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LONDON, UK / ACCESSWIRE / March 27, 2017 / Active Wall St. blog coverage looks at the headline from TransCanada Corp. (NYSE: TRP). The US Department of State (DoS) has signed and issued a Presidential Permit for TransCanada's Keystone XL Pipeline (KXLP) on March 24, 2017. The Presidential Permit signed by Thomas A. Shannon, Jr., Under Secretary of State for Political Affairs, allows TransCanada to "construct, connect, operate, and maintain" the KXLP across the US-Canada border to import crude oil from Canada. Register with us now for your free membership and blog access at:

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One of TransCanada's competitors within the Oil & Gas Pipelines space, ONEOK Partners, L.P. (NYSE: OKS), reported on February 27, 2017, its Q4 and full-year 2016 financial results. AWS will be initiating a research report on ONEOK Partners in the coming days.

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The current decision is in response to TransCanada's reapplication on January 26, 2017, to the DoS after the relevant authorities determined that the Presidential Permit could be granted as KXLP would be in national interest.

Calgary, Alberta based TransCanada is a Canadian energy infrastructure Company that has operations across the USA and Canada. It has a vast network of oil pipeline that supplies oil and gas across North America and it is also involved in power generation.

Commenting on the long-awaited order Russ Girling, President and CEO of TransCanada said:

"This is a significant milestone for the Keystone XL project. We greatly appreciate President Trump's Administration for reviewing and approving this important initiative and we look forward to working with them as we continue to invest in and strengthen North America's energy infrastructure."

The project approval is a part of President Trump's election promise of a 10-year, $1 trillion infrastructure package which supports the energy companies and promotes building of new infrastructure. In February 2017, President Trump had signed two presidential memoranda supporting both the Dakota Access Pipeline and the KXLP. In one memorandum, he asked the Army to review the Energy Transfer Partners (ETP) backed Dakota Access Pipeline and in the second memorandum he asked TransCanada to reapply for permission for the KXLP. Since both pipelines cross the US border, they require federal approval.

The proposed Keystone XL Pipeline

TransCanada's KXLP is a 1,179-mile (1,897-km) long, 36-inch-diameter crude oil pipeline, which originates at Hardisty, Alberta, and extends southeast through Saskatchewan, Montana, South Dakota and ends at Steele City, Nebraska. At Nebraska, it will be linked to the existing network of pipelines connecting the US refineries as well as port in Gulf of Mexico region. TransCanada's multi-billion dollar pipeline has the capacity to transport 830,000 bpd (barrels per day) crude oil from oil sands in Alberta, Canada to Nebraska in US, which would then be exported.

The project when completed has the power to change the economic condition of the entire region. The project will also benefit both Countries' governments. Canada will get a new and easily accessible market for its crude oil. US will reduce its dependence on oil from Middle East and strengthen its energy supplies. The pipeline is expected to generate thousands of jobs in US for its refiners.

Background

TransCanada had first applied for the construction of KXLP in 2008 with plans to open in 2012. However, the project faced political legal hurdles for the last many years. Finally, in 2015, the Obama Administration completely rejected the project after reviewing it for more than six years. According to the Obama Administration, the project was not in the national interest and that it would undermine the environment concerns including its impact on global climate change.

Hurdles ahead

TransCanada has a very long way to go before it can do the victory dance. The Presidential Permit for KXLP is just the first step in a long process which requires TransCanada to overcome legal hassles and get approvals from state regulators. The permit does not guarantee the completion of the project.

  • The landowners from where the pipeline is expected to pass through have used state laws to challenge the project earlier, and they are still opposed to the project.
  • States like Nebraska have yet to approve the project. TransCanada has applied to get necessary permits and approvals from Nebraska, Montana, and South Dakota states, which will further delay the project.
  • Environmentalists and Greenpeace activists have raised their cudgels against the project as it had been earlier rejected by the Obama Administration due to the negative impact of the project on the environment and influence on climate change. The project involving the development of Canadian oil sands crude requires more energy to extract and process endangers the drinking water resources in US.
  • In the last few years, the project has lost its financial appeal given the steep fall in prices of crude oil which are hovering around $50 per barrel. The domestic oil production in the US is also soaring and future demand for fossil fuel is threatened by growing awareness about climate change and consumer preference for energy efficient and environment friendly energy sources.
  • The opponents of the project feel that the ability to generate jobs are highly exaggerated as the majority of jobs will be created during construction of the pipeline and would be temporary and the actual permanent jobs created would be only around 50.
  • The Trump Administration will have difficulty in explaining to critics how a project denied permit by the earlier government on environment grounds could be justified by the current administration given that none of the issues related to the project have changed.

Stock Performance

On Friday, March 24, 2017, TransCanada's share price finished last Friday's trading session at $46.21, slightly down 0.11%. A total volume of 1.64 million shares exchanged hands, which was higher than the 3 months average volume of 952.88 thousand shares. The stock has advanced 1.19% and 27.20% in the last three months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 2.35%. The stock has a dividend yield of 3.64% and a market capital of $40.11 billion.

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SOURCE: Active Wall Street