Tuesday, July 24, 2018

Atlantic Coast Pipeline, Fracked Natural Gas, Another Milestone Reached, FERC Approves North Carolina Portion -- July 24, 2018

Back on January 4, 2015, the proposal:
N.C. regulators will allow Duke Energy and Piedmont Natural Gas to make contracts between their utilities and commercial divisions for gas transportation on the proposed Atlantic Coast Pipeline.
The unanimous vote by the N.C. Utilities Commission on Monday clears the way for Duke, Piedmont, Dominion Resources of Richmond, VA, and AGL Resources of Atlanta to make a preliminary filing next month for federal approval of the pipeline.
The 550-mile pipeline will run from eastern West Virginia, where it will access natural gas from the Utica and Marcellus shale fields, southeastward across Virginia and southward through North Carolina to Robeson County.
Sierra Club press release: FERC allows construction of the North Carolina section of the fracked gas Atlantic Coast Pipeline.

The Sierra Club then went into a tantrum / meltdown often associated with 3-year-olds.

On the other hand, straight news reporting from the WestVirginiaNews.

It's amazing: apparently the Sierra Club is worried about the project for these reasons:
  • it's a pipeline and, by definition, all pipelines are dangerous
  • the pipeline will carry a fossil fuel, and by definition, all fossil fuels are bad
  • the pipeline will carry a fossil fuel obtained through ... OMG ... fracking ... something that has been done frequently and safely at least since 1940 

Ten New Permits -- July 24, 2018

Active rigs:

Active Rigs66593273193

Ten new permits:
  • Operators: WPX (6); Slawson (3); Hess
  • Fields: Mandaree (Dunn); Big Bend (Mountrail); Capa (Williams)
  • Comments: WPX has permits for a 6-well North Mabel pad in NWNW 11-149-93; Slawson with permits for a 3-well Stallion Federal pad on Lot 4, section 1-151-93;
Six permits renewed:
  • Slawson (3): three Submariner Federal permits in Mountrail County
  • Crescent Point Energy (3): three Legacy Et Al Berge permits in Bottineau County
Two producing wells completed:
  • 31434, 2,147, Slawson, Osprey Federal 2 SLH, Big Bend, t5/18; cum 42K 5/18;  (#31431, #31432 - PNC, #18749 - JIP, #31433, #31435 - PNC)
  • 33757, SI/NC, Crescent Point Energy, CPEUSC Njos 7-26-35-157N-100W TFH, Marmon,
Four more SM Energy wells transferred to Petro-Hunt.

Prince Salman's Sovereign Wealth Fund Looks Sick, But I Wouldn't Call It Dead Nor Suggest Coffins Need Filling -- July 24, 2018


July 28, 2018: it's official -- the Saudi Aramco IPO is dead. At least according to oilprice.com.
Two things here:
  • First, nobody besides MbS wants the deal. Aramco Chairman Khalid al-Falih "has long been opposed to a deal for Sabic" the WSJ sources said. Meanwhile, Sabic executives worry that the company "would lose its identity in any deal."
  • Second, in the absence of an Aramco IPO, Saudi Arabia really has no option; Prince Mohammed’s advisers see a deal between the kingdom’s two largest companies as central to remaking the economy.
And the Saudi economy desperately needs remaking: even though oil prices recently have risen, following the 2014/2015 oil price crash which forced the government to inject billions into the economy (and liquidate more billions in reserves) to keep the populace content and the economy operating, the government is running a massive budget deficit this year after announcing the biggest fiscal stimulus package in the country’s history.
July 27, 2018: Aramco considers bond sale to buy SABIC stake. And it's a 70% stake. Also here.

Original Post 

I don't know how widely accepted the views are in this op-ed over at oilprice.com, but gleaning what seem to be the facts from the article suggests this is as good a place to start as anywhere to understand the huge news reported overnight.

Six data points, first.

First, Prince Salman's Vision 2030: take a very small part of Saudi Aramco public; the process has been delayed by one to two years, maybe more, depending to whom one listens.

Second: in the oil sector, there are three "streams": the upstream (E&P); midstream (pipelines); and, downstream (end users -- refineries and retail outlets). In a country like Saudi Arabia, there probably is not much call for "midstream." And that appears to be true. According to the op-ed, the two big oil/gas entities in Saudi Arabia are a) upstream, or Aramco; and, b) downstream, or  SABIC, a petrochemical company.

Third: Saudi Aramco and SABIC are (currently) two completely separate entities.

