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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Trump’s Infrastructure Push Is Set To Benefit These Companies

Trump’s move this week to restart the building of Keystone XL and the Dakota Access pipelines are an indication of the increasing help infrastructure is likely to get from the new Trump administration, impacting the prices that consumers will pay for oil and gas. It should also impact a good number of pipeline companies that have been waiting for approval of new lines, mostly to move natural gas. For a long-term, conservative play in these very overheated markets, they could be a good cornerstone for investment.

Trump’s executive order on Keystone doesn’t ‘green light’ the project immediately – it puts a limit on review times and opens up a renegotiation with TransCanada on the resumption of the pipeline’s construction. Trump has mentioned that he was looking for a 25% surcharge for the US for pipeline revenues and for the project to use nothing but US steel, both of which are frankly absurd requests – but it does indicate that the pipeline this time will likely be built, after being blocked by the Obama administration.

More importantly, it signals a priority of the Trump administration to ‘fast track’ other new infrastructure projects for oil and gas, and here there have been some legitimate slowdowns that could be eased. Currently 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 lobbying and 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 plays. Rover is planned to move westward through Ohio and north into Michigan, a route that is currently underserved and would help to ease the chronic natural gas gluts in overproducing areas of Eastern Ohio and Western Pennsylvania. Currently, Rover has been under review for over two years. National Fuel Gas (NFG) complained on Wednesday of the delay that has forced their start date for their 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.

To be clear, the quick approval of pipelines here in the US doesn’t solve the natural gas glut problem, 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 (SWN) have been experiencing.

A general push from the White House and from a Republican Congress towards faster approval of pipelines already preparing for service and others that are similarly planned would help the stocks of both 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 with the controversial NY State Constitution Pipeline, temporarily banned from completion by Governor Cuomo.

A new moment of infrastructure buildout is upon us with the new Trump administration, giving an opportunity to invest wisely in both the pipeline companies that are awaiting approval for new extensions like ETP and NFG, as well as the natural gas companies like RRC, COG and SWN, equally waiting for their takeaways capacity to increase and ease their price discounts.

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