior subordinated notes, and 50% debt net of cash. In mid-October the Company renewed two existing bank facilities. First, TransCanada Pipeline's limited, amended and restated its CAD2 billion committed revolving extendible credit facility This facility is now set to mature in October 2016. And second, a wholly owned subsidiary, TransCanada Pipeline USA Limited, refinanced its existing US $1 billion credit facility with a new 364-day US $1 billion committed revolving extendible credit facility. Both these facilities are eligible for annual extension with consent of the lenders.

At September 30, we had approximately CAD600 million of cash on hand along with CAD4.3 billion of committed and undrawn revolving bank lines. Our two existing commercial paper programs remain well supported by the market and continue to provide a flexible and very attractive source of short-term funds. In November we expect to establish a new US domiciled commercial paper program fully backstopped by committed credit lines. This will further diversify and improve the cost of the Company's short term sources of funding. Also in November we intend to replenish our equity in US debt shelves to the CAD2 billion and CAD4 billion level, respectively. These normal course filings will allow for access to the Canadian preferred share and US senior and subordinated debt markets on an expedited basis over their 25-month term. In closing, TransCanada produced another strong quarter with comparable earnings per share of CAD0.59, 9% higher than third quarter 2010.

Excluding the Alberta system settlement adjustment in third quarter 2010, which retroactively included the first 6 months of that year, comparable earnings per share in third quarter 2011 were 16% higher than 2010. On a year-to-date basis comparable earnings per share are 20% above last year. This is evidence our plan is working. We have now completed and placed into service approximately CAD10 billion of assets since the spring of 2010. In addition we have invested approximately CAD5 billion into projects that are part of our remaining CAD11 billion committed capital program. We are well positioned to fund the remainder of that program through 2012 and 2013 without the issuance of any additional common equity. Finally, in 2014 and beyond, we expect to generate significant discretionary cash flow that can be used to continue to grow the dividend, invest in additional accretive growth opportunities, and further enhance our financial strength and flexibility. That's the end of my prepared remarks. I will now turn the call back over to David for the Q&A.

Thanks, Don, and just before I turn it back to the conference coordinator, just a reminder, we'll take questions from the investor community first, followed by the media. With that I will turn it back to the conference coordinator for your questions.

Thank you.

(Operator Instructions) Linda Ezergailis, TD securities.

I was interested to read that your Oakville Power contract now is being put through an arbitration process. Can you describe whether that process is binding, who the arbitrator is, what sort of timing that might entail, and why a different process wasn't chosen?

With respect to that arbitration agreement, both parties are continuing to have productive discussions, From our perspective and the government's perspective, the view was that it would be appropriate to put in place some rules for -- to commit the process if we were unable to reach a commercial binding decision between the parties. ¶ To get some certainty as to how we went forward from a legal perspective, so it is binding arbitration -- pretty standard arbitration process, and we have no immediate intention to default to that. We remain very confident we're going to get economic recovery for the value of that PPA, and we're going give that process a chance to work out.

Do you have a sense of what the timing might be on that?

With the election that just occurred, we felt it was -- it was probably a tough time to try to get a resolution, just given requirements of everyone's time. So we'll give a pretty hard run at it for the next couple quarters and, hopefully, we'll get to a result that works without having to resort to that agreement.

TransCanada's proposal to the NEB to build facilities to connect Marcellus Gas. What were the issues that the regulator had with that, and how might those change when you refile?

The regulator had 2 issues. They were interested in a more definitive routing. Normally when you make these filings the route hasn't been finalized. In this case, they asked for a more definitive ruling on routing. We'll be working on that. They also asked for evidence on whether there were integrity issues with reversing the line, particularly right by the meter station at Niagara, and we'll address that for them. We expect to put a more detailed revised filing back in here in the next little while.

Canaccord Genuity.

With regard to Keystone XL -- just wondering if you can update us on the targeted start-up time if the presidential permit for XL is received by the end of the year. I believe previously you had given guidance for a mid-2013 start-up, and if you see that time frame slipping, given the opposition you've seen so far.

Nothing we've seen so far we think takes us off a Keystone XL start-up in the second half of 2013. We certainly expected some of the antics of the opposition, and we have support of our shippers, and we can still it in service in the second half of the year.

Based on some of the concessions for increased pipe safety, have you seen any cost escalation in your estimated CapEx for the project?

There might be tiny bits around the edges. A lot of those safety concessions, and I want to be clear here, this pipe was already going to be the safest crude oil pipe ever designed and operated in North America. We just gave a few additional features that dealt with specific concerns of Nebraskans with respect to the aquifer and the sand hills. The vast majority of those were operational in nature, and we wouldn't expect it to have a very material impact at all on capital costs.