Fourth: SABIC is huge. The continuous international growth in Saudi Arabia's downstream sector (i.e., SABIC) and the successful acquisition of entities in Europe (including DSM Petrochemicals) and elsewhere, saw SABIC growing increasingly powerful [internationally].

Fifth: Saudi Aramco, as part of Prince Salman's Vision 2030, had pretty much decided to take a minority stake in SABIC, but now, out of nowhere, there is talk that Prince Salman may have much larger plans. Saudi sources are suggesting that Aramco is targeting the entirety of the 70 percent stake in SABIC that is currently held by the Prince (i.e., the Saudi sovereign wealth fund PIF).

Sixth: there was always competition between Saudi Aramco and SABIC but now that Prince Salman owns the kingdom, he can set his eyes on some bigger fish, including SABIC.

Now there are two stories going forward. The first story is what this means to Prince Salman, Saudi Arabia, and the global markets if Saudi Aramco and SABIC combine to become one huge behemoth. My hunch: petrochemical companies in the EU are going to be scrambling.

The second story is what this means for the Saudi Aramco IPO. Some suggest this is more evidence that the IPO will never see the light of day. That fits my world view.

So, now we wait and see.

How does the analyst over at oilprice.com see it playing out? Apparently he sees it as one huge slush fund for Prince Salman to fund his Vision 2030 projects:
... possibly a more important factor for crown prince Salman, the sale of PIF’s 70 percent stake in SABIC to Aramco would inject tens of billions into the coffins (sic) of the sovereign wealth fund, which is currently desperately seeking additional funding to support its vast list of projects (Red Sea, NEOM and Qiddiya) and investments.
Additional investments would help to stimulate Saudi Arabia’s struggling job market and the development of SMEs.
A sale of SABIC, leading to a downstream IPO by Aramco, could give a significant boost to MBS’s main target at present of developing the city of the future, called NEOM, a $500 billion investment project in the northwest of the Kingdom, including a free zone in the Sinai (Egypt).
The leverage of the expected $70-80 billion of the SABIC equity sale to Aramco would give the PIF and MBS enough breathing space to get going.
The SABIC acquisition will for sure put some pressure on Aramco’s financial position, but with higher oil revenues and still very low interest rates globally, the pain will be minimal. At the same time, Aramco’s valuation will go up based on SABIC assets and the global market position. 
Freudian? I got a chuckle out of the statement the analyst made: "...the sale of SBIC to Aramco would inject tens of billions into the coffins of the sovereign wealth fund."

Yes, the sovereign wealth fund took a "trillion-dollar hit" with the ill-advised oil production surge in 2014 - 2017, but by no stretch of the imagination did anyone say that the fund was dead, or now made up of coffins.

My hunch is that the good doctor meant to say "coffers."

"... the SABIC equity sale to Aramco would give the PIF and Prince Salman enough breathing space to get going." 

Maybe he did mean "coffins." 

It Seems Building The Bridges Should Be The Easy Part -- Just Saying -- Could The Chinese Have Done Better? -- July 24, 2018

Update on the California bullet train from The Los Angeles Times:
Engineers have built about 24,000 bridges in California over the last century, but a new one under construction in Madera County for the state’s bullet train project shows that they can still lead to serious blunders.
Tutor Perini, the lead contractor building a 32-mile section of railway near Fresno, had completed part of a tall highway bridge that would go over future train tracks when the California High-Speed Rail Authority last year issued a “stop work” order. The firm was told to tear down the construction on the Avenue 8 bridge and start over, the agency said this week.
In a statement, the authority said the Avenue 8 bridge design did not meet its “level of quality for a work product” and showed “signs of distress.” Some time after last September, the authority had Tutor Perini start on an entirely different design, agency documents show. The decision has not been previously reported.
The rail authority said it is discussing who will bear the cost of the rework. [We already know: the California taxpayer.]
At least three other bullet train bridges in the Central Valley used the same design as the Avenue 8 bridge and are now being redesigned, according to a January rail authority status update, raising questions about whether potentially more costly designs will be required in the future. The previous design for Avenue 8, using what is known as mechanically stabilized earth walls, is generally considered cheaper than the new design, using cast in place abutments.
The rail authority has acknowledged that it is behind schedule and facing sharply escalating costs, but a new team of executives who took over this year has vowed to make improvements to the execution of the program and re-establish its credibility as the project comes under the leadership of a new governor next year.
US Farmers To Get $12 Billion By Labor Day 

Of course, not all $12 billion will be dispersed by then, but the goal is to start getting direct payments to farmers before mid-term elections. Details to follow. American Soybean Association unhappy; says it's not enough.

