First Pipeline “Casualty” of Trump Tax Cut Dissolves MLP Jun 29

In March, MDN brought you the news that the Federal Energy Regulatory Commission (FERC) had taken “significant action” to address the Trump tax cut legislation enacted last December (see FERC Takes Aim at Adjusting Pipe Rates in Light of Trump Tax Cut). FERC wants to be sure the tax cuts coming to electric companies and pipeline companies are passed on to consumers and pipeline shippers. The agency proposed new solutions to eliminate “tax loopholes” for natural gas pipelines. Closing these so-called loopholes will eliminate certain tax benefits for MLPs–master limited partnerships. Many pipeline companies (most) are organized as MLPs, which allows tax advantages to flow to investors. With certain tax benefits for MLP unitholders on the chopping block, all of a sudden some MLPs don’t look like such a hot investment anymore, at least on paper. Some analysts have speculated this may be the beginning of the end for MLPs. A few years ago Kinder Morgan got rid of all it’s MLP subsidiaries, combining them all into a single “C” corporation. In March, Tallgrass Energy, builder/operator of the mighty Rockies Express (REX) pipeline which flows Marcellus/Utica gas, announced it would do the same (see Tallgrass Energy Eliminating MLP – First “Casualty” of Tax Cut?). Yesterday Tallgrass MLP unitholders voted “overwhelmingly” to dissolve the MLP and merge it in with the corporation, which will happen later this week…
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Bye Bye MLP – Dominion Energy Merging in Midstream Subsidiary

The move to dissolve MLPs (master limited partnerships) and replace them with a corporate structure continues. In March, the Federal Energy Regulatory Commission (FERC) took “significant action” to address the Trump tax cut legislation enacted last December (see FERC Takes Aim at Adjusting Pipe Rates in Light of Trump Tax Cut). FERC wants to be sure the tax cuts coming to electric companies and pipeline companies are passed on to consumers and pipeline shippers. The agency proposed new solutions to eliminate “tax loopholes” for natural gas pipelines. Closing these so-called loopholes eliminates certain tax benefits for MLPs.
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Pipelines are Dumping MLP Structure but Royalty Firms Aren’t

For some time we’ve covered the story of MLPs–master limited partnerships–and how they are being phased out. An MLP is an alternative form of organizing a company (or subsidiary company), different from a corporation. The primary purpose of an MLP is for investors, who buy “units” in the MLP instead of shares of stock, so the investor can pay less in taxes. Trump’s tax cut, while benefiting the little guy (yeah!), disadvantages MLPs (boo!). Which has caused many pipeline companies organized as an MLP to give up that form of structure. Meanwhile, new companies are being formed to buy royalty rights–using the MLP structure! So while pipeline companies are dumping the MLP structure, royalty companies are embracing it.
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Boardwalk Pipeline Parent Taking Co. Private, Dissolving MLP

We write about Boardwalk Pipeline Partners every now and again. They don’t have a lot of pipelines in the Marcellus/Utica region–but what they do have is important. One of the pipelines operated by Boardwalk is the huge Texas Gas Transmission (TGT)–originally built from the Louisiana Gulf Coast to the upper Midwest to supply Illinois, Indiana and Ohio with natural gas. But then the Marcellus/Utica Shale happened and TGT needed to change strategies. Through a series of projects, TGT made the pipeline system bidirectional, so it could flow gas from the Marcellus/Utica to points south, going as far as the Gulf Coast. In May 2016 TGT began to flow up to 626 million cubic feet per day of Marcellus/Utica gas as far away as the Gulf Coast (see 626 Mmcf/d of Northeast Shale Gas Begins Flowing to Gulf Today). Little known fact: About half of that gas, some 300 Mmcf/d, goes to Cheniere’s Sabine Pass LNG export plant, where it’s super-cooled into LNG and shipped to other countries. Boardwalk is in a multi-year process of expanding TGT by another 384 MMcf/d of capacity. In April 2017, the company asked FERC for an extension to complete the project, until 2020 (see Texas Gas Asks FERC for Extra 2 Yrs on Northern Supply Access Proj). We bring you all of that information to point out Boardwalk’s importance to our region, and to introduce the news that the parent company that owns most of Boardwalk, Loews Corp., is in the process of “buying out” the MLP (master limited partnership) units it doesn’t already own, and then removing all MLP units (i.e. shares) from public trading. In other words, it’s going private. Why? Due to the Trump tax cut and subsequent FERC ruling that makes MLPs much less attractive as a form of organization than they once were…
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FERC Tax Decision Forces Williams to Restructure – No More MLP

