US Oil, Gas Pipeline Companies Seek New Markets, Sources Of Funding


The NEPA process is very troublesome, he stated.

For its part, pipeline construction that runs along private land has its own impediments, with private landowners enhancing raising problems over the use by the pipeline business of eminent domain to secure right of way, even in such industry-friendly states as Texas, Pugliaresi stated.

In quickly producing oil-producing plays such as the Bakken Shale of North Dakota, the lack of pipeline facilities to move the product to market is offering risegenerating the use of railroads, with all of the fundamental dangers that requires.

Pugliaresi commented that while delivering crudepetroleum by rail is a short-lived solution to the transportation problem, building of required infrastructure has been slow to meet the needs of the market, as lots of energy producing companies are cautiouswatch out for the lasting dedication a pipeline stands for.

Rails like dating, while a pipeline resembles marriage, he stated.

Last month, the world of pipeline funding was shocked when pipeline giant Kinder Morgan revealed plans to desert the tax-advantaged master limited collaboration structure that had actually permitted it to turn into one of the largest facilities companies on the planet in favor of ending up being a conventional C corporation.

Nevertheless, panelists at the conference said that Kinder Morgan, s scenario was distinct to that business and they do not anticipate a rush by other pipeline gamers to jettison the MLP structure that has served the industry well as a financing car for the last lots or so years.

Gabriel Moreen, senior expert at Bank of America/Merrill Lynch, stated Kinders idea happened as a result of a winners curse, after the business has actually placed itself in the great tier or the industry for a years and a half.

Distribution rights tend to become a larger burden to the MLP, raising the expense of capital for the MLP, he stated.

Another deal in which a pipeline company moves far from the MLP area comparablejust like the Kinder Morgan deal is unlikely to happen over the near or medium term, Moreen said.

On the other hand, the realproperty investment trust, which like the MLP offers tax advantages to investors, is progressively ending up being popular as a funding automobile for facilities business, Jeff Fulmer, senior vice president CorEnergy, stated on the sidelines of the conference.

Its a pass-through tax entity that, as opposed to an MLP permits an investor a streamlined tax experience in the form of a 1099 form at the end of the year, rather than a K-1, he stated.

Thus, the REIT offers a means for investors not just in their taxable accounts, but likewise significantly in their tax- exempt accounts to get involved and purchase United States energy infrastructure, Fulmer commented.

By utilizing the REIT structure energy infrastructure business can acquire exposure to a more comprehensive variety of financing options, he stated.

There are institutional investors that for excellent factor wantwish to participate in the United States energy industry, but they may have an aversion to buy other ways, whether it is with private equity or MLPs, he stated. In addition, the REIT form of financing permits US pipeline business to tap overseas sources of capital. A REIT is something that everyone is comfortable with, not just here but also abroad, Fulmer stated.

This provides United States facilities business the alternative of attracting foreign financial investment without ceding to foreign control of their properties, he stated.

Its not the exact samelike a foreign business being available in and having and operating wells.

— Jim Magill, jim.magill@platts.com
— Modified by Richard Rubin, richard.rubin@platts.com

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