Can't wait to see lawmakers "vote" against this.

Not inconsequential for the affected farmers but won't "break the bank."

Let's put the $12 billion in perspective. From medium.com:
The U.S. Air Force bought 21 B-2 stealth bombers from Northrop Grumman in the 1980s and 1990s at a price of more than $2 billion apiece, if you count development costs. One crashed on Guam in 2008, leaving 20 in the active fleet. But declining readiness—owing to maintenance and upgrades, wear and tear and cash shortages—routinely grounds 11 of the radar-evading, bat-wing bombers.
Just 21 aircraft for the USAF cost in excess of $40 billion, most of which are seldom flying.

Three International Majors Lead The Pack On Low Greenfield Costs And Low Lifting Costs -- July 24, 2018

Take a look at a couple of articles, presentations. This is interesting.

First, this article highlights three international majors that lead the sector in a) greenfield costs; and, b) lifting costs. This is a big, big deal. Look at the graphic -- the article highlights BP, Shell, and ENI -- the small red arrows.

But look at the "little company" in the far right lower corner: COP. Look at those greenfield costs -- amazing.

This is how graphics can skew things. COP is way to the right (bad). But look at the y-axis. We see the "5" and the "10" on the y-axis but there is no "15." There is very little distance between those on the far left and COP on the far right. I'm not an apologist for COP -- their lifting cost is far to the right (bad). But it is not as bad as the chart might suggest when one looks at the y-axis / range.

But one has to ask, why the huge discrepancy in lifting costs among the four: BP, ENI, Shell, and COP?  My hunch is it has to do with "boe," natural gas vs crude oil.

COP:  from its website, July 24, 2018 --

First, operations --
  • Asia, mostly natural gas, I assume, largest segment
  • US, lower 48, mostly crude, I assume, second largest segment
Now, some great photos taken from that presentation:

For newbies who have not seen a fracking operation:

Yeah, I'm inappropriately exuberant about the Bakken.

For newbies, COP is represented by Burlington Resources in the great state of North Dakota.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions just because you like the photos.

Who Would Have Thought? A Shortage Of Railcars For Refined Products, Crude Oil -- Reuters -- July 24, 2018

From Reuters via Rigzone:
U.S. oil refiners as well as producers are frantically looking for ways to reverse a decision by the country’s largest railroad operator, BNSF Railway Co, to curb the use of retrofitted oil tank cars on its railroads as a safety measure after a derailment in Iowa in June.
Reuters reports that this decision could lead to the removal of several thousand oil tank cars from a crucial railway line and up the lease the rates for new cars substantially. Already, two brokers told Reuters, the lease rate for new oil tank cars is over US$1,000 apiece per month, up from US$400 per month at the end of last year.
In June, an oil train derailed in Iowa and spilled more than 200,000 gallons of Canadian heavy crude into a public waterway. Following the incident, BNSF said it will stop offering retrofitted tank cars—of which there are about 11,000 on U.S. railroads—in new contracts. Companies including Exxon, Phillips, and Enbridge use the cars and will be affected by the change.
BNSF’s decision comes at a bad time for shale producers, particularly in the Permian.
The oil rush that some media have dubbed Permania led to a shortage of pipeline capacity in the prolific shale play that has resulted in a discount for crude pumped there as it sits and waits longer than usual to be shipped to the Gulf Coast refineries.
For operators who got into the Permian late and paid upwards of $50,000/acre it's going to be a nail-biting year. One such company has a market cap of $4 billion and debt of $2.7 billion, but their shares are "on a tear" as they say.

Disclaimer: this is not an investment site.

The Market, Energy, And Political Page, T+54 -- July 24, 2018

Free trade. Everyone's for it. But the only one trying to really get "free trade" is Trump. Everyone else, it seems, supports China's a) theft of intellectual property; and, b) high tariffs on American products. And, of course, no one says anything about the Canadian tariff of 275% on US dairy products. In this day and age, why are there tariffs anywhere among these "trading partners": the US, Canada, Mexico, China, EU, Great Britain, Russia, Brazil, and Argentina.

The market. Wow, who would have thought. And why? Up 204 points in early trading (the Dow). More importantly, the S&P 500 up an astounding 22 points and solidly above 2,800.

