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North American pipeline operators restructure following US tax change

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World Pipelines,

Reuters reports that pipeline operators Enbridge Inc., Williams Companies and Cheniere Energy Inc. will restructure after a US rule change removed a key tax benefit for publicly traded partnerships controlled by those companies.

Williams said it would buy all common units of its master limited partnership (MLP) Williams Partners in a deal valued at US$10.5 billion.

Enbridge said it would buy its independent units including Spectra Energy Partners and Enbridge Energy Partners, as well as its pipeline assets and bring then under a single listed entity for CAN$11.4 billion (US$8.94 billion).

Cheniere said it will buy out shares it does not already hold in Cheniere Partners Holdings for about US$6.54 billion.

MLPs are tax-exempt corporate structures that pay out profit to investors in dividend-style distributions.

In 2016, a US Appeals Court ruled that energy regulators were allowing these companies to benefit from a “double recovery” of taxes.

In March, the US Federal Energy Regulatory Commission (FERC) said the companies, largely oil and natural gas pipeline firms, will no longer be allowed to recover an income tax allowance as part of the fees they charge to shippers under a “cost of service” rate structure.

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