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Trump greenlights Keystone XL pipeline, but obstacles loom

U.S. President Donald Trump's administration approved TransCanada Corp's (TRP. TO) Keystone XL pipeline on Friday, cheering the oil industry and angering environmentalists even as further hurdles for the controversial project loom. The approval reverses a decision by former President Barack Obama to reject the project, but the company still needs to win financing, acquire local permits, and fend off likely legal challenges for the pipeline to be built."TransCanada will finally be allowed to complete this long-overdue project with efficiency and with speed," Trump said in the Oval Office before turning to ask TransCanada Chief Executive Officer Russell Girling when construction would start."We've got some work to do in Nebraska to get our permits there," Girling replied."Nebraska?" Trump said. "I'll call Nebraska."Trump announced the presidential permit for Keystone XL at the White House with Girling and Sean McGarvey, president of North America's Building Trades Unions, standing nearby. He said the project would lower consumer fuel prices, create jobs and reduce U.S. dependence on foreign oil. The pipeline linking Canadian oil sands to U.S. refiners had been blocked by Obama, who said it would do nothing to reduce fuel prices for U.S. motorists and would contribute to emissions linked to global warming. Trump, however, campaigned on a promise to approve it, and he signed an executive order soon after taking office in January to advance the project. TransCanada's U.S.-listed shares (TRP. N) dipped 5 cents to close at $46.21 on Friday. JOBS Trump has claimed the project would create 28,000 jobs in the United States. But a 2014 State Department study predicted just 3,900 construction jobs and 35 permanent jobs.

The president said he would get in touch with Nebraska Governor Pete Ricketts later in the day. TransCanada applied to the Nebraska Public Service Commission in February for approval of the pipeline's route through the state. The company said it expects that process to conclude this year. Ricketts said in a statement posted on Twitter that the project would help his state. "I have full confidence that the Public Service Commission will conduct a thorough and fair review of the application," he said. The White House has said the pipeline is exempt from a Trump executive order requiring new pipelines to be made from U.S. steel, because much of the pipe for the project has already been built and stockpiled.

"As we move forward, we'll continue to look to buy the rest of the materials we need from ... American manufacturers. We'll put American workers to work," Girling told reporters. Environmental groups vowed to fight it. Greenpeace said it would pressure banks to withhold financing for the multibillion-dollar project, and others said they would fight the pipeline in court."We'll use every tool in the kit," said Rhea Suh, president of the Natural Resources Defense Council. Since Obama had nixed the pipeline based on an environmental assessment commissioned by the State Department in early 2014, opponents will likely argue in court that Trump cannot reverse the decision without conducting a new assessment. CHALLENGES

Fred Jauss, partner at the international law firm Dorsey & Whitney and a former attorney with the Federal Energy Regulatory Commission, said local permitting would also be a challenge."The Presidential Permit is only one part of a web of federal, state, and local permits that must be obtained prior to starting construction," he said. "Other federal agencies, such as the Army Corps of Engineers, state regulatory commissions, and even local planning boards may have requirements that need to be fulfilled by Keystone prior to construction.""In addition, TransCanada may still need to reach deals with hundreds of potentially affected landowners on the pipeline’s route. There is a lot of work ahead for TransCanada.”The Keystone XL pipeline would bring more than 800,000 barrels per day of heavy crude from Canada's oil sands in Alberta into Nebraska, linking to an existing pipeline network feeding U.S. refineries and ports along the Gulf of Mexico. The project could be a boon for Canada, which has struggled to bring its vast oil reserves to market."Our government has always been supportive of the Keystone XL pipeline and we are pleased with the U.S. decision," said a spokesman for Canada's minister of natural resources. "The importance of a common, continental energy market cannot be overstated."The president of the American Petroleum Institute, Jack Gerard, said the approval was "welcome news" and would bolster U.S. energy security. Expedited approval of projects is part of Trump's approach to a 10-year, $1 trillion infrastructure package he promised on the campaign trail. The White House is looking for ways to speed up approvals and permits for other infrastructure projects, which can sometimes take years to go through a regulatory maze. TransCanada tried for more than five years to build the 1,179-mile