Carl Kirst, BMO Capital.

Do appreciate the color on the XL open seasons here. Russ, I'm not really sure this can actually be answered, but with respect to your comments on Nebraska and that you would expect legislation to be introduced, do you have any sense of timing as far as how that process plays out?

Is this something where, one way or another, and, again with all questions of constitutionality aside, is that something that gets voted on if it is introduced in the next several weeks? Or is this potentially a process where it could still be lingering even after you get BNID?

I'll take a shot at answering the question because there's a lot of uncertainty as to how the process is going to work out, and maybe Alex can jump in. The difficulty, obviously, in proposing legislation, and just to be clear, we're not sure -- I think there's going to be legislation proposed. I'm not sure that legislation actually is voted on and implemented.

And the key issue is whether or not siting legislation that pertains to the routing of Keystone XL at this late stage in the process would be legal and constitutional. That's a very difficult high bar hurdle for them to get over to thread the needle between not having legislation that is so narrow that it just captures our pipeline.

But broad enough that it can actually be thought of in terms of all the other implications it would have in the state with respect to oil and gas developments, infrastructure developments -- no matter what that might be through the sand hills. So it's a very difficult and narrow spectrum of potential legislation that could be put in place. Through process, we know that the Department of State says they're going to make a final decision by the end of the year.

I believe what they're trying to do in Nebraska is come to a conclusion as to whether or not legislation can be put forward sometime before that, at that point in time. Those legislators have been very clear that they're not sure that's possible. It's hard to comment beyond that as to what the implications are, because, A, we haven't seen any legislation yet.

There's just been a whole bunch of speculation on what it might look like, so we can comment on that once we see it. As you probably read in the legal opinions that have been generated by our Company, any legislation is going to be a very tricky and difficult thing to implement.

I would just add, in terms of the actual process, Carl, the special session started today. The original plan was that would it go for the rest of this week and the balance of next week. The governor stated that it would be his goal to have everything wrapped up before Thanksgiving weekend. We expect that there will be a number of competing bills proposed, some that may purport to capture Keystone XL and others that will not.

Those bills need to be debated within the relevant committee, likely the natural resources subcommittee of the state senate. Assuming they get a majority of that committee, those bills will be brought to the floor for a vote. Certainly from what I'm seeing coming out of Nebraska, there's not an insignificant chance that no acceptable bill is able to come out of committee on the state siting issue. We're monitoring it very closely, but that's kind of the process.

Just a second question on the Mainline, and certainly it's nice to see the toll down to CAD1.29 from CAD1.41 a couple months ago. Was there any singular issue that tweaked that rate down? Was it just the fact that we've gotten volume certainty through the third quarter which gives you better certainty for 2012? Was it an O&M in addition just trying to get a better color on that.

Yes. When we filed in September we used forecast 2011. We didn't make any adjustments to 2011 with respect to changes that we anticipated coming in '12. One of the big ones would be the reduced rate base so there's less income and less income tax related to the reduced rate base.

Also, we have higher volumes in 2011, so the amortization of uncollected revenues is less. So that's another significant change. And the third one is O&M reductions as a result of the fact that we don't have a settlement any more, and we're not sharing O&M savings with our shippers.

Greg, is there a target for what the amortized revenue of the end recoveries will be at the end of the year?

I think what we said in the filing is we would expect to defer CAD100 million worth of under-recoverred costs over a long-term period -- so amortized, at the depreciation rate, and then we'd recover the rest. We would hope to get that number down to a minimal number, but I'm not exactly sure what that will be at this stage.

Paul Lechem, CIBC.

On the Bruce A. Don, I believe you mentioned there's going to be some work on unit 3. Just wondering the cost of that and if there's any further work on any other units coming up.

As Don mentioned in his prepared remarks, in order to get that extended life, a decision was made to undertake this west-ship process. I don't have the number in front of me. It isn't a significant number. The more significant issue is that it is a pretty significant outage in terms of the time period.

That just affects unit 3, or are there other units that will be affected?

Unit 3 is a unit that requires this West Ship Plus campaign to deal with the pressure tubes.

And on Ravenswood, the appeal of the capacity project to the FERC, is there any timing that you're aware of in terms of what are the next steps? When are the hearings? When might that be resolved?

