Kinder Morgan Energy Partners LP (NYSE:KMP) gave the green light to a $5-billion expansion of its existing Trans-Mountain pipeline on April 2012, from Edmonton to the Pacific coast near Vancouver. If the regulatory application process is successful, construction of the new pipeline could begin as early as 2016 with the commissioning expected in 2017. Therefore, the current capacity of 300,000Bbls/d would rise to 850,000Bbls/d, surpassing the capacity of Enbridge Inc (NYSE:ENB)’s Northern Gateway plan.
Source: Kinder Morgan Energy Partners LP (NYSE:KMP)
Enbridge Inc (NYSE:ENB) and Enterprise Products Partners L.P. (NYSE:EPD) completed a project to reverse the flow direction of the 500-mile, 30-inch diameter pipeline in May 2012, allowing it to transport crude oil from the bottlenecked Cushing, Oklahoma hub to the vast refinery complex along the Gulf Coast near Houston. The Seaway pipeline is a 50/50 joint-venture between Enterprise Products Partners L.P. (NYSE:EPD), the operator, and Enbridge Inc (NYSE:ENB). The pipeline has a capacity of 150,000Bbls/d along a route parallel to Keystone, directly competing directly against TransCanada Corporation (NYSE:TRP)’s Keystone pipeline.
Source: Seaway Crude Pipeline Company LLC
Bottom Line
These developments raise the possibility that Canada’s two leading pipeline companies (TransCanada Corporation (NYSE:TRP) and Enbridge Inc (NYSE:ENB)) can lose out to American rivals in the race to get fast-rising oil production from Alberta, Saskatchewan and North Dakota to higher paying refiners on the Gulf Coast, Asia and California. Then much is at stake for these companies, waiting for the political game between proponents and opponents of the project to come to an end. Keystone XL needs presidential approval because it crosses a national border. It has been pending with the administration since 2008 and is now undergoing a second round of review by the State Department.
Notably, the Wednesday voted bill faces an uphill battle because it would have to pass the Senate with enough votes to overcome a promised veto from President Obama. Therefore, the push from the House of Representatives does not appear as an antidote to the endless studies and the final approval process. Nevertheless, I believe that Keystone XL will get approved in its due time, when President Obama will decide it, a decision that could be delayed a little more giving the recent events.
The potential contracted EBITDA that would be generated annually by Keystone XL is estimated at $1.02 billion, with the entire Keystone pipeline system generating about $1.7 billion of contracted EBITDA when it is all completed. Therefore, now is the time to act for investors looking for an energy stock with good upside potential. Adding to this opportunity, TransCanada Corporation (NYSE:TRP) yields currently a 3.74% dividend which is appealing compared to its industry average of 2.19%. This opportunity will pass only once, time to get on board.
The article A Push From the House of Representatives for Keystone XL originally appeared on Fool.com.
Stephan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
