Trump's OK on Pipelines May Unblock Investing Potential

 | Jan 30, 2017 | 3:00 PM EST
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President Trump's move last week to restart the building of Keystone XL and the Dakota Access pipelines is an indication of the increasing help infrastructure is likely to get from the administration, which will also impact a good number of pipeline companies that have been waiting for approval of new lines, mostly to move natural gas. In this overheated market, which should drift lower, they could be a good cornerstone for investment. 

Trump's executive order on Keystone and Dakota Access doesn't "greenlight" the projects -- it opens up renegotiations on the resumption of both pipelines' construction. Trump has mentioned that he was looking for a 25% surcharge for the U.S. for pipeline revenues for Keystone and for the project to use nothing but U.S. steel, both of which are frankly absurd requests -- but I believe that this time, the pipeline will likely be built. 

It also signals a priority of the Trump administration to fast-track other infrastructure projects, and here there have been some legitimate slowdowns that could be eased. At least five major gas pipelines are caught up in lengthy reviews from the Federal Energy Regulatory Commission (FERC). Bloomberg estimates that the average time for approval of new pipelines by FERC has risen to 429 days, courtesy of regulatory pressure and environmental protest. 

One such project is the Rover pipeline, proposed by Energy Transfer Partners (ETP) , designed to move natural gas out of the Marcellus and Utica shale and has been under review for more than two years. Rover is planned to move westward through Ohio and north into Michigan, a route that would help ease the chronic natural gas gluts in overproducing areas of eastern Ohio and western Pennsylvania. 

National Fuel Gas (NFG) complained on Wednesday of the delay that has forced its start date for the Northern Access pipeline expansion to the spring of 2018. October saw a delay for the Williams Partners' (WPZ) $3 billion Atlantic Sunrise pipeline, which would give better access from western Pennsylvania to New Jersey and parts of Delaware and Virginia. 

The quick approval of pipelines in the U.S. doesn't solve the natural gas glut, but it does help immensely in removing the basis discounts that many natural gas producers in the Marcellus, particularly Range Resources (RRC) , Cabot Oil and Gas (COG) and Southwestern , have been experiencing. 

A general push from the White House and a Republican Congress toward faster approval of pipelines already preparing for service and others that are similarly planned would help the stocks of the pipeline companies and the natural gas companies that are scheduled to take advantage of them. It might also break the balance of support and protest against other pipelines that have been held back by state governments; for example, the controversial New York State Constitution Pipeline, temporarily banned from completion by Gov. Andrew Cuomo. 

A new moment of infrastructure buildout is upon us with the Trump administration, giving an opportunity to invest wisely, particularly with the pipeline companies that are awaiting approval for new extensions like ETP and NFG, as these pipeline master limited partnerships rely less upon the underlying stock and gas markets for their continued success. And at this moment of unsure price action in both, it might be a good time to get conservative with nicely paying infrastructure plays.

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