It's in the FERC's hands now. The FERC has received our complaint. They've received rebuttal -- evidence of the New York ISO and a number of other stakeholders, and we and our -- the other generators similarly situated to TransCanada have filed significant evidence. FERC has the information that it requires to act, but it's in their hands, and there has been a lot of information and testimony filed so we think it will probably be at least a few months before we hear back.

If you're successful on this would that affect capacity prices going forward, or would there be any retroactive payments to be made? How would that work out?

You know, unfortunately, FERC has a real reticence to retroactively impact power rates, or any kind of rates, particularly power rates. We expect whatever decision comes forward, we're certainly arguing for retroactivity, but there is not insignificant possibility that the relief will be on a go-forward basis.

Ted Durbin, Goldman Sachs.

If I could just ask about your western segment. I think you said CAD48 million of revenues from -- it looked like there was a big pickup in your contracted revenues out there. I'm just wondering if you can give us a little more color there, and then how you're seeing supply/demand play out going forward. You've got Keephills 3 that has started up. I'm just wonder if you're thinking about leaving yourselves open a little bit more going forward?

I think that pickup in contracted volumes more than anything -- it's more volumes out of our PPAs, and -- I'm trying to think. Glen, do you have the exact information on that?

Coolidge would have come online, and that will be included in that, as well as increased contract activity.

Nothing significant. With respect to our views on the market, obviously you've had the impact of the Sundance A outage, but I think a lot of people in Alberta were somewhat caught by surprise by the large and continuing increases in demand. This is probably the fastest-growing power demand market in North America -- sort of in the range of 3 or 4% a year. I would say that, subject to the uncertainties of where Sundance A comes out, we generally are fairly bullish on this market going forward.

On the Mainline. I guess there's some uncertainty, given the timing, on what kind of interim tolls will you put in place for 2012. Can you give us a sense of what you're thinking right there?

Yes, as Russ highlighted, when we did get the NEB hearing schedule, it was a longer time frame than we had anticipated. We worked very diligently towards getting a September 1 filing in place with the hope that we could get to a decision here by mid-2012.

That's obviously going to lag, so we are working on interim tolls. We really can't speak to what the interim tolls will be in advance of filing that since it does have commercial sensitivity. What we're trying to do is to minimize, as we've done in the past, any kind of toll shock to our shippers, so we're working diligently to put that filing together.

Some of the items in the regulatory filing can't be implemented until the decision has been made. And the NEB, in their decision last December, when we were working towards a settlement, indicated that where there's significant changes, they're not prepared to put those in on an interim basis. So we have limited flexibility as to what that interim filing will look like. I hope to be in position to talk more about it by Investor Day.

Pierre Lacroix, Desjardins Capital Markets.

I had a strategy question with regard to the M&A activity going on in North America right now with the deal between Kinder and El Paso. What does it mean for TransCanada going forward in terms of potential strategic implication for you? How do you react to that? How do you intend to go forward with this kind of environment?

There's been a few consolidations in the United States. Obviously the deal between Kinder Morgan and El Paso appears to be well-received by shareholders of both corporations. I think that's positive in terms of building a company that has a larger [stand] -- a larger capacity.

As we've stated before, our strategy is focused on our capital build-out at the time current time. It's been a CAD20 billion capital program. We're about halfway through. Our capital is committed through the next few years. We've got another CAD10 billion of projects that we're currently actually constructing. Then we have several new projects that are being generated by our core businesses.

We've got 3 very strong core businesses that all have good fundamentals for growth. Our gas business, obviously the advent of shale gas and increases in demand are resulting in large opportunities for us, large capital opportunities. We see that in the Alberta system primarily with billions of dollars of potential investment. (inaudible) the oil side, as Alex pointed out, our open seasons have been very successful.

I expect that will lead to increased capital investments going forward in that business. And then in our power business -- as the world moves from a more carbon-intensive power footprint to a less carbon-intensive power footprint we believe that means more gas-fired power, more renewables, in particular in on Ontario, a refurbishment of the nuclear fleet on the go-forward basis.

As I look forward, our capital opportunities are substantial, and, at the current time, we're not looking for acquisition opportunities as an avenue for the reinvestment of our free cash flow. That said, minor opportunities for acquisitions that are bolt-ons to our existing system continue to be important to us, but our focus isn't on participating in any large sort of corporate transaction at this point in time. Our slate is full with what's in front of us, and I think there are great opportunities to continue to add shareholder value.

Steven Paget, First Energy.

Given that one of [cap's] objections to the Mainline toll application is the allocation or the methodology of allocation of Mainline costs to NGTL, would it make sense to consider an alternative? Pulling the NGTL Mainline and Foothill systems together into one system?

