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TransCanada's (TRP) Pipeline Projects Take a Back Seat

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North American pipeline operator, TransCanada Corporation’s (TRP - Free Report) mega project Energy East Pipeline as well as Eastern Mainline Project has hit a regulatory roadblock. The company recently filed an application with the National Energy Board (NEB) to suspend the federal review of the projects for 30 days due to the stringent regulatory policies issued by the NEB on Aug 23.

In a judgment, which was lauded by the environmentalists but condemned by the oil industry players, NEB decided to initiate a tougher review process for the Energy East Pipeline and Eastern Mainline Projects. The board announced that the approval process for the projects will involve the examination of greenhouse gas emissions at both upstream and downstream stages. The board feels that the expanded scope of the review is likely to provide more visibility in the assessment of risks related to causalities like oil spill, among others. Expanding the scope of the review has put increased pressure on a number of Canadian projects. Alberta’s energy minister criticized NEB’s amendment policies citing it as a major impediment to Canada’s future energy development.

A cloud of uncertainty is now hovering on the $15.7 billion Energy East Pipeline and $1.5 billion Eastern Mainline Project. Energy East Pipeline — expected to carry crude Alberta and Saskatchewan to eastern Canadian refineries — has a transportation capacity of 1.1 million barrels of oil per day. Eastern Mainline which is a 279 kilometer pipeline will connect Markham and Edwardsburgh. Post the declaration of the stringent regulatory process by the NEB, the company has stalled the funding allocations for the construction of the projects.

TransCanada is now evaluating the new review guidelines to examine its effects on the cost and feasibility of the project in relation to Canada’s growing commitment toward the reduction of greenhouse gas emissions. The company also warned that it might scrap the project. This might negatively impact the carrying value of its investment as well as its ability to recover development costs incurred till date. Apart from affecting the company adversely, the termination of the project will also lead to potential loss of jobs and investment opportunities in Atlantic Canada.

Zacks Rank and Other Stocks to Consider

Headquartered in Alberta, TransCanada mainly focuses on natural gas transmission and power services. Its pipeline transports the majority of Western Canada's natural gas production to growing markets in Canada and the United States. The company currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has an impressive pricing strength and has outperformed the broader industry in the last six months. During the aforesaid period, units of TransCanada were up by 10.35%, compared the broader industry’s 0.17% gain.

Other top-ranked stocks within the same industry include TransMontaigne Partners LP (TLP - Free Report) , Southcross Energy Partners, L.P. (SXE - Free Report) and Cheniere Energy Partners LP Holdings, LLC (CQH - Free Report) . While TransMontaigne sport a Zacks Rank #1, Southcross Energy and Cheniere Energy Partners LP Holdings carry a Zacks Rank #2 (Buy), each.

TransMontaigne delivered an average positive earnings surprise of 6.6% in the trailing four quarters. 

Southcross Energy delivered an average positive earnings surprise of 9.79% in the trailing four quarters. 

Cheniere Energy Partners LP Holdings expects year-over-year growth of 1,408.36% and 1,062.5% in its revenues and earnings, respectively in 2017.

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