The Motley Fool

Trans Mountain to Face New Challenges: Should Investors Give Up on the Industry and Sell Enbridge (TSX:ENB)?

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The drama surrounding the Trans Mountain just never seems to end. Even though the pipeline received approval earlier this year, there was little doubt that the issue was done and over with. The appeals process has dragged this out, and it’s unclear how long it will be until we can know for sure whether the pipeline will be built.

It’s just one of the reasons that investors have been very hesitant to invest in the industry — there’s simply too much uncertainty around projects. What’s frustrating for those involved with Trans Mountain is that even federal approvals aren’t enough anymore. The National Energy Board has reviewed the pipeline and given its stamp of approval, and yet, that has not guaranteed anything.

More appeals to be considered

Last week, the Federal Court of Appeal said that six of the 12 challenges against the pipeline would move forward and would be heard by the courts. Those challenges once again centre around the federal government’s consultations with Indigenous groups.

Justice David Strata issued a statement saying, “Many of the Indigenous and First Nations applicants now allege that the poor quality and hurried nature of this further consultation rendered it inadequate.”

While the appeals will undergo what’s said to be “expedited court proceedings,” the whole process has been anything but quick. It puts the issue further into limbo and creates uncertainty as to how much longer it will take to know whether the pipeline will be built.

For oil and gas companies, it highlights the unenviable nature of the situation in the current political climate. While the government owns the Trans Mountain today, it has also tried to take a hard stance on climate issues, and generally hasn’t been very supportive of the oil and gas industry, making for a very odd situation all around.

While the government doesn’t want to be the long-term owner of the pipeline, companies aren’t interested in owning the Trans Mountain because of the legal costs involved and headaches that will likely follow, especially for a project that may not be built.

Oil and gas investors shouldn’t be surprised anymore

Sadly, the reality is that for a company like Enbridge Inc (TSX:ENB)(NYSE:ENB), the results aren’t surprising. The negativity in the industry has been a big reason why the stock has struggled over the past two years, falling 10% in value.

For all the company’s profits, what investors always come back to is expectations. And with the expectations for the future being uncertain at best, there’s little reason to buy shares of an oil and gas company today.

Even with more than $4.7 billion in profits over the past three quarters, it still hasn’t been enough to keep Enbridge’s share price up over $50 for more than a very brief period.

Unfortunately, whether it’s the Trans Mountain or the price of oil, there are some fairly large obstacles that can get in the way of Enbridge and other oil and gas stocks rising in value.

While Enbridge’s dividend may be a good consolation prize for investors, it’s hard to find another compelling reason to buy it — or any other oil and gas stock today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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