First of all, we operated as one system, so we have common operation, common equipment. We move equipment back and forth between the systems. We have gas control that's common to both. The extension that we proposed really just has less encompassed the entire Western Canadian Sedimentary Basin within the gathering system and then use the long haul pipe to move it to the market.

It's really an alignment of the supply end and the market end, and we think that's an effective way in which to get the tolls down and to have the appropriate parties pay their reasonable share of the cost of transportation. We think it's going to have a positive impact to Netbecs in Alberta and will be positive for growth of the basins, a goal of having a competitive Western Canadian Sedimentary Basin that can continue to grow is fulfilled, partly, and moving in the right direction, and then as volumes come back up, the competitiveness improves even more.

We think we've got a very solid proposal. We've had discussions with stakeholders. We haven't received any other proposals that meet all of the objectives that have been met by our filing. I would just say that I think the flexibility that the TBO system and using the Alberta extension offers is positive for the industry.

My next question is for Alex. With CAD90 million in US Power EBITDA in Q3, could we use CAD360 million as a run rate for EBITDA US power going forward assuming things remain stable? For that annualized run rate?

Sorry -- say that again. What was the number?

CAD360 million as an annualized run rate EBITDA for US Power.

Let me think about that, Steven, and I'll get back to you. I'm just checking some stuff.

Okay, thank you.

Andrew Kuske, Credit Suisse.

Russ, have you had any conversations recently with Alaskan Governor Parnell on some of the developments of the Alaskan pipeline?

We have ongoing discussions with the Alaskan administration, and you could be referring to some comments that the governor has recently made with respect to LNG as being a possible alternative. As part of the AGIA process, in our proposal, we had put forward the option of either going to a lower 48 or into an LNG project off the west coast someplace, and, through the open season process we invited shippers to tell us where they wanted to take their gas to. We haven't concluded that open season yet.

Preliminary indications were around lower 48. That's the continued focus of the AGIA project today, but certainly if the shippers -- and as we've always said, the shippers will decide which direction this gas is going to go -- if the shippers decide that ultimately they want to ship that gas to a different market, we will adjust accordingly. So we have ongoing discussions with both the shippers and with the state on commercial, technical, and other matters.

How much volume do you foresee coming out of Alaska over a period of time? Would there be enough to fill down into the lower 48 through your existing system, and then having a portion of gas heading out by way of LNG into Asian markets?

We've always said we think there's only room for 1 project, and I think that given the magnitude of economies of scale that are required to move the gas to the lower 48, to get economic numbers, you need a pipeline that's in the 4 to 5 billion cubic feet a day range. Currently they produce approximately 7 billion cubic feet a day, but that won't be available over the long haul. We've always said that it probably makes sense to build 1 project, and the producers will to have sort out where they want that gas to go over time.

Sorry, conference coordinator before, we take the next question -- Steven, Alex has an answer for you re US Power.

I was just checking our forecast, and generally how we're looking at things going forward. That CAD90 million number you referenced, Q3 is historically always the best quarter of the year for that business. I would probably think of something kind of more in the range of CAD60 million -- CAD65 million going forward, give or take.

And the other quarters?

As an average quarter. There's always going to be some cyclicality to it, but that's a pretty good ballpark.

Robert Kwan, RBC Capital Markets.

Coming back to Keystone XL and Nebraska. I saw the press release you put out yesterday. Was there anything with respect to how long the litigation timing might be if they actually pass some of these siting laws and what that might mean for construction schedule? Is there anything you can give on the contracts for Keystone XL if you keep pushing the timing out when they might start to fall away?

We have the full support of our shippers there. They are very cognizant of what is going on and have indicated to this point their full support for the project in light of what they're seeing. You know, with respect to the timing implications of litigation, there is a very interesting debate going on. There is a very significant understanding among a majority of the senators that this action of a state siting bill is fraught with legal concerns.

I'm not even sure that we'll see a bill come out of committee, and we've not even seen any of the bills. It's hard to comment legally on what our options are and what our remedies are until we actually see some of these bills start coming out of committee. The opinions that you saw released yesterday were in large measure responding to an earlier bill that one of the senators put forward.

Both those legal opinions and the opinion of the Speaker of the House that was issued about a week or so ago were strongly of the view that a bill along those lines would have been unconstitutional. We're going to have to wait and see what kind of bills get out of committee.

Robert, I would just add to that perhaps that those parties that are fundamentally opposed to our pipeline and opposed to oil in general will continue to file lawsuits, and I think I've characterized it as the allegation of the day. There will continue to be filings and lawsuits. I don't characterize their legal position in Nebraska.

