WASHINGTON – Shares in TransCanada Corp. (TSX:TRP) are falling amid reports that suggest Keystone XL, Canada’s controversial cross-border pipeline project, is about to be rejected by the U.S. government.

Washington political publication The Hill says the U.S. State Department is set to announce this afternoon that it won’t approve the $7-billion TransCanada plan.

The project, designed to transport bitumen from northern Alberta to Gulf Coast refineries, has been a major challenge for U.S. President Barack Obama in an election year amid opposition from environmental groups.

TransCanada and its supporters, including Prime Minister Stephen Harper, have argued for months that the Keystone XL pipeline from Alberta to the Gulf Coast is vital to the United States because it will provide energy security and jobs.

Originally, TransCanada had expected to receive approvals from the U.S. State Department – required because the pipeline crosses an international boundary – by the end of 2011.

But the department said in November, amid widespread protests by environmentalists and others opposed to the pipeline, that it would delay its decision until after the 2012 presidential election.

The news comes amid public hearings in Canada into another controversial proposal, the Enbridge Northern Gateway pipeline project between Alberta and the B.C. coast.

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