MLPs are the big news in the equity market, but there could be some problems, according to Shannon Nome, Houston-based managing director and lead E&P research analyst for Deutsche Bank. There are currently six E&P MLPs in the market with some $8- to $9 billion of market capitalization. That has grown from just $6 billion six months ago. "So what could go wrong?" she said at a joint Houston Energy Finance Group and IPAA program recently. The answer: changes in tax laws, interest rates, commodity-price hedging, overly aggressive expansions and an ill-advised rush to acquire assets. Tax-law changes are a legitimate concern, she said. The chance that Congress will "pull the rug out from under MLPs" and take away the tax advantage is of primary concern to MLPs. However, to some extent, the chance of that happening is mitigated due to the fact that MLPs have been limited to natural resources since 1987, so they do not cause any large tax issues in the U.S. In Canada, trusts were being formed across all industries, including retail and automotive, increasingly reducing total government tax receipts. For more on this, see the September issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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