The Senators will weigh all of these things, but they're also very cautious of the proposition put forward by environmental groups that there are no legal issues here that one needs to worry about. We expect to receive a presidential permit by the end of the year. If that is the case, we expect to commence construction very shortly thereafter, and way fully expect, as we saw in the base Keystone project and Enbridge's experienced in Clipper, there will be objections to that and lawsuits that object to that.

What we've seen in the past is that those lawsuits and objections did not hold up the construction of the project, and I would expect that to be the case here as well. If it's determined to be in the national interest of the United States, we fully expect there will be appeals to that, but our intent is to start construction immediately, unless we are barred from doing that legally. But that wasn't our experience in our base Keystone project.

Coming back to your comment that you have the full support of the shippers. If there is a delay, whether it's State Department or otherwise, are we in the zone where they have the right, but not the obligation to confirm support? How long can you legally hold them to the contract?

The contracts contain some contractual sunset provisions. We believe we're in a position where none of those will kick in as long as we receive our approval. I'm trying to think exactly how to couch this. They have sunset provisions. Largely we have extended those provisions, and we do not expect our shippers to rely on those sunset provisions any time in the near future.

I think what they've told us, Robert, is they need, the refiners, for example, they need crude oil by a time certain. If they don't think this process is going to get them crude oil by a time certain they're going to have to look for other alternatives. There is no other pipeline alternative that can meet their needs and deadlines so they will be looking at things like offshore crude oil, looking at tankers moving down the Mississippi River. They will be look at other avenues by which to source their crude because they do need crude oil for their refineries.

In terms of commitment to our project, they're committed as long as they can see there is a logical way of getting to a decision, and that decision will be made such as they can source crude oil from the Bakken or from Canada. If they don't see that's possible, they will put in place other alternatives to source that crude oil because the fact is they need to run something in their refinery. If they can't get it from those sources, they have to make other alternatives.

They're with us to the extent that they think we can get through this process in a reasonable time frame. If the administration delays the project long enough that it's owe that he it becomes a low probability that they'll get through the process in a time frame that meets their needs, they're not going to support us any more. They've been pretty clear that their support is around moving Canadian and US crude oil to the marketplace, but they can't wait forever because they have commercial realities that they need to deal with.

Quick question on the Sundance. The CAD48 million booking on Sun A, was that booked at the spot price, or was that booked at the blended hedge and spot price for the Alberta market?

Under the power purchase agreement, if the sell does not deliver the required amount of power they pay a penalty which is equivalent to the rolling 30-day average price in the market. Given that the average third-quarter price was around CAD95 a megawatt hour, that's what resulted in that very significant CAD48 million -- CAD4949 million number. We wouldn't expect it to be as high in Q3 and Q4.

You booked it at RAP. You didn't book it where you may have had some hedges in place?

No, that's straight at RAP.

(Operator Instructions)

Carl Kirst, BMO Capital Markets.

On the Canadian-US storage situation. Had a little bit of a fall-off in the third quarter -- perhaps not surprising given the market. But seasonally speaking we have usually some pretty strong winter quarters, fourth and first, and I'm wondering you have any color you can give us on what you're expecting as we go forward here.

I haven't checked for a few days, Carl, but the last time I checked we -- I know the trading floor felt that they were expecting to see a little more strength in forward spreads coming forward. This is a business I think everybody understands is fairly cyclical. We're probably well at the bottom of the cycle, and we'll experience a bit of that in 2012, and hopefully we'll see spreads improve going forward.

We have no further questions from analysts at this time. We will now take questions from the media.

(Operator Instructions) Paul Tullis, Bloomberg Business.

Terry Cunha told CNN Money on September 30 that the Cornell report on KXL's job creating potential has multiple erroneous and misleading statements. Can you give some examples of where they got it wrong on that?

I don't have the information right in front of me. But what I would say when I read that report several weeks ago is that it grossly underestimated the actual jobs, both in construction and in manufacturing. As Russ said in his prepared statement, during the construction of the base Keystone system, we put 9,000 Americans directly to work on that project in construction, and we knew that because we were paying those checks.

This is larger project, and we expect to employ commensurately more people. This is a 1700-mile pipeline. When you build a pipeline you break it up into construction segments called spreads. We have 17 of those spreads, and we're going to put hundreds of Americans to work on each of those spreads. On top of that, we have somewhere over 40 pump stations; each of those pump stations takes a couple hundred contractors to construct.