It appears a decision by the Federal Energy Regulatory Commission (FERC) earlier this year that strips away the main advantages of the tax-advantaged master limited partnerships (MLP) structure is causing the MLP to go the way of the dodo bird. Because of the Trump tax cut, in March FERC reversed a previous policy and will no longer allowed MLP interstate oil and gas pipelines to include an income tax allowance in their cost-of-service rates (see FERC Takes Aim at Adjusting Pipe Rates in Light of Trump Tax Cut). Not long after, Tallgrass Energy, owner of the Rockies Express Pipeline, announced they would phase out their MLP structure (see Tallgrass Energy Eliminating MLP – First “Casualty” of Tax Cut?). As we predicted, it was the first of many to do so. Williams is now the latest midstream company to dump its MLP. Williams is essentially two companies–Williams (the corporation) and Williams Partners (the MLP). The MLP owns most of the assets. Williams Partners will be no more and instead, all of the assets will now live under the Williams (corporation) umbrella. Which shouldn’t surprise anyone. Once upon a time Williams had plans to merge the two together–but that all got mothballed when they ended up first fighting against, then trying to merge with Energy Transfer Equity (see Energy Transfer Makes “Indecent Proposal” to Buy Williams for $48B). FERC’s action in March provided the motivation for Williams to move forward with phasing out the Williams Partners MLP, which will cost Williams (the corporation) $10.5 billion to do…
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Tallgrass Energy Eliminating MLP – First “Casualty” of Tax Cut?

Last week MDN brought you the news that the Federal Energy Regulatory Commission (FERC) had taken “significant action” to address the Trump tax cut legislation enacted last December (see FERC Takes Aim at Adjusting Pipe Rates in Light of Trump Tax Cut). FERC wants to be sure the tax cuts coming to electric companies and pipeline companies are passed on to consumers and pipeline shippers. The agency proposed new solutions to eliminate “tax loopholes” for natural gas pipelines. Closing these so-called loopholes will eliminate certain tax benefits for MLPs–master limited partnerships. Many pipeline companies (most) are organized as MLPs, which allows tax advantages to flow to investors. With certain tax benefits for MLP unitholders on the chopping block, all of a sudden some MLPs don’t look like such a hot investment anymore, at least on paper. Some analysts have speculated this may be the beginning of the end for MLPs. A few years ago Kinder Morgan got rid of all it’s MLP subsidiaries, combining them all into a single “C” corporation. Now, Tallgrass Energy, builder/operator of the mighty Rockies Express (REX) pipeline which flows Marcellus/Utica gas, is doing the same as Kinder did. Which causes us to ask the question, is Tallgrass’ MLP the first “casualty” of the Trump tax cut among pipeline companies?…
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FERC Takes Aim at Adjusting Pipe Rates in Light of Trump Tax Cut

Last Thursday the Federal Energy Regulatory Commission (FERC) held an open meeting during which the commissioners “took significant action” to address the Trump tax cut legislation enacted last December. FERC wants to be sure the tax cuts coming to electric companies and pipeline companies are passed on to consumers and pipeline shippers. We are still trying to make sense of it all and frankly, we still don’t fully understand it. What we can tell you about what FERC did last week is this: The agency proposed new solutions to eliminate “tax loopholes” for natural gas pipelines. Closing these so-called loopholes will eliminate certain tax benefits for MLPs–master limited partnerships. A good many pipeline companies (most) are organized as MLPs, which allows tax advantages to flow to investors. With certain tax benefits for MLP unitholders on the chopping block, all of a sudden some (most?) MLPs don’t look like such a hot investment anymore, at least on paper. Which has caused pipeline companies, many of them with operations in the Marcellus/Utica, to issue a flurry of public announcements to say “FERC’s actions won’t impact us all that much.” The stock market certainly didn’t share that sentiment with shares (called “units”) in MLPs taking a hit since FERC’s announcement. Below is a collection of stories–bits of stories–that we’ve pieced together in an attempt to shed light on what is happening, and how it may change the pipeline business in the future…
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Obama Judge Orders DAPL Operating Pipeline to Shut Down

We’ve had enough of activist leftist judges attempting to shut down the will of the people by using obscure legal loopholes as their justification–when the real reason for the action is to block President Trump and fossil fuels. A U.S. District Court judge appointed by Barack Hussein Obama, Judge James Boasberg (D.C. Circuit) has ordered the Dakota Access oil pipeline in the Midwest to stop flowing oil because he doesn’t like it.
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Victory! Atlantic Coast Pipeline Wins US Supreme Court Case

