Politics is a cynical game, rarely more so than during US presidential election years.

d there are few better examples than the off-again, on-again treatment by federal regulators of TransCanada Corp’s (TSX: TRP, NYSE: TRP) attempt to build the Keystone XL pipeline.

The 1,179-mile Keystone pipeline would bring large amounts of oil from Canada’s tar sands south to US refineries for the first time.

Opposition has centered around the path the pipeline would take though environmentally sensitive areas of Nebraska as well as what opening Canada’s reserves would unleash in terms of carbon dioxide emissions.

The pipeline is currently officially in limbo, with the Obama administration deferring judgment until almost certainly after the election. The president, however, has allowed TransCanada to begin construction on the southern leg of the pipeline, a segment connecting Oklahoma’s Cushing hub with Gulf Coast refineries. This segment promises to be profitable in its own right, given the bottleneck at Cushing.

That move is a pretty good sign Mr. Obama will eventually approve the entire project if he’s re-elected in November. Meanwhile, his principle opponent Mitt Romney has said repeatedly he’ll OK Keystone.

David Dittman has reported on this controversy many times in his Maple Leaf Memo. And there’s no doubt this is a tale with much left to tell, and ink to spill telling it.

Our view is that the Keystone will eventually win approval and eventually begin shipping oil south in the coming years. That will unlock tar sands oil–as well as Canadian light oil from shale–as never before.

And the result should be an unprecedented wave of investment in the region that will trickle down to companies involved in everything from drilling wells to building schools.

Investment would be accelerated further if TransCanada rival Enbridge Inc (TSX: ENB, NYSE: ENB) succeeds in building is Northern Gateway pipeline, which will take oil sands output to the Pacific Coast.

Meanwhile, a third group of developers is gearing up to develop and export liquefied natural gas from British Columbia.

Below, I take a brief look at the beneficiaries of the boom, several of which are already Canadian Edge Portfolio Holdings. The rest are tracked in How They Rate.

Oil from Tar

Suncor Energy Inc (TSX: SU, NYSE: SU) was the first company to develop Canada’s tar sands bounty, opening its Great Canadian Oil Sands mine in 1967. Today the company produces 542,000 barrels of oil equivalent a day; the majority of that total is from tar sands, and Suncor has plans for much more such output. And virtually every other major global oil company has joined it in the region, several of which operate under the Syncrude Partnership.

The key challenge is costs. As the graph “Pricey Sands” shows, the cost of producing a barrel of oil equivalent from Syncrude’s facilities has steadily ratcheted higher, even as scale has ramped up.

Syncrude’s average cost in the second quarter of 2012, for example, was over CAD50, more than twice what it was in third quarter of 2005.

That’s the precise opposite of the economics of most other energy sources, and it points to a long-term problem of many major oil sands producers.

Their facilities are simply not economic unless oil and gas prices are at a high enough level.

The exception to the rule is MEG Energy Corp (TSX: MEG, OTC: MEGEF), which uses a method of extraction known as in situ. Rather than mine and refine as Syncrude does, MEG’s method more or less flushes, with the results that costs are far less, production is greater and even environmental disruption is subdued.

The result is MEG’s costs are even lower than those of many conventional oil producers, coming in at a record of CAD7.79 per barrel produced in the second quarter. The company’s projects are backed by the financing power of China National Offshore Oil Corp, known as CNOOC, and judging from its second-quarter conference call output is likely to ramped up substantially if Keystone XL becomes a reality.

The chief drawback of the company’s stock for many investors is the lack of yield. That’s not likely to change anytime soon, given the company’s needs for development capital. But for those who want to make a bet on the long run growth of tar sands, MEG Energy is our favorite play up to USD45.

It’s also worth noting that Aggressive Holding Pengrowth Energy Corp (TSX: PGF, NYSE: PGH) appears to hold an increasingly valuable piece of the sand through its Lindbergh project. The need to ensure capital to develop the project was one reason cited by management for last month’s dividend cut.

The company reported last week that its steam injection process at Lindbergh has been more successful than expected. That increased the production potential of the overall project.

Pengrowth isn’t set to report its second-quarter profits until Canadian Edge after the market close on Aug. 10.

The new dividend rate, however, has been set very conservatively and the company looks set to successfully develop considerable oil in the coming years.

Accordingly, I’m raising Pengrowth back to a buy up to USD10 for aggressive investors.

Finally, Cenovus Energy Inc (TSX: CVE, NYSE: CVE) is also worth a look. The bulk of company production is from conventional sources.

But that may not be the case for long, as management ramps up production at the Christina Lake project, also a steam injection operation, where it ramped up output by 38 percent in the second quarter.

Cenovus, like all oil companies, suffered from lower realized selling prices during the quarter. But with the tar sands-focused Christina Lake and Foster Creek projects very much on track with their development, the company is definitely building a franchise.

Regulatory approvals have also been received for the Narrows Lake oil sands project, which is expected to ultimately deliver production of 130,000 barrels a day.

The current dividend is well covered with cash flow–the payout ratio was 18 percent–and management has already shown it won’t be shy about increasing it over time.

The increase in the March 2010 dividend was a full 10 percent over the prior rate. Buy Cenovus Energy up to USD40.

Light oil is Canada’s second big energy rush. And from places like Bakken to Cardium, production is ramping up. The Canadian Edge Aggressive Holdings list several major players in the region, including ARC Resources Ltd (TSX: ARX, OTC: AETUF), Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF), PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF) and Vermilion Energy Inc (TSX: VET, OTC: VEMTF).