So it is very easy and simple to get to the math that we're going put 13,000 Americans to work on the construction side. Then on top of that, the manufacturing jobs created -- that this pipe is being rolled in Arkansas. The pump motors are being made in Ohio. All of those jobs would not be there but for Keystone I was very surprised at that report from Cornell. I think it grossly underestimated the jobs. Anybody who has spent any time on a pipeline right of way would have no problem confirming the types of numbers we're talking about.

Scott Haggett, Reuters.

I'm wondering how seriously you take recent signals from the State Department that they may delay the decision beyond year end and what effect that would have on the timing of the line?

I don't think that the State Department has signaled that there's going to be any delay. At least that's my view. What I heard the State Department say is that primary in their mind is ensuring that they have a thorough process, and they hope to make a decision by year-end, and I think that's been consistent. We understand and support that. We believe that the process should be thorough. We believe that it has.

We don't believe there's any new information to come forward, and that they should be in a position to make a decision by year end. But I don't think in any way they have signaled a change in their posture of trying to run as thorough a process as they possibly can and as transparent a process as they possibly can, and that they are hopeful of making a decision before year end.

Talia Buford, POLITICO.

Even though you say you think there won't be a delay, if there is a delay, could this be a breaking point for the pipeline? Would you pull out, or is it that TransCanada is committed to trying to get this pipeline, even if there's a delay that pushes it into next year?

I think that the delay would have an impact on our customers, and it's really our customers that will dictate how they're going to react to a delay and whether they're going to stay with this project or not. So the nature of the delay will be very important in that. But I think more importantly there is no new information to come forward. This has been an exhaustive 30 -- what is now a 38-month review. There is no new information to come forward. There is no reason not to make a decision.

If a decision isn't made, that just delays people going back to work. That delays manufacturers from starting to deliver the materials and manufacture materials for our pipeline. It delays an increase in energy security. It results in those refiners having to seek crude oil elsewhere, because we're not going to be able to meet their contractual timing of their contracts that expire with their current suppliers, for example, the Venezuelans. So they're going to have to be out there looking for new supply.

All of those things are just not good news. So I think everybody is intent on trying to get to a decision as quickly as possible, but as I said, the process has to be transparent, it has to be thorough. We believe that's been the case, and we don't believe that there's any need for additional delay.

Nathan Vanderklippe, The Globe and Mail.

Can you give any color at all on what the implications would be of successful siting legislation? There has been speculation that it could result in a 2- or 3-year delay for a refiling of some aspect of the environmental process. Is that accurate, or is it something that -- could the route actually be changed much quicker if it came to that?

The route that has been approved is the result of that exhaustive 38-month review process. We've looked at every aspect of the route, from endangered species, including insects, wildlife, habitat, vegetation, water resources -- every aspect has been reviewed in great detail. The route chosen has been chosen to be the best route. We've proposed 8 alternate routes in the state of Nebraska. All have been determined to be inferior from both environmental and other aspects. The process has been pretty thorough and pretty conclusive.

If the route is arbitrarily moved to another location, we would suspect that we would have to restart that thorough environmental review process of that new route. Given that this process has taken us approximately 38 months, there's nothing for us, there's no reason for us to suspect that a review of a new route would take any less time than the review of this route.

It's a very real possibility that changing the route would cause that kind of delay, and obviously that causes our customers very great concern, because they have crude oil contracts that expire in 2012 and 2013. Alex, you want to add to that this?

I think that covers it. The only comment that I would say, a lot of our opponents are disingenuous in this regard. We hear about this issue about changing the route in Nebraska. But let's be clear, the true opponents of Keystone want to get the US off crude oil, and they don't want to see any pipeline get built. It is very disingenuous of these groups to suggest that it isn't about the pipeline, it's about the route, because for the vast majority of the opponents of Keystone it is about the pipe, and it is not about the route.

You can't file an amendment to your current environmental application. You would have to file an entirely new application, even if the route was only changed in 1 state?

We would have to file an amendment, but that would require a replication of the entire process, which would add a 2- to more likely 3-year delay to the approval process.

Bradley Olson, Bloomberg [LT].

If this is the best route, why was there a different route before?

The route that was taken before was a result of the design of the pipeline, both in terms of where it was coming from and where it was going. The original pipeline started with a conversion of the TransCanada Mainline that crossed the Canadian prairies from Alberta to about Winnipeg. We converted a line that was put in place in the early 1950s from gas service to crude oil service, and then we took the most environmentally benign route directly south to our delivery points at Patoka and Wood River.

