Last week’s announcement of Russia’s USD400 billion deal to export its natural gas to China has global liquefied natural gas (LNG) players scrambling.

The good news, as we noted last week, is that as staggering as the numbers are, the 30-year contract between Russia’s state-controlled OAO Gazprom and the state-owned China National Petroleum Corp (CNPC) will fulfill just 9 percent of projected Chinese gas demand by the time natural gas starts flowing through East Siberian pipelines toward the end of this decade.

And the Chinese are shrewd enough to know that the Russians are only as dependable as current exigencies allow. In other words, they understand the importance of diversification when it comes to meeting the country’s critical energy demands. So while Canada’s political and regulatory process is proceeding at a glacial pace, the country’s relative stability is a welcome complement to its resource riches.

Besides China, the Asia-Pacific region includes other major consumers of natural gas, including Japan, South Korea, India and Malaysia, all of which will need Canadian LNG.

Still, this landmark deal means the LNG market just got even more competitive than it was already. And there’s a real possibility that Canada could squander some of its advantages if politics continue to get in the way.

Fortunately, the companies involved in developing Canada’s LNG export infrastructure are now even more motivated to do what it takes to expedite the approval process. To that end, the companies behind four of coastal province British Columbia’s largest LNG export projects have formed the B.C. LNG Developers Alliance to lobby the government for sensible policymaking, help each other navigate the thorny approval process, and avoid duplicate efforts when it comes to the infrastructure itself.

According to The Globe and Mail, the group’s four members are: Petronas-led Pacific NorthWest LNG, Shell Canada Energy-led LNG Canada, BG Group PLC’s Prince Rupert LNG, and the Kitimat LNG project, which is co-owned by the Canadian units of Chevron Corp and Apache Corp.

Three smaller LNG projects are also considering joining the group. The alliance might also team with the Canadian Association of Petroleum Producers on issues related to drilling for natural gas.

For now, the fledgling group is not quite yet in launch mode. According to a representative from Kitimat LNG, alliance members are still working out the details involving governance, while staff need to be hired, including a leader, who will act as spokesperson for the group, as well as outside consultants.

The companies hope that by working together they’ll be able to more easily secure the imprimatur of key constituencies, such as First Nations groups, environmentalists and labor unions, among others. Outreach efforts will include an LNG literacy program to address the sort of misconceptions that have hindered the approval process for other energy infrastructure projects, such as Enbridge’s Northern Gateway pipeline.

And once they receive the blessing of these various groups, the companies behind these LNG projects could also negotiate with the provincial government as a collective entity, instead of on a one-on-one basis. There’s a solid precedent for the collective approach, as it apparently helped facilitate the negotiations that led to the development of Alberta’s oil sands.

Additionally, as these projects are approved, the alliance will also work toward ensuring a steady supply of skilled labor is available for both construction and operation, as labor shortages have plagued past ramp-ups in the energy sector.

According to a report issued last year by the B.C. Natural Gas Workforce Strategy Committee, LNG exports will require more than 100,000 new skilled workers: about 60,000 to build gas liquefaction plants starting in 2016 and 75,000 workers to operate them after they’re built.

Finally, LNG project stakeholders may even broker the sharing of certain pipelines, which would not only save on construction costs, but also help speed the approval process.

Nevertheless, the political and regulatory process remains formidable. And this likely means that only a few of the 14 LNG projects that have filed for export licenses with the country’s National Energy Board will ever become operational.

For instance, according to Canada’s Business News Network, Calgary-based investment bank Peters & Co Ltd believes that just one LNG export plant will be operational by the end of this decade, with “maybe” two on line by 2025.

AltaCorp Capital Inc notes that Petronas’ Pacific NorthWest LNG and Shell Canada Energy’s LNG Canada are the two presumptive leaders at the moment, though this could very well change, particularly if the provincial tax and compliance regime becomes so onerous that companies decide it’s no longer economic to pursue these projects.

LNG projects must appease the provincial government, as well as the aforementioned constituencies, which enjoy considerable political clout. The B.C. government estimates the LNG industry will create at least 75,000 new jobs in the province, while it hopes taxes and royalties will help fund a CAD100 billion prosperity fund. At the same time, it hopes to allay the concerns of First Nations groups, as well as ensure that these projects are in compliance with stringent environmental regulations.

All of these demands add up. Companies investing in these massive multi-billion-dollar LNG projects must not only enjoy a rate of return that justifies their risk, but Asian buyers of LNG are becoming increasingly adamant that contracted commodities be delivered on time and within budget, as they’ve seen other developed-world energy projects hit by huge cost overruns.