All of them are reviewed elsewhere in the issue, with a focus on their second-quarter results. All are ripe for purchase and remain on track for strong production growth the next several years.

ARC Resources and Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) are also big players in Canada’s dash to gas.

Natural gas prices in Alberta have been even more abysmal than the spot prices quoted on commodity exchanges, actually sliding under USD1.50 at one point last summer. These companies’ appeal is they’ve been able to maintain profits due to low costs, conservative finances and rich reserves as well as to lay the groundwork for future profitability when prices rebound at last.

That may not happen for some years. But the recent takeovers of Canadian energy companies by foreign players (see the table “Big Deals”) is pretty clear evidence the real players in this game are seeing value in Canadian energy.

The upshot is all of these companies are candidates for takeovers in the coming years, with both foreign and domestic potential suitors. That’s another reason to keep some of them in your portfolio, despite the likelihood that North American gas is likely to stay cheap for some time.

And note that ARC’s Montney reserves are in the same region where recently acquired Progress Energy Resources Corp (TSX: PRQ, OTC: PRQNF) operates.

Red-Hot Pipes

I’m a big fan of Keystone XL developer TransCanada, but only partly because of the pipeline project. In fact, this is a company that will prosper, even in the unlikely event that Keystone is actually killed.

The reason is the company has some CAD13 billion worth of other energy infrastructure projects to build, all of which will generate a rising stream of cash flow for many years.

One of these is North America’s biggest nuclear power plant, set for startup later this year in Toronto. Another is the Northern Courier Pipeline, an oil sands transportation project to be built and operated for a consortium led by Suncor, Teck Resources Ltd (TSX: TCK/B, NYSE: TCK) and Total SA (France: FP, NYSE: TOT).

Keystone would be a major boon for the company. But it’s set to prosper with or without it. TransCanada is a buy for even the most conservative investors up to USD45.

Energy midstream companies AltaGas Ltd (TSX: ALA, OTC: ATGFF) and Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) are also poised for big profits and are on the bargain rack as well. I review both companies’ second-quarter earnings elsewhere in this issue.

But their real appeal is they’re in the very center of energy patch development in Canada, with numerous opportunities to build and operate new fee-generating assets.

Fee-generating assets’ returns don’t change with energy prices. But they are absolutely essential to any attempt to pump oil, gas and natural gas liquids (NGLs) and bring them to market. That gives them almost a utility-like quality for stable revenue, which in turn allows companies to pay reliable and growing dividends.

Pembina’s acquisition of Provident Energy Ltd last year brought it into the NGLs business in a big way. The purchase also involved inheriting some commodity price exposure, which hurt second-quarter results. But it also positioned the company for a surge of fee-generating assets serving this sector, which is set to feed a new generation of North American heavy industry.

Meanwhile, the company’s connection to Syncrude as its exclusive transportation partner, relations with Canadian Natural Resources Ltd (TSX: CNQ, NYSE: CNQ) and Mitsue and Nipisi projects make it a big and growing player in oil sands transportation.

That’s a business that can only expand, whether Canadian oil is going south or west. Pembina Pipeline is a buy up to USD30.

AltaGas, meanwhile, owns gas utility and storage infrastructure adjacent to the planned Kitimatt liquefied natural gas facility, being developed by EOG Resources Inc (NYSE: EOG), among others.

That could prove an extremely valuable asset should exports become a reality, as would the company’s existing base of gathering infrastructure in Western Canada. Buy AltaGas up to USD32.

Note that Keyera Corp (TSX: KEY, OTC: KEYUF) is also a major player in these areas, and is ramping up its ability to deal with diluent, a key element in oil sands development.

Keyera is a bit expensive at these levels but is a solid buy on any dips to USD42 or lower.

Poseidon Concepts Corp (TSX: PSN, OTC: POOSF) is a new addition to How They Rate under Energy Services. The company’s specialty is dealing with liquid used in producing energy, and business is booming.

Second-quarter profits nearly quintupled to CAD0.57 a share on a CAD535 million increase in cash flow, as the company boosted its tank fleet to 400 units and signed its first contract outside of North America.

Split off from Open Range Energy Corp (TSX: ONR, OTC: ONRRF) prior to its parent’s merger with Peyto Exploration & Development, the company pays a monthly dividend of CAD0.09 per share in a growing business with major applications in Western Canada. Aggressive investors can buy Poseidon Concepts on dips to USD13 or lower.

Note Aggressive Holdings energy services companies PHX Energy Services Corp (TSX: PHX, OTC: PHXHF) and Newalta Corp (TSX: NAL, OTC: NWLTF) also have oil sands and exposure and are highlighted in Portfolio Update.

Finally in the valuable niches department, Bird Construction Inc’s (TSX: BDT, OTC: BIRDF) increasingly dominant position in construction and Artis REIT’s (TSX: AX-U, OTC: ARESF) growing portfolio of Western Canada properties give them skin in the game in the energy patch as well.

Bird’s strong second-quarter results, including an expanding contract backlog serving the oil sands region, are highlighted in Portfolio Update. Artis, meanwhile, acquired five buildings in Alberta and British Columbia during the quarter, as it gears up to cash in on continued strong economic growth.

The more Western Canada’s energy patch grows, the more it should benefit both companies. Bird Construction is a buy up to USD14.50. Buy Artis up to USD16.

This is not an exhaustive list of winners from Canada’s ongoing energy boom. It is, however, a group of very solid companies set to win from one of the world’s surest trends, and that’s even if Keystone XL is never built.

And, best of all, this is a story that’s only just unfolding, with the promise of big profits for those who get their bets in now.