This second phase doesn't have the opportunity of conversion of another pipeline across the prairie, so it has taken the most direct route possible between Alberta and Steel City, Nebraska. And the result of that, the focus is always on reducing the environmental impact, and it gave us the opportunity to cross both Montana and South Dakota to pick up growing crude oils out of the US Bakken formation.

We consign a considerable amount of our volume out of that location. I'd expect those to continue to grow, and connect those supplies as well as Canadian supplies to market. So for those reasons it provides the best solution for the purpose which is to pick up both Canadian and US crudes and deliver them to US refineries, and to do that with the least environmental impacts, and that was the reason for the chosen route.

If we move the route the direction some folks have suggested, that would mean greater distance, which would mean greater environmental impact, more backyards that would be impacted by that. And would also impact our ability to transport US crudes to market. And we don't think that is in anybody's best interest.

The route was chosen for a whole host of good environmentally sound reasons. And that was confirmed by the environmental review, which confirmed that it was the best route and that the route has no material impact on the environment.

I just wanted to follow up with a question about the shippers. You said that they support you, they're watching what's going on, but it sounds like they will only support you so far. Could you characterize the difference between the refiners that are on the receiving end and the folks like Sun Core who may be on the shipping end?

Make no mistake on the shipping end, that the Canadian Oil sands is the second largest, in some places people would say the third largest source of crude oil in the world. It's a very important source of energy for Canada, for North America, and for the world. It will get developed, and it will get developed responsibly.

To the extent that the US denies access of Canadian oil into US markets, Canada will find alternate markets for its crude oil. So those shippers will only wait so long, and then they will start looking for alternate markets. Similarly, the refiners can only wait so long for Canadian crude oil to come into their marketplace, and as I said, Bakken crude oil, and, in the case of this project, we will open up the bottleneck from Cushing, Oklahoma, to the Gulf Coast as well.

If those options aren't available, refiners will look for other options. So on both sides the US is going to continue to refine 15 million barrels a day and 10 million barrels a day of that is going to be imported. If it's not imported from Canada we'll see increased tanker traffic into the Gulf Coast. That's the only possible thing that could happen.

Similarly in Canada, if we can't market the oil into the United States, that oil will get developed. We'll see increased tanker traffic off the west coast of Canada moving to alternative markets. That alone, I think, is reason for common sense here.

Having increased tanker traffic moving off the west coast of Canada and increased tanker traffic moving into the Gulf Coast of the United States, obviously increases the chance of environmental risk. At the same time, given that those tankers are fueled by Bunker Sea fuel oil, we'd see an increase in greenhouse gas emissions. So we'd see a net negative impact to the environment as a result of that kind of decision.

We'd see a reduction in energy security in the United States, and we'd deny thousands of jobs and economic stimulus. That just doesn't seem to make any common sense. So our shippers recognize that is a very, very strong value proposition for both Canada and the United States and are willing to hang with us because it's the right thing to do. How long they hang with us I think is dependent upon how long they think that it will take to get to that right answer.

L. C. Ross, Daily Oil Bulletin

This refers to the Marcellus facilities. How soon do you actually anticipate re-filing that? Could you be a bit more specific?

We'll be filing before the end of the year.

Would that delay have any effect on project coming in from the south, bringing down Marcellus out of the state?

We think we can keep the project on schedule with that time frame.

Rebecca Penty, Calgary Herald.

I have a question about the Alaska pipeline and conversations with Governor Parnell. I apologize if you addressed this earlier, but just looking for a little but more detail on whether the market has changed in the United States. We keep hearing about this glut in gas supply due to shale. Has the market changed since the project was proposed that it would make TransCanada favor LNG off the west coast instead of shipping gas from the lower 48 states?

There's no question that the market has changed over the last 24 months. Shale gas has determined to be in very abundant supply and economically accessed. That said, our view continues to be that the lower 48 will continue to need gas moving forward. It's about an 80 billion cubic feet a day market. Supply declines at 20% a year, so we have to replace around 15 billion cubic feet a day every year on a go-forward basis in the lower 48.

Shale gas will make up a large portion of that 15 billion cubic feet a day of additional gas that we need every year. But if you think about that over a five-year time frame we have to replace 100% of the supply in the lower 48 every 5 years. Over a 10-year time frame, which is more the kind of time frame we've been talking about for northern gas, you have to replace all the supply in the lower 48 twice. So I think there's still a strong case to be made for the lower 48.

