EOG Resources Inc (EOG), Continental Resources, Inc. (CLR): Could Railroad Companies Lose Their Fastest-Growing Client?

The other major threat for rail is increased pipeline capacity, especially in the Bakken and Canadian oil sands. Enbridge‘s Northern Gateway pipeline, Kinder Morgan Energy Partners LP (NYSE:KMP)‘ Trans Mountain Pipeline, and TransCanada Corporation (USA) (NYSE:TRP)‘s Keystone XL pipeline combined could potentially move almost 2 million barrels per day of Canadian oil sands  to either the U.S. Gulf Coast or the Canadian West Coast. All three of these companies’ projects are mired in political debate, so the certainty that any of these pipes will get built is uncertain. If one and/or all of them are built, it would take a big chunk out of rail companies’ market share.

Canadian Pacific is not naive, and it has made it clear at its annual meeting that these pipelines will have a significant impact on how the company plans to allocate capital for infrastructure and upgrades. If these pipelines don’t go through, though, rail could find itself working with oil a whole lot more in the future.

What a Fool believes
It’s so much easier to get an idea of whether a pipeline project will be completed when it isn’t at the center of a political spat. In the case of all three of these pipelines, they are facing some very stiff opposition that could potentially derail these pipelines from being built. If they aren’t built, it could be viewed as a win for rail companies. At the same time, though, the higher price tag for oil moved by rail will also make exploration and production companies less excited about growing production. As investors, it might be best to replicate what Canadian Pacific is doing and wait till a definitive decision is made regarding these three major pipelines.

The article Could Railroad Companies Lose Their Fastest-Growing Client? originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter @TylerCroweFool.The Motley Fool recommends Canadian National Railway (NYSE:CNI).

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