Energy Pipelines’ Bad Year Has a Silver Lining

Low oil prices aren’t exactly at the top of pipeline operators’ wish lists, but they do come with one possible upside: They could help boost the value of existing infrastructure.

Depressed oil demand has led energy companies across the value chain—from those pumping it, to those transporting, refining and converting it into other products—to hold back on new investments. Permitting challenges already were slowing down new pipelines. The pandemic’s shock to the oil market was like slamming on the brakes.

In the third quarter, capital expenditures in the oil-and-gas industry were less than half the lowest level recorded in the economic crisis in 2009, according to Dean Forman, chief economist at the American Petroleum Institute. The decline in spending applies not only to companies pumping oil and gas but also those in the crucial business of transporting and refining hydrocarbons. In the midstream sector, capital expenditures were down almost 30% year over year in the third quarter, according to API data.

Just as investors are asking for more discipline from producers of oil and natural gas, they also are demanding moderation from pipeline operators. Project return thresholds are getting higher for these companies, and investors are asking them to give priority to debt repayment rather than new projects, according to Timm Schneider, head of Americas energy and utility equity research at Citi Research.

All of that adds more speed bumps to new pipeline additions. President Trump’s moves to expedite controversial projects came with the unintended consequence of fueling challenges to permits that stood on shakier legal ground. The incoming Biden administration is unlikely to make things easier.

Source: WSJ

Trump-Era Tax Rule Benefiting Some Multinationals May Get Revised Under Biden

WASHINGTON—A Trump administration regulation that cut the tax bills of companies such as Philip Morris International Inc. and Sealed Air Corp. could be poised for reversal in 2021 as the Biden administration tries to deliver on its campaign promise to raise taxes on corporations.

The rule, which gives some corporations a path out of a U.S. minimum tax on foreign earnings, has drawn criticism from progressives, including Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee.

“These regulations let megacorporations choose how they want to be taxed,” he said. “They could take the massive tax cut Republicans gave them, or they could take an even bigger tax cut the Treasury Department pulled out of thin air.”

If Democrats don’t take control of the Senate after Georgia’s runoff elections in January, regulatory changes present the clearest paths to one of President-elect Joe Biden’s campaign promises: higher taxes on U.S. companies’ foreign operations.

The Biden transition team declined to comment. It would likely take months for the new administration to hire Treasury Department officials, make a decision and follow the procedures needed to revise or repeal the regulation.

Source: WSJ

Covid-19 Resurgence and the Election Changed Calculus for Aid Negotiators

WASHINGTON—When Rep. Ro Khanna called for Democrats to embrace a $1.8 trillion deal with the White House back in mid-October, House Speaker Nancy Pelosi wasn’t happy.

“Ro Khanna, that’s nice. That isn’t what we’re going to do,” Mrs. Pelosi said on CNN, when asked about a tweet from her fellow California Democrat urging leaders to finalize an agreement with Treasury Secretary Steven Mnuchin. The tense interview drew widespread attention—including from Mr. Khanna’s own mother, who had some questions for her son.

“My mom is a great admirer of Speaker Pelosi” and an avid cable-news watcher, Mr. Khanna said in an interview Friday. “So she texted me saying, ‘What are you doing? You have to be in line with the Speaker!’ ”

At the time, Mrs. Pelosi and other Democratic leaders backed a $2.4 trillion bill passed by the House, and negotiations continued. A deal never came together, derailed by the politics of the approaching election and policy debates over testing for the virus, funding for state and local governments and other issues. Senate Republicans also made clear they would support spending only around $500 billion, putting them out of step with the Trump administration.

Now, lawmakers from both parties are throwing their support behind a package valued at roughly $900 billion, nearly double what Senate Republicans were backing before the election, and only half of what Mr. Khanna and some other Democrats said the party should have accepted. As with most congressional compromises, the final result is likely to leave few fully satisfied.

Source: WSJ

U.S. Stocks Edge Lower as Covid-19 Cases Rise

The Dow Jones Industrial Average slipped Monday, after hitting a record last week, as investors worried that elevated Covid-19 infection levels could weigh on economic growth through the winter months.

The blue-chip index fell 165 points, or 0.6%, in morning trading. The S&P 500 declined 0.2%, while the technology-heavy Nasdaq Composite rose 0.5%.

Stocks have rallied to record highs in recent weeks on brightening economic prospects due to the development of Covid-19 vaccines. But rising coronavirus infection levels and their potential impact on the rebound is weighing on sentiment. New restrictions intended to slow the spread of the virus in California went into effect Sunday night, after the number of people hospitalized in the U.S. because of Covid-19 hit another record.

“For U.S. growth, the vaccine is not going to have a substantial impact on this third wave,” said James McCormick, a strategist at NatWest Markets. “The U.S. growth picture in the very near term is clearly tilting lower.”

Data released Friday showed that U.S. job growth slowed sharply in November, suggesting the labor-market recovery is losing steam amid the surge in coronavirus cases and new business restrictions.

Source: WSJ

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