End of Keystone XL Shows Hard Road for New Pipelines | Sidnaz Blog

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The failure of the Keystone XL project demonstrated the challenges of building new pipelines in the U.S. and Canada amid galvanized environmental groups and delivered a blow to oil-and-gas companies that now must rely on aging infrastructure.

Protesters targeted Keystone XL, which Canada’s

TC Energy Corp.


TRP -0.26%

abandoned Wednesday, and other pipelines for more than a decade, hoping to choke off fossil-fuel usage by making it harder to transport. The success with Keystone XL already has emboldened environmentalists, who in recent weeks have turned their attention to other pipelines in the U.S. and Canada.

But the U.S. and Canada still rely on pipelines to transport fossil fuels that underpin commerce, transportation and heating and cooling. As pipelines become increasingly difficult to build, the countries will become more dependent on older infrastructure that is vulnerable to disruptions. The shutdown of the Colonial Pipeline last month after it was attacked by hackers highlights the potential impact caused by unexpected disruptions to the current network.

“Clearly, we’re relying on the infrastructure we currently have. The question becomes, as we think about filling future demand, and we need to repair or replace old infrastructure, how are we going to handle it?” said

Amy Myers Jaffe,

a research professor at Tufts University’s Fletcher School.

Global oil demand is projected to peak in coming years, which could mean projects like Keystone could eventually outlive their utility, Ms. Jaffe said. “We’re not building for the 1950s, we’re building for the 2030s.”

In the past two years, at least four multibillion-dollar pipeline projects that drew protests have been canceled or delayed after encountering regulatory and political roadblocks, and environmental groups are looking to capitalize on the momentum. Some producers also have resorted to transporting oil by rail, a more expensive and potentially more dangerous alternative.

On Monday, Calgary-based

Enbridge Inc.

evacuated 44 workers in Minnesota, working on replacing a crude-oil pipeline there, after a group of protesters descended on a pump station in the middle of the state. Native American tribes and environmental groups continue to challenge the Dakota Access Pipeline in a long-running effort that has entangled the company in court for years.

The death of Keystone XL is the latest setback for the oil-and-gas industry. In May, a Dutch court found that

Royal Shell

PLC is partially responsible for climate change and ordered the company to sharply reduce its carbon emissions in an unprecedented ruling. Meanwhile, an activist investor won three seats on

Exxon Mobil Corp.’s

board, a historic defeat for the oil giant that may force it to alter its fossil-fuel-focused strategy.

Activists in Washington, D.C., in April called for the shutdown of pipelines in the northern U.S.



Photo:

daniel slim/Agence France-Presse/Getty Images

The trio of defeats demonstrates how dramatically the landscape is shifting for oil-and-gas companies as campaigns directed by environmentalists have spread to investors, lenders, politicians and regulators who are increasingly calling for a transition to cleaner forms of energy.

Last year,

Dominion Energy Inc.

and

Duke Energy Corp.

abandoned the $8 billion Atlantic Coast Pipeline, meant to move West Virginia natural gas to East Coast markets, and

Williams

Cos. dropped its Constitution natural gas pipeline after failing to gain a water permit from New York state.

President

Biden,

who made canceling Keystone XL a central plank of his election campaign, has remained mostly mum about other pipeline projects under construction.

Environmental and indigenous groups have sued to stop construction on Enbridge’s project to replace its Line 3 crude-oil pipeline with a larger conduit that will carry oil from Alberta’s oil sands to Superior, Wis., arguing that the U.S. Army Corps of Engineers failed to consider the environmental impacts of the pipeline when it granted a water-quality permit.

The company already has replaced sections in other states but has encountered obstacles in Minnesota, where it hopes to complete construction by the end of the year. After Enbridge evacuated workers Monday, the Hubbard County Sheriff’s department arrested 179 people for damaging equipment and dumping garbage on the site.

“The project is already providing significant economic benefits for counties, small businesses, Native American communities, and union members—including creating 5,200 family-sustaining construction jobs, and millions of dollars in local spending and tax revenues,” said the company in a statement on Thursday.

The Minnesota Court of Appeals is expected to make a ruling on a case that challenged the state’s Public Utilities Commission’s approval of the project.

Michigan state officials in November revoked a permit that allowed another Enbridge pipeline to run along the bottom of the Straits of Mackinac, citing the risk of damage to the region’s ecosystem. Gov.

Gretchen Whitmer

gave Enbridge a May 12 deadline to shut down the pipeline, but the company hasn’t complied, claiming the governor lacks the authority to do so.

The 645-mile conduit carries more than half a million barrels of oil and natural-gas liquids each day from Superior to refineries in Michigan, Ohio, Pennsylvania, Ontario and Quebec.

“Does the Keystone XL cancellation embolden fights against other pipelines? That’s a resounding yes,” said

Mike Shriberg,

Great Lakes region executive director for the National Wildlife Federation, which opposes the operation of Enbridge’s pipeline through Michigan.

“We’re very pleased,” said

Michael Brune,

executive director of the Sierra Club, which opposes both Enbridge pipelines in Minnesota and Michigan. He said the successful Keystone XL effort has taught them important lessons on how to oppose other projects. “It has taught us to never give up,” he said.