At the same time, we're seeing an increase in demand for international LNG, and those producers in Alaska obviously have an interest in international trade in LNG. The largest producers being Conoco Phillips, BP, and Exxon Mobil. They have to make a decision as to which market they think is better for that gas over the long haul. The gas is currently being produced, and it's being re-injected. Eventually that gas will be turned to a market.

Under the AGIA legislation, under our proposal, we said we would move the gas to whatever market those producers ultimately decide they want to move it to. And certainly there's discussion amongst those producers as to which market that they want to go to. We've been working with ExxonMobil over the last year or so in moving to a lower-48 solution. We continue to have the dialogue on other options, and if at the end of the day that's the direction producers want to go then we would move there as well.

Through our license with the state of Alaska, we have ongoing communications with Alaska on exactly what direction that gas may take. It's a complicated large-scale project which is going to require careful analysis on these kinds of things before an ultimate decision is made, and that's what we continue to look for. We remain flexible as a company. We're market-driven. We'll move the gas to wherever the market decides it wants to move the gas to.

Is it becoming clear where producers want to move the gas, whether it's LNG or lower 48?

It's become less clear with the, as I said, the advent of shale gas -- the abundance of shale gas -- and the difference in pricing between North American markets and international markets. Those fundamental changes in the marketplace would obviously cause those producers to think thoroughly through what their options are, and at the current time, they haven't decided which option best fits their long-term needs.

These are decisions that you make today and affect where the gas is going to go 10 or so or more years from now, and that's difficult forecasting. So it's not something that you come to an immediate answer very quickly on, and you have to be careful and thorough thought and analysis has to go into this kind of decision making.

Paul Tullis, Bloomberg Business.

I wanted to give you a chance to correct the record on some of the statements made by opponents. You mentioned that they are really in truth opposed to oil in general and not just the route. There's been a lot of statements that opponents have made. I wonder what has really struck you as some of the most egregious?

Well, boy, there's a fairly long list. We find it interesting that among the more active opponents of Keystone XL would be the Sierra Club, which clearly is not looking for a route change. They will only be satisfied with a non-approval of the pipeline. If you want to get into some of the mistruth's being circulated, you could go with things such as the oil is heated, the oil is more corrosive than regular oil, the oil has more sediment in it, which would scour the inside of the pipe. All of these statements are completely untrue.

They have been debunked repeatedly by independent scientific analysis, and yet our opponents continue to persist with these allegations in the hope of scaring the people in the areas that the pipeline will pass through. Obviously one of the largest in Nebraska, we've seen allegations that this pipeline will purportedly poison thousands of wells in Nebraska.

Just to use a few numbers, the Ogallala Aquifer overlies some of the most productive oil-producing reservoirs in North America. Something like 6 or 8 states. Since 1950, 30 billion barrels of oil have been produced through wells through the aquifer and transported safely through pipelines across the aquifer. Any suggestion that TransCanada building a state-of-the art pipeline is going to have a different experience is just patently false.

We could add numerous things to the list that we're dealing with on a daily basis that are mainly targeted at discrediting the process itself. They are targeted at discrediting the regulators, discrediting our employees, discrediting the company -- all in an effort, I believe, to stop the oil pipeline project. I believe with an intent that would lead to a reduction in the development of the Canadian Oil Sands, and that's the target.

They include the allegations around caustic oil. This oil is no different than any other oil. We've faced allegations of collusion with the Chinese to export the oil off the Gulf Coast of the United States. That's ludicrous. That is not going to happen. There's no bitumen that is going to be exported.

Collusion with the Coke brothers -- I can tell you that Coke isn't a shipper. I've never met the Coke brothers before. Collusion with Midwest refiners to increase the price of gasoline in the Midwest. From my perspective, if you bring more supply into a marketplace, and all other things being equal, the only direction prices can go is down. Obviously, if we supply another million barrels a day to the US, we'll see prices go down.

As Alex mentioned, those that are opposed to the project would say that the pipeline is a fuse to the largest carbon bomb in the world. Our view would be is that patently false, and that's been determined to be a falsehood. It's a continuous process of dealing with these allegations to discredit the process and the regulators, and we have worked very diligently with the authorities to provide them with accurate information on a timely basis and we'll continue to do so.

Nathan Vanderklippe, The Globe and Mail

The 25% of XL that you are devoting to US crude, is that an increase over previous estimates? Does that mean backing out any Canadian oil?

Those are identical to what we have been talking about for some time.

We have no further questions at this time. I would now like to return the meeting over to Mr. Moneta.

Thanks very much, and thanks to all of you for your interest in TransCanada. We very much appreciate your time and look forward to talking to you in the not too distant future. Bye for now.

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.