Build it and they will come: When these words are matched by deeds it will be a clear warning that America’s ongoing energy midstream expansion is at an end.

Fortunately, despite the headwinds facing the energy industry this year we’re still a long way from there. The latest evidence is ONEOK Partners LP’s (NYSE: OKS) decision this week not to go through with its Bakken Crude Express Pipeline.

The Bakken Shale region of the upper US Midwest boasts the most prolific light oil reserves in North America, and its eventual development is assured.

ONEOK, however, was unable to secure “sufficient long-term transportation commitments” in a recent “open season.” Despite the promise of the project, management was unwilling to take the near-term financial risk that revenue wouldn’t be there at completion.

Adhering to conservative financial and operating strategies keeps a lid on master limited partnerships’ (MLP) near-term risks as well. Should the US government go over a fiscal cliff and a resulting recession drag down energy prices further, for example, North American producers would likely reduce drilling plans for 2013 even more.

Energy midstream MLPs that have tied projects to contracts, however, would see little material impact on their cash flows. Tighter credit conditions would also have minimal impact, as management teams have used the record-low borrowing rates of the past three years to reduce MLPs’ traditional dependence on credit lines and other near-term funding sources.

Tabled projects do come at the price of reduced future revenue. ONEOK Partners still plans USD2.2 billion in 2013 capital expenditures, and management says it still has USD4.2 billion to USD4.8 billion in projects underway in the Bakken region alone.

As a result it’s not changing projections for annual cash flow growth of 17 percent to 21 percent through 2015 or expected annual distribution growth over that time of 10 percent to 15 percent.

A deeper slump in North American energy drilling would no doubt force more retrenchment of growth plans for midstream MLPs. And despite the security of existing assets and contracts, less new development will eventually cut into growth of cash flow and distributions.

That’s a good reason to keep a close watch on MLP valuations now, particularly those that have much lower yields than rivals because of investor expectations of rapid distribution growth. If those projections aren’t met unit prices will come down, even if dividends are still safe.

The good news is there are more high-quality MLPs selling at bargain prices than in many months. That’s in large part due to lingering fears about the fiscal cliff and its potential impact on the US economy as well as worries a federal budget deal could involve more levies on MLP income.

We won’t have definitive answers to these questions until there is a deal in Washington. But MLP Profits readers can rest assured about two things while we wait.

First, financially strong and growing companies always build wealth for investors, no matter how they’re taxed. Canadian energy midstream income trusts, for example, have been North America’s top-performing dividend-paying stocks since they lost their tax advantages on Halloween night 2006.

Second, trusts’ gains were thanks to reliable revenue growth, something all MLP Profits Portfolio Holdings would maintain even if they are eventually taxed. That includes energy producers such as Linn Energy LLC (NSDQ: LINE), which has locked in lofty selling prices for all of its projected oil and natural gas output through 2016 and 2017, respectively.

The bottom line is we’re not recommending any sales from the MLP Profits Portfolio this month. In fact it’s a good time to flesh out holdings.

Thanks for reading.

In This Issue

Solid operating results coupled with recent market weakness make several Portfolio Holdings compelling long-term opportunities at these levels. See Portfolio Update: Strong Prospects, Better Buys.

We’re introducing a new feature this month, which will showcase two Portfolio Holdings that stand out for new buyers. One selection will appeal to more aggressive investors, while the other should attract the more conservative. See Best Buys: Two to Get Started.

It’s a small universe of maritime transport MLPs. Here’s the latest on a group with solid operating performance, compelling value metrics and attractive yields. See Sector Spotlight: Maritime Transport MLPs.

The key to playing in the European-style variable-dividend MLP space is to know exactly what you’re getting with the business and to know how and when you’re getting paid. See Sector Spotlight: Variable-Dividend MLPs.

Going over “the fiscal cliff” will likely approximate the impact on everyday life of the “Y2K” changeover. This is much ado about very little–right now. See News & Notes: Cliff Notes.