We finally have a major court victory over the forces of anti-fossil fuel evil, so let’s sit back and soak in the warmth and sunshine of this moment. Yesterday the U.S. Supreme Court delivered a decision we expected, a decision that allows Dominion’s Atlantic Coast Pipeline (ACP), a 600-mile project from West Virginia through Virginia and into North Carolina, to cross under the Appalachian Trail. The decision is not only a victory for ACP, which is only about 6% built, but also a victory for the 303-mile Mountain Valley Pipeline, which is 92% built. MVP also needs to pass under the Trail.
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Shale Energy Stories of Interest: Mon, May 11, 2020

MARCELLUS/UTICA REGION: PA DEP Air Quality Advisory Committee takes no position on proposed carbon tax; OTHER U.S. REGIONS: Schlumberger plans to cut jobs in Houston; NATIONAL: U.S. drilling rig count lowest since 1975 as shale boom fades; Midstream companies are making deep cuts to capital spending; We disagree with you, so shut up – environmental left cage fight; Now more than ever, Americans must support oil and natural gas; INTERNATIONAL: Qatar uses market mayhem to secure top spot in global LNG market.
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Shale Energy Stories of Interest: Tue, Jan 28, 2020

OTHER U.S. REGIONS: FERC staff issues supplemental EIS for Magnolia LNG capacity project; NATIONAL: Cheniere hits 1000 LNG cargoes milestone; EIA forecasts U.S. crude oil production will keep growing through 2021, but more slowly; Shale production is on DUC life support and will need it going forward; As gas prices crash, will this shale giant survive?; Will Democrats embrace fossil fuels in crucial swing states?; BERNing Down America (video); INTERNATIONAL: China’s promise to buy more US energy probably unachievable.
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Shale Energy Stories of Interest: Tue, Jan 7, 2020

MARCELLUS/UTICA REGION: Garth Everett isn’t running after finishing out 7th term; ODNR issues 2 permits for Utica Shale drilling; OTHER U.S. REGIONS: Summit Midstream Partners relocating corporate headquarters to downtown Houston, Texas; The 2020 outlook for Permian oil and gas markets; NATIONAL: Energy commodity prices rose more than other goods in 2019; Hard as it is, frackers should ignore Iran; Oil and gas group launches campaign to advertise itself as combating climate change; U.S. LNG exports soar in 2019 but supply glut may await in 2020; Natural gas looks awful now that it’s 2020.
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Shale Energy Stories of Interest: Tue, Oct 29, 2019

MARCELLUS/UTICA REGION: PA House Judiciary Committee holds Dec. 16 hearing on bipartisan anti-SLAPP lawsuit legislation; OTHER U.S. REGIONS: California pro-natural gas coalition using ‘guerilla’ tactics; DTE’s electricity subsidiary aims at net zero carbon emissions by 2050; Permian natural gas prices get crushed, again; NATIONAL: US drilling on federal and Indian lands surges in 2019; Key takeaways from Q3 ’19 energy earnings (part 1); Natural-gas futures rally to highest finish this month; An insider’s look at the ins and outs of international LPG trading; INTERNATIONAL: EIA projects that natural gas consumption in Asia will continue to outpace supply; The Arctic is Russia’s key to LNG dominance.
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Blackstone Buys Controlling Interest in Tallgrass Energy

Tallgrass Energy, builder and operator of the mighty Rockies Express (REX) pipeline which is a critical link that flows Marcellus/Utica gas to Midwestern markets, dropped a bombshell announcement yesterday. The company said that investment firm Blackstone is buying a “controlling” interest in the company. Which raises the question, will Blackstone indeed “control” the company?
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Energy Stories of Interest: Tue, Jan 29, 2019

MARCELLUS/UTICA REGION: Lawmaker calls on officials to investigate pipeline players; WV’s Northern Panhandle resurgent; officials cite natural gas, remediation projects; Rover Pipeline donates $40,000 to 4-H; Dominion Energy, Dominion Energy Midstream complete merger; NATIONAL: U.S. energy-related CO2 emissions increased in 2018 but will likely fall in 2019 and 2020; EPA highlights decrease in greenhouse gas emissions and deregulation in annual review; Kinder Morgan sets 2019 budget with emphasis on natural gas projects; Heavy-duty natural gas truck sales down in 2018; New shale tech provides real-time picture, avoids frack hits.
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