ENERGY INTELLIGENCE

LawIQ Energy Intelligence White Paper

Profit or Loss?  Financial Risks of Tax Cuts on Gas Pipelines

This timely and comprehensive whitepaper from the LawIQ Energy Intelligence team is critical to anyone with a financial interest in U.S. gas pipelines.  Energy asset operators, shippers, gas powered utilities, equity investors, commodities traders, and regulators all need to understand potential market changes driven by the Tax Cuts and Jobs Act of 2017.  LawIQ’s Director of Pipeline Markets, Mr. Gary Kruse, and his expert team gives you the facts and scenarios you need to know to understand and quantify the impact of tax cuts on your business or portfolio.

Purchasers of this whitepaper will also receive one free consultation with Gary Kruse to obtain insights specific to your situation.

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ABSTRACT:

Since 2005, the Federal Energy Regulatory Commission (FERC) has allowed interstate gas pipelines to include the 35% federal tax rate as a cost of service for purposes of calculating their tariff rates. The recently passed Tax Cuts and Jobs Act reduced this rate to 21%. Reducing the taxes included in a pipeline’s cost of service should lead to a reduction in the rate the pipeline can charge under its tariff, and thus could impact the profitability of many operating pipelines. However, before the pipeline will be required to reduce its tariff rate, there needs to be a formal proceeding before FERC under either Section 4 or Section 5 of the Natural Gas Act (NGA).

What are the possible actions FERC will take? Which actions are most likely and what are the possible timelines for action? What pipelines are most likely impacted and why? What are the critical financial metrics that will influence possible FERC actions and valuations of pipeline entities? How much and for how long will a pipeline be able to maintain its top line revenue given tax rate reduction became effective on January 1, 2018? This timely and comprehensive whitepaper answers these questions, so you can understand and quantify the impact of Tax Cuts on your business or portfolio.

The analysis is derived from the LawIQ Energy Oil and Gas Platform that includes and structures millions of regulatory and financial filings and provides derivative analytics, such as calculations of return on equity.  Also included are curated databases of key pipeline settlement provisions and a proprietary model, which, based on these inputs, ranks the impact of a reduction in rates on the revenue for the nine major public pipeline companies.