U.S. business spending picking up, but may slow in second quarter

New orders for U.S.-made capital goods unexpectedly fell in February, but a surge in shipments amid demand for machinery and electrical equipment supported expectations for an acceleration in business investment in the first quarter. Manufacturing is recovering from a prolonged slump, driven by the energy sector, bucking a slowdown in the broader economy. The Federal Reserve last week described business investment as appearing to have "firmed somewhat." "The evidence is building that manufacturing activity is on something of an upswing and that capital spending on business equipment is poised to advance for the second consecutive quarter," said John Ryding, chief economist at RDQ Economics in New York. The Commerce Department said on Friday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dipped 0.1 percent last month after rising 0.1 percent in January. That suggested a slowdown in business spending in the second quarter. Shipments of these so-called core capital goods jumped 1.0 percent after declining 0.3 percent in January. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Last month's jump reflected increases in orders at the end of 2016. Economists polled by Reuters had forecast core capital goods orders rising 0.6 percent last month. Orders for machinery inched up 0.1 percent while shipments increased 0.9 percent. Orders for electrical equipment, appliances and components advanced 2.2 percent, the biggest increase in seven months, and shipments rose 1.5 percent. U.S. financial markets were little moved by the data amid drama surrounding efforts by Republicans to repeal Democratic President Barack Obama's 2010 Affordable Care Act and overhaul the healthcare system.

Republican leaders in the U.S. House of Representatives called off a planned vote late on Friday because of a lack of support despite desperate lobbying by the White House and its allies in Congress, dealing a stiff setback to President Donald Trump. Stocks on Wall Street ended down, while the dollar was little changed. Prices for U.S. government bonds rose."What the healthcare bill does is serve as the first litmus test of the Trump/Republicans' ability to deliver on important legislative initiatives," said Steven Ricchiuto, chief U.S. economist at Mizuho Securities in New York. "If they fail at this then the prospects for tax reform, infrastructure and defense spending will need to be rethought."MANUFACTURING RECOVERING

A recovery in oil prices from multi-year lows is driving demand for equipment in the energy sector, helping to lift the manufacturing sector. Manufacturing, which accounts for about 12 percent of the U.S. economy is also being underpinned by a burst of confidence amid promises by the Trump administration to slash taxes for businesses, boost infrastructure spending and repeal some regulations. Details of the fiscal stimulus package, however, remain vague, resulting in a moderation in orders for equipment in the last couple of months. Economists say business spending could slow in the second quarter even as they expect an acceleration this quarter. A separate report on Friday from data firm Markit showed its U.S. manufacturing sector index fell in March to a five-month low.

"Business optimism has been at cycle highs since the start of the year, but has yet to translate into commensurate strength in real activity," said Sarah House, an economist at Wells Fargo Economics in Charlotte, North Carolina. Spending on equipment is expected to pick up after a 1.9 percent annualized growth pace in the fourth quarter. Still, that will likely be insufficient to offset the drag on GDP from slower consumer spending and a wider trade deficit. The Atlanta Fed is forecasting the economy growing at a 1.0 percent rate in the first quarter after expanding at a 1.9 percent pace in the final three months of 2016. Last month, a 4.3 percent jump in demand for transportation equipment offset the dip in core capital goods bookings, and hoisted overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, 1.7 percent. Durable goods orders rose 2.3 percent in January. Civilian aircraft orders soared 47.6 percent in February, driven by an increase in plane orders at Boeing. Orders for motor vehicles and parts fell 0.8 percent in February, while orders for defense aircraft declined 12.8 percent. There were increases in orders for primary metals, but orders for fabricated metal products fell as did those for computers and electronic products. Unfilled orders for core capital goods increased 0.2 percent last month after rising 0.5 percent in January. Inventories of overall durable goods rose 0.2 percent last month.

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