New record: NASDAQ hits a new record. 

Disclaimer: this is not an investment site.

What's moving?
  • Harley-Davidson: up 7%
  • UNP: down about 0.75%
  • AAPL: up about 0.75% -- wow; 
  • S: down about 0.75% -- there seems to be a trend here, LOL
  • NOG: up 1.75% -- nice
  • OAS: up 3% -- wow
  • EOG: up 3% -- wow
  • BRK-B: up about a percent
  • XOM: up 1.6%
Wow, what's oil doing today? I guess that explains a lot -- WTI is up about $1.00 -- up about 1.4%, now trading at $68.85.

TSLA: on a day the Dow is up over 200 points, TSLA is down about 0.7% -- and TSLA is in a trading range where "speculators" start jumping back in. We will know more by the end of the day.

The Modern Art Page

A couple of weeks ago the two older granddaughters were with their dad's relatives in Kentucky. One of the many things they did was learn to weld. It turns out welding is nothing more than really, really strong E6000 adhesive -- but a bit hotter.

The middle granddaughter made a small cityscape sculpture. In the first photo below, the penny is placed there to provide a bit of perspective.

I like this photo better:

Don't you just love the bus stop: trash can, parking meter (or sign), and chairs! Look at the shadow of the sign/parking meter reflected on the skyscraper. And a little bit of leaning tower. I love the "windows" on the skyscraper to the left. And, of course, the Sears Tower in the rear.

The Trump-Putin Summit, The Political Page, Part 2, T+48 -- July 18, 2018

From July 16, 2018: the link.
Putin-Trump summit: I think this was a much more important "summit" than folks seem to think. My hunch: the mainstream media is completely missing the importance of this "summit." Trump also took advantage of being "in the area." He attended the NATO conference in Brussels, which put him within "same time zones" and just hours from Scotland -- he saw the Queen; the Prime Minister; and, his golf course -- and hours from Helsinki which gave him a chance to see Vladimir Putin. Great, great use of time.

Hi-Ho, Hi-Ho, It's Off To Work We Go -- July 24, 2018

Every day I ride into town to work on the blog, and every day I wonder if there will be anything new to blog.

And every day I am pleasantly surprised. Today was no different. Wow, there are a lot of stories. And that's even before I get to Trump's tweets, and the "back stories from a reader in New Mexico."

I started blogging about 5:00 a.m. this morning because of family commitments starting about 8:00 a.m. local time.

I may or may not be blogging again this morning, but most likely I will.

It's Off To Work We Go, Snow White and The Seven Dwarfs

From the internets (as both my dad and Bush II would say):
In a foreword to The Hobbit, published in 1937, J R R Tolkien writes:
"In English, the only correct plural of 'dwarf' is 'dwarfs' and the adjective is 'dwarfish'. ... So, "dwarves" was coined by Tolkien about 80 years ago to give his dwarves a dignity that dwarfs could hardly attain.
I remember reading that about "dwarfs" and "dwarves" years ago when I was in my belated "Tolkien" phase. This is one of the reason English is such a hard language for non-native speakers to learn. Or so they say.

A Note for the Granddaughters

Our son-in-law enrolls the two older granddaughters in activities throughout the summer so they literally have no "free" time: software coding at local university; sailing lessons; scuba diving lessons; painting; cooking classes; baking classes; summer junior Olympics (water polo); etc, etc.

They've been doing that for the past several summers.

Earlier this summer, the middle granddaughter took (another) summer course in computer coding at the University of Texas, Dallas. This time it was Java Script. She said it was very challenging and would like to take the course again. [It's rare that she would call a course "challenging."]

Yesterday, I came across a computer coding article in The Economist. [I was able to access it yesterday, but not today.] Here's another article on the same subject: Is Python the future of programming?
"I certainly didn't set out to create a language that was intended for mass consumption," he explains. But in the past 12 months Google users in America have searched for Python more often than for Kim Kardashian, a reality-TV star. The rate of queries has trebled since 2010, while inquiries after other programming languages have been flat or declining.
The language's popularity has grown not merely among professional developers -- nearly 40% of whom use it, with a further 25% wishing to do so, according to Stack Overflow, a programming forum -- but also with ordinary folk.
Codecademy, a website that has taught 45 million novices how to use various languages, says that by far the biggest increase in demand is from those wishing to learn Python. It is thus bringing coding to the fingertips of those once baffled by the subject. Pythonistas, as aficionados are known, have helped by adding more than 145,000 packages to the Cheese Shop, covering everything from astronomy to game development....

