Investors aren’t waiting around for Obama’s decision anymore. They’re buying up stocks — and these are some of the best stocks to own while the pipeline is delayed…
It’s been dragging on for five years.
Since it was first proposed back in 2008, the advancing of the Keystone XL Pipeline expansion has been anything but smooth.
What was supposed to be a game changing solution to increase insufficient pipeline capacity in the US has instead become a nightmare of political red tape – with environmentalists, celebrities, and politicians protesting its construction.
Despite the problems, two of four phases of the Keystone Pipeline system are already in operation, and a third phase from Oklahoma to the Texas Gulf Coast is under construction.
But it’s the fourth and final Keystone XL phase from Canada to Steele City, Nebraska that’s caused the biggest controversy.
Blocked By The President
For those who don’t know, the proposed pipeline route is to run from Hardisty, Alberta, through Montana and South Dakota, and end at Steele City.
If completed, phase 4 would have an initial capacity of 830,000 barrels per day from the Alberta oil sands and help reduce American dependence on oil from Venezuela and the Middle East by up to 40%.
Sounds like a no-brainer, right?
Last year however, the President shot down the application presented by Keystone’s operator, TransCanada Corporation (TSX:TRP), citing environmental concerns for the Sand Hills region of Nebraska where the pipeline would cut through.
In March, an environmental report by the US Department of State further highlighted the changes that were made which would significantly reduce impacts along the route.
On top of that, there’s been mounting pressure from many Republicans to push the proposal through…
But so far, the President still has not made the call.
Originally expected to be built by this summer, there’s been no indication from the State Department that a decision will be made anytime soon.
One official close to the matter estimates the earliest date may be sometime in November or even early 2014, as the President wants to “look under every stone.”
In other words, the Administration will continue to stall its decision for months to come…
…Which presents and interesting opportunity for investors to turn a quick profit in the short to medium term…
Best Stocks To Own Right Now:
You see, whether the Keystone gets approval or not, energy companies still need to get their crude to market.
And one of the biggest beneficiaries from the Keystone pipeline debacle has been the rail industry.
Over the past year, rail stocks have soared on rising transport demand and higher profits as oil-by-rail shipments have skyrocketed.
So far, the delay of Keystone XL has led to a 47% increase in rail shipment of oil, according to Canadian Ambassador to the US, Gary Doer.
Investors who complemented their midstream stocks last year by buying into the likes of Canadian Pacific Railway Ltd. (NYSE:CP) and Union Pacific Corp. (NYSE:UNP) are now sitting on double-digit gains.
If a decision isn’t made in the next few months, it’s likely that Keystone’s projected in-service date of 2015 won’t be achieved — meaning far bigger gains for the rail industry are in store.
But while that may have investors perking up, it’s not the rail companies themselves that I am most excited about.
Rather, I’m seeing even bigger opportunities in the beaten-down midstreams operators that are partnering with these rail companies.
All Aboard Oil-By-Train
In a recent report by Arc Financial Corp., more than 700,000 barrels per day of new rail capacity is expected to be built by 2015 in Canada alone:
Likewise, more capacity is being planned in the U.S. as well.
BNSF Railway Co. said this week it plans to invest $115 million on rail projects in Montana this year, including the replacement of nearly 100 miles of rail. A $220 million investment in North Dakota finances the replacement of about 315 miles of rail this year.
The industry is clearly booming. And Arc notes that a number of midstream companies have recently established strategic JV’s with rail operators and producers to build new terminals to transport Canadian crude across North America.
By diversifying beyond pipelines, midstreams are seeing the construction of railways as a critical strategy to boost their share value.
One such company that’s set to profit from this approach is Calgary-based Gibson Energy Inc. (TSX:GEI).
In early August, Gibson signed an agreement with Houston-based US Development Group LLC to build a rail-loading facility near Hardisty, Alberta, which will connect to Gibson’s nearby petroleum terminal.
Upon completion in Q1 2014, the facility will be able to handle two unit trains per day of up to 120 railcars each. Capacity is expected to hit 140,000 barrels per day.
With construction for this and other rail projects expected to take place for at least the next two years, oil-by-train is only going to pick up steam… literally.