Nebraska Okays TransCanada Keystone XL On Alternate Route

TransCanada Corporation’s (TO:TRP) Keystone XL Pipeline has finally received a regulatory approval from Nebraska commissioners after a prolonged period of delay. The decision marks a partial victory for Transcanada since the regulators have approved the project on an alternative route rather than the company’s proposed route.

Challenges Galore

The $8-billion Keystone XL pipeline with 830,000 barrels' capacity was designed to improve oil extraction from Alberta’s oil sands and the Bakken region in the U.S. refineries. The initial phase of the pipeline project was finished in 2011. A proposal was made to add another 1179 miles to the 2100 mile long pipeline. However, the proposed extension was strongly opposed by environmentalists and politicians owing to risks involved of transporting bitumen along with crude to the United States as this might emit greenhouse gases.

In November 2015, President Obama rejected TransCanada's application to construct the Keystone XL pipeline on fears that it would weaken United States’ position in the international climate change negotiations. However, in 2017, the project was cleared by President Trump as he was of the opinion that development of such pipelines can revive the economy.

However, despite Trump administration's clearance, the pipeline has been facing regulatory obstacles, route challenges and opposition from landowners, environmentalists and Native American tribes.

Recently, the company had to stall operations at the existing Keystone pipeline, following a spill of around 5,000 barrels in Marshall County, SD, highlighting the risk posed by the pipeline expansion.

The pipeline project which had been already granted approval by Canada, Montana and South Dakota, had been eagerly awaiting a federal ruling from the Nebraska state.

What Lies Ahead?

Nebraska commissioners’ recent verdict, granting approval to the project on an alternate route, created new problems. Per the company, the originally proposed route was most efficient. The alternate route will likely
balloon costs and delay the disputed pipeline project further. The alternate route calls for a 63-mile detour and attempts to add 5 miles of pipeline along with additional transmission lines and pumping stations. This will be done avoid regions that are ecologically critical. However, it is unclear as of now whether the alternate path will require any additional approvals.

TransCanada and industry advocates as well as governments in Edmonton and Ottawa welcome the approval as they believe that the pipeline is one of the key pillars of North America’s energy securities. The project can create around 42,000 jobs nationwide. However, environmentalists are unhappy with the move as they believe that the pipeline would encourage use of carbon-heavy tar sands oil, increasing global warming.

TransCanada announced that it is set to begin the review of Nebraska’s decision to examine the economics of the project. The company will thereby take an official call regarding construction and completion of the pipeline after carefully reevaluating the project’s viability and schedule.

Zacks Rank and Stocks to Consider

Headquartered in Alberta, TransCanada mainly focuses on natural gas transmission and power services. Its pipeline transports majority of Western Canada's natural gas to the growing markets in Canada and the United States.

TransCanada currently carries a Zacks Rank #3 (Hold).

TransCanada Corporation Price

TransCanada Corporation Price | TransCanada Corporation Quote

Some better-ranked stocks in the oil and energy sector are ConocoPhillips (NYSE:COP) , Denbury Resources Inc. (NYSE:DNR) and Northern Oil and Gas, Inc. (NYSE:NOG) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based ConocoPhillips is a major global exploration and production company. The company delivered an average positive earnings surprise of 152.3% in the last four quarters.

Plano, TX-based Denbury Resources is an oil and gas company. The company delivered an average positive earnings surprise of 125% in the last four quarters.

Minnetonka, MN-based Northern Oil and Gas is an independent energy company. The company delivered an average positive earnings surprise of 175% in the last four quarters.

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