There was some good news for the oil and gas industry last week, as the Nebraska Supreme Court gave the Keystone XL the green light, confirming an earlier decision by the Nebraska Public Service Commission for an alternative route for the pipeline.
While TC Energy (TSX:TRP)(NYSE:TRP) president and CEO Russ Girling noted this was an “important step” toward “building this vital infrastructure project,” he didn’t offer any insight into what this could mean for the company and if construction would go ahead.
What complicates the project is that it runs through multiple states, and while getting the okay from Nebraska is an important step, there are still unresolved issues in Montana. However, with the company acknowledging that it would be too late to begin any major construction this year, even if there is progress in Montana, the earliest we could possibly see the pipeline start to get built is in 2020, although there’s been no confirmation of whether TC Energy is planning for that.
There’s been a lot of back and forth relating to the Keystone XL over the years and it’s hard to be convinced of if or when construction will actually happen. Investors have long been skeptical of the industry, and it’s hard not to be with approvals continuously being met with appeals and the result being a very long, drawn-out process that leaves investors with a lot of uncertainty.
It’s one of the reasons that the oil and gas industry has struggled, particularly in Canada, where investors have not shown much bullishness in stocks, even when oil prices were stronger.
The upcoming U.S. election is another risk for TC Energy
One of the reasons that the Keystone XL didn’t make any real progress over the years was that the government in the U.S., until recently, wasn’t in favour of approving the pipeline. Even now, with President Donald Trump showing support for the Keystone XL, it’s still been a struggle to get the pipeline going, and he’s more than halfway through his term.
The danger is that if Trump isn’t re-elected in next year’s election, the pipeline could again become in jeopardy. Multiple Democratic candidates have pledged to oppose the pipeline with Elizabeth Warren calling on permits to be revoked for the Keystone XL as well as the Dakota Access.
Who will end up being in power in a couple of years could end up having a significant impact on whether the Keystone XL is able to get built.
Waiting game continues for investors
Unfortunately, for TC Energy investors, this means that there’s little to take from these wins, as they could all be for naught if there’s a change in power in the U.S. and a new president blocks the pipeline from being built.
However, given the pessimism investors likely have for the industry by now, odds are that few are expecting that anything will happen. Despite the progress the pipeline has made, TC Energy’s stock has risen by just 5% over the past two years and there’s likely not going to be any added excitement on these recent developments. But with the stock providing investors with a good dividend, it may be worthwhile to hang on to TC Energy for the time being.
