Keystone XL Pipeline Delayed Again: What Companies Will Suffer?

The U.S. government has held off (again) on issuing a permit for the Keystone XL pipeline. Tar sands oil won't flow to the Gulf anytime soon. Many businesses and the economy could be impacted.

Apr 23, 2014 at 11:42AM

The U.S. government has again held off making a decision on the controversial Keystone XL oil pipeline. The State Department announced recently that litigation currently pending in the Nebraska courts is one reason for the delay. It's likely that the issue will not be settled until after national, state, and local elections later this year.

Approval of Phase IV of the Keystone system had been previously delayed a number of times.

The new pipeline, originally proposed in 2008, is basically a replacement for the piece built during the first phase of the project. The newly constructed portion will travel southeast from the tar sand oil-fields near Hardisty, Alberta, Canada, through Montana, where shale oil can be introduced, to Steele City, Nebraska. Two other pipelines completed earlier in the project will then move the crude south through Cushing, Oklahoma, to refineries in Texas. The finished products would be gasoline and diesel.

Images

Source: Wikipedia

Greens don't like it
The section of the 1,179-mile long, 3-foot diameter pipeline that travels though Nebraska has been the contentious part of the entire project, which has been challenged by environmental groups and activists. Heavy lobbying of the Obama administration and Congress and lawsuits filed with various courts appear to have been effective in delaying the permit.

Keystone Protests

Source: Wikipedia

The concern is that the use of "dirty" oil from the tar sands will contribute to climate change, pollute water and land, and harm wildlife in the event of a spill.

However, an environmental impact study performed as part of the approval process indicated that using the addtional oil that flows through the pipeline would not significantly change the current dynamics of the fossil fuel equation, so it is looking more and more like politics is taking over the process.

Losing proposition

TransCanada Corp. (NYSE:TRP), owner of the pipeline system, could suffer as the result of the delay, while other companies, like Union Pacific (NYSE: UNP) and Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), might benefit because of the inaction.

The lack of a timely decision has created a lot of uncertainty for TransCanada. It is difficult to make long-range plans when a centerpiece of the corporate strategy has been delayed for an extended period of time. The hold-up is also likely supressing the stock price, which has been lagging the overall market, so investors are being affected too. 

The lack of an approval also is a jobs killer. Up to 9,000 construction jobs and over 100,000 spin-off positions could be created by the project.

In addition, if the oil is not refined in the U.S. there could be a hit to economic growth. It's possible that the oil companies drilling in the tar sands would move the crude to the Canadian west coast and then ship it to China and elsewhere. The U.S., which is rapidly becoming an energy dynamo, might have to depend more on foreign sources of oil. 

It is a losing proposition for many stakeholders without the Keystone XL in place.

Someone could win 
If there are any winners in the process it could be railroads and railcar manufacturers. Trains might be called upon to move crude oil to the U.S. refiners or even to ocean-going tankers, which would then transport the product to Asia from Canadian ports.

The movement of oil by rail has increased as the result of the energy boom in North Dakota. Lack of pipeline capacity from the Bakken shale region allowed railroads like Union Pacific and BNSF, a unit of Berkshire Hathaway, to grow their businesses. These companies can probably easily adapt to increased demand to ship tar sand oil out of Alberta. 

Foolish conclusion
Yet another delay in the approval of the Keystone XL pipeline can only lead to more uncertainty for TransCanada Corp. and its investors. Expect the uncertainty to last as the politics surrounding the pipeline continue to swirl.

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Mark Morelli has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers