Law360 Quotes John Goodgame on Potential Impact of Obama Budget Proposal on MLPs

For its article “Obama Tax Proposal Would Spell Doom For Oil, Gas MLPs,” Law360 interviewed Akin Gump oil and gas partner John Goodgame on the potential impact of President Obama’s 2016 budget proposal on fossil fuel master limited partnerships (MLPs).

The article notes that the budget’s proposed taxation of these energy MLPs as corporations could dampen, if not extinguish, investor interest in such structures. Goodgame, whose practice focuses on MLPs in the energy industry, said that, while the elimination of tax incentives could make it harder for MLPs to raise cash, the MLP structure itself could still be useful to large, vertically integrated companies: “From a structural standpoint, for large producers, there would be some benefit to the MLP structure for them and investors to directly own midstream assets that are strategic for the upstream operations. Would that be sufficient incentive from an investor demand standpoint? I don't know.”

He added that there are questions as to whether MLPs taxed as corporations could generate levels of investment comparable to those that these structures currently inspire: “Think about all the capital that has gone toward midstream and upstream expansion over the last 10 years. The MLP form has been critical in funding a lot of the midstream assets that are now taking oil and gas from the shale plays. It's an open question as to whether the same amount of capital would be available for the energy infrastructure America needs.”