The energy industry has already balked at the B.C. government’s proposed tax of 7 percent on the income from LNG facilities after the recovery of capital costs. That’s just the latest tax on top of many others already proposed or in existence. And the resulting thicket of taxes has created extraordinary complexity for which the government still needs to provide clarity. That’s not expected to happen until the B.C. legislature’s fall session, at the earliest.

That timing is crucial, as Petronas is expected to make its final investment decision by year-end. And while the CEO’s tough talk at a Vancouver energy conference last week may be just another negotiating tactic, there’s definitely a point at which it will no longer make sense for the company to commit further resources to Canadian LNG.

Canada’s federal government certainly is in favor of developing the country’s LNG export market. And British Columbia clearly sees significant benefits for the province as well. But the provincial government is going to have to shake off its bureaucratic malaise by moving faster and making more concessions, or it will risk killing the golden goose.

Portfolio Update

Grain-handling and storage equipment manufacturer Ag Growth International Inc (TSX: AFN, OTC: AGGZF) had a blockbuster first quarter.

Both trade sales and adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) achieved record highs due to robust demand across all business lines and geographies. Trade sales jumped 43.8 percent, to CAD86.2 million, while adjusted EBITDA nearly doubled, to CAD13.6 million.

Sales in Canada increased 39 percent over the prior-year period, to CAD23.2 million, a result which was 19 percent higher than the previous record set back in 2012. Sales were very strong across all on-farm product lines, including grain augers, storage bins and aeration products.

In the US, strong demand for on-farm grain augers as well as commercial grain-handling equipment led to record sales of CAD49.2 million, up 32 percent year over year.

And international sales of CAD13.9 million exceeded the prior year by CAD7.8 million, as AG Growth entered 2014 with a higher level of committed business in Eastern Europe and South America.

Ag Growth’s earnings beat analyst forecasts by 45.3 percent for earnings per share (EPS) and by 12.6 percent for revenue. This was the third consecutive quarter in which the firm has surpassed sales expectations, though its recent history on the EPS front has been jagged.

On Bay Street, analyst sentiment remains largely bullish, at seven “buys” and four “holds.” The consensus 12-month target price is CAD51.28, which suggests potential appreciation of 12.2 percent above the current share price.

For full-year 2014, analysts forecast revenue will rise 19 percent year over year, to CAD427.4 million, while EBITDA are expected to jump 33 percent, to CAD77.5 million. For 2015, analysts project revenue will climb 8 percent, to CAD461.2 million, while EBITDA will increase by 10 percent, to CAD85.5 million.

Bullish analyst sentiment is consistent with management’s optimistic outlook for the remainder of the year. Record North American crop production in 2013 resulted in strong demand for on-farm portable grain-handling equipment and low post-harvest inventory levels throughout the company’s dealer network.

That along with lower agricultural commodity prices have caused farmers to retain more of their 2013 crop on the farm, resulting in higher levels of storage and increased demand for Ag Growth’s storage, aeration and handling equipment. As such, off-season demand was higher than usual.

Ag Growth’s backlog for portable handling equipment remains at record levels, which presages a strong second quarter. The US Department of Agriculture projects that the upcoming planting season will continue at historically high levels, with 91.7 million corn acres, down just 4 percent from last year, and 81.5 million soybean acres, up 6 percent from a year ago.

Also, the planting season got a late start, with just 29 percent of total projected corn acres planted as of the beginning of May compared to an average of 42 percent over the past five years, which should mean a later harvest and, therefore, a longer in-season sales period. That bodes well for the company’s performance during the second half of the year.

According to management, Ag Growth’s increasing presence in international markets has resulted in record levels of quoting activity, and committed international business is significantly higher compared to the prior year. Despite the political turmoil in Ukraine, the company still expects to conduct significant business there this year, though the volatile situation could delay the shipment of committed orders and hinder new business development.

In Latin America, the company already has committed business of over CAD11 million, compared to total sales there last year of CAD2.4 million. The Company has also received new orders in Africa and is working to grow its business in the Asia-Pacific region. Management believes the international division is poised to outperform last year’s record sales.

In late 2012, the stock hit a three-year low of CAD27.84, following that year’s record drought, but it has since recovered and currently trades near CAD45.71, up 64.2 percent from the aforementioned low. At recent prices, the stock is just 14.2 percent below its all-time high of CAD53.25 set back in early 2011.

Ag Growth pays a CAD0.20 monthly dividend, or CAD2.40 annually, for a current yield of 5.3 percent.

Ag Growth is a buy below USD40 in the Aggressive Portfolio.