Enbridge pointed to the dramatic impact of the Colonial Pipeline’s six-day closure last month as an example of the consequences of scuttling energy infrastructure. The shutdown of the nation’s largest fuel pipeline, caused by a May 7 ransomware attack, spurred a run on gasoline across the Southeast, leaving thousands of gas stations without fuel for days.

During a Senate committee testimony Tuesday, Colonial Chief Executive

Joseph Blount

emphasized the scale of the pipeline, noting 50 million Americans rely on it to carry fuel to gas stations, as it provides almost half of the fuel consumed on the East Coast.

“Not only do everyday Americans rely on our pipeline operations to get fuel at the pump, but so do cities and local governments, to whom we supply fuel for critical operations, such as airports, ambulances and first responders,” Mr. Blount said in written testimony.

Write to Vipal Monga at [email protected] and Collin Eaton at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Hedge Fund Behind Amazon-MGM Deal Amasses Big Bet on Uranium | Sidnaz Blog

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The hedge fund behind the

Amazon.com Inc.

-MGM Holdings Inc. deal has another trade up its sleeve: going big on uranium.

New York hedge fund Anchorage Capital Group LLC has amassed a holding of a few million pounds of uranium, people familiar with the matter say, in a bet that prices of the nuclear fuel will recover after a decade in the doldrums. It is buying and selling uranium alongside mining companies, specialist traders and utility firms with nuclear-power plants, turning the fund into a significant player in the market.

Venturing into the uranium market, which is much smaller than oil or gold markets, is unusual for a firm that typically invests in corporate debt. It is another example of money managers straying into esoteric markets in search of returns after a yearslong run-up in stocks and slide in a bond yields.

Anchorage was recently in the spotlight after scoring about $2 billion in paper profits from Amazon’s deal to buy MGM in May. The hedge fund became MGM’s biggest shareholder after the Hollywood studio emerged from bankruptcy in 2010.

Anchorage’s physical uranium holdings are also a rarity because Wall Street firms don’t typically own physical uranium. Most investors bet on uranium prices by buying shares of mining firms, or through companies like

Yellow Cake

PLC., which acts as an exchange-traded fund.

In the 2000s, investors piled into uranium trades, helping to power a run-up in prices that peaked in 2007. Most funds exited either during the 2008-09 financial crisis or after Japan’s 2011 Fukushima nuclear disaster sapped demand.

Goldman Sachs Group

has pared back its uranium trading book and

Deutsche Bank AG

has quit the market, leaving

Macquarie Group Ltd.

as the financial institution with the biggest presence.

The uranium that is usually traded takes the form of U3O8, a lightly processed ore. Prices for U3O8 have sagged since Fukushima knocked demand, leading to a glut that traders say has yet to be whittled down.

The material this week traded at $32.05 a pound, according to UxC LLC, a nuclear-fuel data and research company. Prices reached an all-time high of $136 a pound in 2007, according to records going back to 1987.

Anchorage is wagering on a reversal. Spearheaded by trader Jason Siegel, the fund began acquiring uranium a few years ago, because its analysis showed most miners were booking losses at prevailing prices, a person familiar with the fund’s thinking said. The fund bet that uranium prices would rise to encourage miners to produce enough material.

Mr. Siegel didn’t respond to requests seeking comment.

The entry of a financial firm has caused a stir in the uranium market. Anchorage buys and sells infrequently, but in large quantities that put it in the same league as big uranium merchants such as Traxys Group, participants say.

A Honeywell Specialty Materials plant in Metropolis, Ill.



Photo:

Steve Jahnke/Associated Press

Anchorage hasn’t publicly disclosed its interest in the uranium market, the size of its holdings or the terms of any specific transactions. The exact size of Anchorage’s position—a topic of speculation in the market—couldn’t be learned. The person familiar with the fund’s thinking said it owned fewer than five million pounds of uranium. The overall spot market for the nuclear fuel turns over 60 million to 80 million pounds each year, according to UxC.

Due to strict rules about where uranium can be held, trading typically doesn’t involve moving the fuel around the world. Firms instead take ownership of U3O8 stored in drums at three processing facilities in France, Canada and the U.S. When they sell, buyers take ownership on the spot. The transactions aren’t reported publicly.

Anchorage’s wager relies on buying uranium and selling it to utility companies and others at a higher price for delivery several years in the future, in what is known as a carry trade. Doing so could generate annualized returns of roughly 5% for Anchorage, according to people familiar with the matter.

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The hedge fund embeds options into sale agreements with utilities and other firms, people familiar with the matter say. This can involve selling fuel to a utility company at a discount in return for the right to deliver more uranium at a set price at a later date.

Anchorage isn’t alone in betting that prices are primed to rebound.

Investment firms including Segra Capital Management LLC, Sachem Cove Partners LLC and Azarias Capital Management LP expect that efforts to wean the world off fossil fuels will require new nuclear-power stations, according to executives at the funds. They are seeking to profit by buying shares of uranium miners or firms like Yellow Cake, which is up 31% in London trading over the past year.

Some investors hesitate to own uranium outright because of the perception that it can cause dangerous accidents, according to Joe Kelly, chief executive of brokerage Uranium Markets LLC.

“There’s a deterrent that does not exist in other commodities,” said Mr. Kelly.

Write to Joe Wallace at [email protected]

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