TransCanada's intraday stock chart. The company's Keystone XL pipeline project was rejected Wednesday.

Shares in TransCanada Corp. slipped Wednesday after the U.S. State Department rejected the company's massive Keystone XL pipeline project.

The agency said Wednesday it won't approve the $7-billion TransCanada plan as it's currently laid out. 

TransCanada shares closed at $41.89 on the TSX on Wednesday, down 47 cents or a little over one per cent for the day. That's a recovery of sorts from earlier, when the shares had dropped as much as five per cent within minutes of the initial reports.

The shares appeared to be buoyed somewhat by the company's reaction, which breathed new life into the plan. In a statement, TransCanada said it intends to apply again, giving new life to the contentious project. "While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL," TransCanada CEO Russ Girling said. 

"Plans are already underway on a number of fronts to largely maintain the construction schedule of the project … We will re-apply for a presidential permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014," Girling said.

Contentious project

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 the Keystone's backers say the massive project will create jobs and ensure America's energy security for decades to come.

The State Department was supposed to rule on the issue by the end of 2011, but in November, facing mounting environmental opposition, the agency said 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.

With files from The Canadian Press