Python was already the most popular introductory language at American universities in 2014, but the teaching of it is generally limited to those studying science, technology, engineering and mathematics.
A more radical proposal is to catch 'em young by offering computer science to all, and in primary schools.
Hadi Partovi, the boss of Code.org, a charity, notes that 40% of American schools now offer such lessons, up from 10% in 2013. Around two-thirds of 10- to 12-year-olds have an account on Code.org's website. Perhaps unnerved by a future filled with automated jobs, 90% of American parents want their children to study computer science. 
"The CIA has employed Python for hacking, Pixar for producing films, Google for crawling web pages and Spotify for recommending songs," notes the Economist.
I sent the article to our middle granddaughter and then mentioned it later to the older granddaughter.

This was the older granddaughter's response: "Oh, yes, I know all about Python."

This was the middle granddaugher's response:
"I'll be sure to read it [the article], but it's quite interesting (even just seeing the headline), as many of my friends use that program to create games and such. My friend and I played around with it whilst still working on the House Museum (to create an interactive advertisement), and I believe it's pretty simple to start writing. However, it would be interesting to see what more complex commands look like."
The family subscribes to The Economist so the middle granddaughter will have no trouble accessing the article.

Meanwhile, this is the youngest granddaughter at "finishing school," learning to properly serve tea.


By the way, all the paintings on the wall that can be seen were done by the three granddaughters before they were five years old.

Am I a proud grandpa or what? Wow, I must be overbearing. Sorry. 

Cheaper For East Coast Refiners To Get Oil From Urals Than North Dakota -- Reuters -- July 24, 2018 -- What's Wrong With This Picture?

Just twelve days ago I pondered aloud where the "Delta refinery" was getting its crude oil. Now we know. And it's a bizarre story to say the least.And so many story lines.

From Reuters:
U.S. refiners will import a record monthly volume of crude from the Caspian region in July after snapping up the cargoes when prices reached near six-year lows, according to market sources and Thomson Reuters shipping data.
The unusually large volume of crude is one of many changes in the international oil trade caused by a flood of U.S. shale oil headed overseas. [Three million bopd.]
Record exports of crude from the United States to Europe and Asia have pushed down the price of comparable oil, such as the crude produced near the Caspian in Kazakhstan and Russia.
That oil is pumped through the CPC pipeline and loaded in the Mediterranean.
U.S. East Coast refiners, which rely on crude imports, have bought most of the 3.7 million barrels of CPC crude that will reach the United States in July.
The East Coast refiners have limited access to the oil produced in the shale fields hundreds of miles away in Texas or North Dakota. They buy additional crude from West Africa, Middle East and Europe.
That is because U.S. domestic shipping rules can make it more expensive for East Coast refiners to ship crude from the Gulf coast to the northeast than it is to import oil.
East Coast refiners "can get oil cheaper from the Urals than the Eagle Ford," said Kyle Cooper, a consultant for options broker Ion Energy.
Anyone who thinks they understand the oil industry better think again.

MLPs And Investors -- Important Update -- RBN Energy -- July 24, 2018 - Quick! What's The CPC?

Pending today: API crude oil inventory data this afternoon.
  • consensus: a drawdown of 3.0 million bbls
  • actual: a drawdown of 3.16 million bbls
  • WTI pretty much unchanged throughout the day; just above $68
Short stack:
  • Score tied: Israelis, 1; Syrians, 1
  • Saudi IPO: Saudi Aramco CEO: deal for Sabic would affect IPO timeline. Saudi Aramco signaled another potential delay for the world’s largest initial public offering after it started talks this week to buy a stake in a local petrochemical company. Anyone really think this IPO will ever happen? Rhetorical, don't reply.
  • Yawn: war of tweets between Trump and Iran had zero impact on price of oil yesterday. Just between you and me, I find that ... amazing ...
  • Record: US refiners boost purchases of CPC blend to record as prices drop. This was going to go on the "short stack, " but it's such an incredible story, it became a stand-alone post.
  • Oh-oh; HAL shares fell yesterday despite a great earnings report; guidance was terrible based on bottlenecks in the Permian -- some of the smaller, newer players in the Permian could be in trouble -- buying Permian acreage at $40,000/acre; the word Reuters used to describe HAL's share action yesterday: plunge. Not a good word to see in the same sentence as share price ... unless one has shorted the stock. Now, waiting for the other oil services' shoe to drop: SLB.
  • Trumped: folks who doubted Trump and Kim need to look again. The WSJ is reporting that NOKO is dismantling a rocket launch site. 
  • Predictions: which reminds me -- the mainstream media has been reporting for the past year (?) that Trump's chief of staff John Kelly would resign ... and resign ... and resign ... of course, he will step down at some point, but so far ...
  • Heidi's calendar: does not include a visit with Mr Kavanaugh. Or so I'm told.
  • Worst list ever: do not visit the MoneyWise site listing the worst 25 states to retire in; it's nothing but click bait. Nothing new. Texas was ranked #24 because of ... poor physician-patient ratio ... hellooooo -- it's called west Texas, but in Houston, DFW, San Antonio, Austin, more than adequate and best health care in the states; most of New England were on the list (high taxes) and most of Deep South were on the list. Not making the list: ND, SD, MN, IA, MT, KS, NE, WY, ID, etc.
Disclaimer: this is not an investment site.

