Keystone Pipeline Gets Step Closer to Approval - Which Is Good News for These Investors

Keystone XL pipeline supporters - who have been waiting years for this project to be completed - just received good news from the U.S. Department of State.

The Keystone pipeline is 1,179 miles long and would connect heavy crude oil from bitumen deposits in Canada to the southeastern refining network of the United States. While the southern portion has been built, the northern section requires approval given its cross-border passage.

The State Department on Jan. 31 released a study on the Keystone pipeline's environmental impact. The report concluded that the Keystone pipeline would not substantially worsen carbon pollution.

In fact, the pipeline provides a steep reduction in emissions compared to what's happening now....

Here's how.

Keystone XL Pipeline Is Key to Canada's Oil

There's a significant oil glut in Canada. Without the Keystone pipeline, that oil gets moved by rail.

One million barrels of oil are set for rail shipment from Canada to the United States by the end of 2014. According to the State report, rail shipment of oil from Canada would be 28% to 42% higher than if the same volume of 830,000 barrels moved through the pipeline.

But last year saw a string of environmental accidents rattling the railcar industry. So now the administration must decide whether an 830,000-barrel-per-day pipeline is a suitable and more eco-friendly alternative.

With the emissions alternative of a pipeline to railcars reducing emissions from expected levels, President Obama is likely to approve this pipeline by the end of the year.

Plus, the United States wants this oil - badly...

If the United States doesn't buy it, it will likely be sold to China.

And Canadian producers want the pipeline because the oversupply of oil and lack of infrastructure are driving spot prices down. Once the infrastructure is in place, and the glut reversed, oil prices will appreciate locally, a boon for producers. This same trend happened to natural gas prices over the last three years.

This means profits ahead for shareholders of certain oil producers and transportation companies...

How to Profit from the Keystone XL Pipeline

One place to look for Keystone pipeline profits is Canada, as Canadian producers will greatly benefit as crude prices begin to rise as the glut vanishes.

This includes Canadian Natural Resources Ltd. (NYSE: CNQ), an Alberta-based independent oil and gas exploration company. By increasing production at higher margins, companies like Canadian Natural Resources will profit with improved infrastructure.

The company has fluctuated between $26 and $32 over the last year. But every time the Keystone hits the news, CNQ is one of the first companies that sees its price target rise. It's up 3% in the past few days to trade at $33.12.

The other company that is set to profit is the owner of the pipeline itself, TransCanada Corporation (NYSE: TRP). The company is Canada's second-largest oil and gas infrastructure company and has been a vital part of the growing pipeline system across North America.

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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