Kinder Morgan's Pipeline Faces Threats From Political Groups

Kinder Morgan Inc.’s (NYSE:KMI) $5.8-billion oil pipeline expansion is threatened by the political overtures of British Columbia, which is not in favor of this project and vows to join the legal fight against it by teaming up against Canadian federal approval of the project.

The expansion is clouded by political uncertainty of the province of British Columbia through which the pipeline passes. Per the environment minister, a seven-fold increase in heavy oil tankers in B.C.’s coastal waters is a big risk to its environment, economy and to thousands of existing jobs.

The current political landscape in British Columbia is fractious and in disfavor of the Trans Mountain Pipeline. Majority of the voters sided with the Alliance of New Democratic Party and Green Party, opposing the Trans Mountain pipeline. The Green Party is trying to avoid risks connected with the transportation of diluted bitumen in British Columbia's coastal areas.

The pipeline received its federal approval during the rule of the incumbent Liberal party, which failed to secure majority against the Alliance in the election held on May 9, 2017.

The Canadian unit of Kinder Morgan had also raised C$1.75 billion ($1.4 billion) in May to help it fund its expansion.

Per David Eby, the province’s new attorney general, there are 21 parties challenging the National Energy Board’s approval of the project in court.

Thomas Berger, a former Supreme Court judge, has been appointed by the province to direct it as it seeks to become an intervenor in a judicial review of the November decision by Prime Minister Justin Trudeau to back the project.

The company aims to move forward with its plan in September. However, Kinder Morgan still hasn’t fulfilled five of the eight conditions required by the environmental assessment certificate issued by the previous B.C. government. Therefore, the company cannot begin construction on public lands until all the stated conditions are met.

The Canadian unit of Kinder Morgan owns the 1,150 km Trans Mountain Pipeline, which carries crude and refined oil from Alberta to the west coast of British Columbia.

The construction of the expansion project that could begin in September will help the company to nearly triple the size of the existing pipeline. The $7.4-billion development will help Kinder Morgan to carry 890,000 barrels a day of crude from Edmonton, Alberta to Barnaby, British Columbia.

Over the last three months, shares of Kinder Morgan have lost 4.1% compared with the industry’s decline of 3.0%.

Kinder Morgan currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Range Resources Corp. (NYSE:RRC) , Braskem S.A. (NYSE:BAK) and TransCanada Corp. (TO:TRP) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources delivered a positive earnings surprise of 250.00% in the preceding quarter. The company beat estimates in three of the trailing four quarters with an average negative earnings surprise of 94.22%.

Braskem delivered a positive earnings surprise of 107.79% in the quarter ending September 2016.

TransCanada delivered a positive earnings surprise of 12.00% in the preceding quarter. It surpassed estimates in two of the trailing four quarters with an average positive earnings surprise of 4.06%.

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