Back to the Bakken

Wells coming off the confidential list later this morning:
  • 31955, 1,118, Hess, EN-Vachal-155-93-0532H-8, Alger, t6/18; cum --
  • 24518, SI/NC, Slawson, Gabriel 6-36-25TFH, North Tobacco Garden, no production data, (#32617, #21250, #24521)
Active rigs:

Active Rigs66593273193

RBN Energy: FERC actions on gas and liquids pipeline taxes bring some summer joy.
Back on March 15, the Federal Energy Regulatory Commission shook up master limited partnerships (MLPs) and their investors by deciding that income taxes would no longer be factored into the cost-of-service-based tariff rates of MLP-owned pipelines. We said then that there was no need to panic. In part, this was based on the view the FERC policy wouldn’t affect as much of the industry as some worried it would. But more importantly, our soothing message was tied to the fact it would take a long time for this to play out. It looks like we were right to have some confidence. Today, we explain why the commission’s July 18 vote on a topic as nerdy as “accumulated deferred income taxes” can warm the hearts of MLP investors.
Twice in the past four months we ventured into the strange and sometimes frightening world of FERC rate-setting, dealing with a decision that sent shock waves through the industry. In its March 15 decision, FERC told natural gas and liquids pipelines owned by master limited partnerships (MLPs) that they could no longer have an allowance for income taxes in the rates they would be allowed to charge shippers. The rationale was that MLPs didn’t pay income taxes at the partnership level — only their partnership-unit owners did, in the same way that stockholders in a corporation pay taxes on dividends (which also aren’t allowed in rates). Regardless of the reasoning, the impact had the potential to kick out as much as 10% or 15% of the total rate levels of the MLP-owned pipelines that use “cost of service” to set their rates. That made unit prices (the MLP version of a stock price) go down a lot and there was a hint of panic in the air. It calmed pretty quickly as we and others explained why the policy didn’t necessarily affect everyone, why it would take a while, etc.
Then in May, by which time not much had happened, we wrote to explain the intricacies of the three things FERC had said March 15, how they related to each other and what they did, and we explained the concept of “FERC Time” — a pace considerably more stately than what we’re used to in a market-driven world. A few days ago (on July 18), FERC (its commissioners pictured below) took a couple of actions that make the situation a lot better for the industry, a rare piece of really good news for pipeline owners. It got everyone’s attention and made unit prices for a bunch of MLPs jump, some by double-digit percentages.
Now, the update and good news:
But then came July 18. In an order on rehearing of the Statement of Policy, FERC decided unanimously that MLPs eliminating their income-tax allowance could just erase their whole ADIT balance — pretend it was never there. So suddenly, most of the MLPs with cost-based rates got a bunch of net investment back, on which they could earn their rate of return — in other words, the income hit they faced because of the elimination of the tax allowance was offset by an income bump from this newly earning investment. In some cases, it’s a complete wash, in some not quite, and in other cases, a pipeline’s rates might go up. Heard on the street: “Say hallelujah one time.”
FERC also issued the final version of the NOPR, telling everyone how the Form 501-G and potential rate-review process would work. Without going into detail, for the most part, it came out a lot better for the reporting entities, especially the MLPs that now would be less likely to show a big over-recovery that could trigger a rate reduction. The fact that FERC acted on this whole mess of complicated issues just four months after starting the process is a testament to how seriously they took the impact on financial markets that resulted from all the uncertainty. In FERC Time terms, they acted at light speed.
Much more at the link.