Energy Prospectus

We better be willing to work nicely with our Canadian neighbors or our way of life will be at the mercy of OPEC. The U.S. still consumes a lot more oil than we produce and there is no way that wind & solar projects will reduce our dependence on a steady flow of oil & gas.

Biden's War on Pipelines is meant to please the Far Left and reward Warren Buffet for his big campaign contributions. Warren owns railroads that transport crude oil from Canada.

The Most Misunderstood Investment in the U.S. (and It’s Not Bitcoin)
By Keith Kohl
Written Feb 10, 2021

All it took was one swift stroke of a pen, and President Biden ended a 13-year war against the Keystone XL pipeline.

At the very least, he delayed any hope for the project by another four years.

Remember, Trump reversed a previous veto from the Obama administration. This game of one-upping the previous administration’s stance on the Keystone XL pipeline has been going on since 2008 when the project was first proposed. All I can say is be careful what you wish for.

Whether you love or hate oil and gas pipelines, they remain a sorely misunderstood investment in the United States today.

And that, dear reader, breeds an interesting opportunity for individual investors like us.

Let me explain...

The Most Misunderstood Investment in the U.S.
Once completed, the Keystone XL would have transported approximately 830,000 barrels of oil from Alberta to refineries along the Gulf Coast of Mexico.

If you’re asking yourself why it's so important that crude comes from the bituminous sands of Alberta, you have to realize that these refineries are special — they’re specifically geared to handle heavy grades of crude oil.

These refiners crave the heavy, sour crude oil we import from two particular places: Venezuela and Canada.

Now, we all know how Venezuela’s oil industry has been an absolute dumpster fire ever since Hugo Chávez seized assets from oil companies operating in the country back in May 2007.

With a snap of his fingers, PDVSA took control of 30 barges, 13 drilling rigs, 399 boats, and 39 terminals that were owned by roughly 60 oil companies.

And it’s been an utter disaster for Venezuela since then. < Biden's war on pipelines could be an utter disaster for the U.S..

Couple the collapse of Venezuela’s oil output with the crippling sanctions placed on the country by the U.S., and those refiners along the Gulf of Mexico could only turn to Canada to satisfy that hunger for poor-quality crude.

Naturally, the oil sands stepped up in a major way.

Today, we import well over 4 million barrels of crude oil and petroleum products every day from our friendly neighbors to the north.

To put a little perspective on how crucial Canadian oil is to the United States, keep in mind that this is nearly seven times more crude than we buy from all of OPEC!

So you can understand why it’s important we have a safe and effective means to transport this oil.

Believe me, I’ve read the same headlines that you have regarding pipelines.

Depending on which political team you play for, it’s safe to say that you either abhor the notion of using pipelines to transport crude or you see pipelines as a saintly option with absolutely no drawbacks.

Spoiler alert: Both of those takes are inaccurate.

Let me be clear — NOTHING is perfect when it comes to transporting crude oil, pipelines included.

And even though 99.9% of the crude oil that starts at one end of the pipeline will make it safely to its destination, it’s illogical to think that pipelines don’t have their own flaws.

However, you also have to realize the alternatives will make President Biden regret revoking the Keystone XL’s permit. < It is going to increase carbon in the atmosphere.

Just break down the numbers yourself…

Let’s take the 830,000 barrels per day that the Keystone XL would’ve transported to our refineries.

There are only two other ways to move that crude. You can either load it up onto tanker cars and ship it via railway or you can haul it out with trucks.

Given that the weight limit for trucks is set at 80,000 pounds, each truck can haul roughly 8,000 gallons of crude, or about 190 barrels.

That means it would take 4,368 trucks to ship what the Keystone XL could in a day.

Of course, this is also assuming that President Biden’s attack on U.S. pipelines stops after revoking the Keystone XL permit.

If he decides to go after the rest of America’s pipelines, we’re talking about a network of over 2.6 million miles of oil and natural gas pipelines that crisscross our country.

Even if he only goes after new pipeline projects, that could lead to an even greater catastrophe. Not only would it come during a time when natural gas plays a critical role in our energy mix but also when our energy infrastructure is in desperate need of an upgrade.

By now, you can probably see the opportunity in midstream players that control our current pipeline infrastructure.

That’s one place investors can start their search for the hidden investment gems under President Biden’s administration. < Some high quality pipeline companies that pay very nice quarterly dividends are in our High Yield Income Portfolio.

Until next time,
Keith Kohl

Great post Dan, 2 questions:

What are your favorite mid streams?

Dumb question: Inland river tank barges. Do they factor into this at all?

‘Real-world costs are devastating’: 14 AGs threaten legal action over Keystone pipeline cancellation
February 10, 2021 | Terresa Monroe-Hamilton for www.bizpacreview.com

Fourteen GOP state attorneys general decried President Biden’s cancellation of the Keystone XL pipeline in a letter on Tuesday, urging the president to reconsider and warning that they are considering legal action if that doesn’t happen.
“Please be aware that the states are reviewing available legal options to protect our residents and sovereign interests. In the meantime, we urge you to reconsider your decision to impose crippling economic injuries on states, communities, families, and workers across the country,” Montana Attorney General Austin Knudsen wrote in a letter to the Biden administration. Knudsen is the author of the letter and is leading the coalition of 13 other state AGs who co-signed it.

“We write with alarm regarding your unilateral and rushed decision to revoke the 2019 Presidential Permit for the Keystone XL pipeline,” the letter stated. “Your decision will result in devastating damage to many of our states and local communities. Even those states outside the path of the Keystone XL pipeline – indeed all Americans – will suffer serious, detrimental consequences.”

“The real-world costs are devastating,” the letter continued, pointing out that Biden’s actions will cost thousands of jobs that also include union labor. The mandate will also potentially devastate local businesses and governments financially.

The Biden White House is vaguely stating that they intend to push for job creation and will consider the implications of canceling the pipeline.

“The Biden-Harris administration has proposed transformative investments in infrastructure that will create millions of good union jobs here in America, boost the U.S. economy, and advance our climate and clean energy goals,” announced Assistant Press Secretary Vedant Patel.

That did not placate the AGs. “It’s bad enough for the government to pick winners and losers in the marketplace, but much worse when the winners are aspirational. Aspirations don’t put food on the table, or pay the phone bill, or put kids through college. Jobs do, and you eliminated thousands of them with the stroke of a pen.”

Montana will be hard-hit by Biden’s decision. It could reportedly cost the state $58 million in annual tax revenue, Knudsen estimated. That would not only impact jobs and families, but schools and public services as well.

“It is not too much to ask that the President give due consideration to the destructive consequences his decisions impose on our – and his – constituents,” the letter implored. “We are therefore deeply concerned that your unilateral approach, which failed to consider costs and reliance interests, sets a dangerous precedent for other permits and projects that affect all our states.”

The other co-signers on the letter include Ken Paxton of Texas, Alan Wilson of South Carolina, Jason Ravnsborg of South Dakota and Patrick Morrisey of West Virginia as well as Steve Marshall of Alabama, Leslie Rutledge of Arkansas, Christopher Carr of Georgia, Indiana’s Todd Rokita, Derek Schmidt of Kansas, Jeff Landry of Louisiana, Lynn Fitch of Mississippi, Missouri’s Eric Schmitt and Wayne Stenehjem of North Dakota.

“We cannot ‘Build Back Better’ by reflexively tearing down,” the letter stated in an apparent mockery of Biden’s campaign slogan.

Senator Joe Manchin (D-WV), who heads the U.S. Senate energy committee, is reportedly requesting Biden reverse his cancellation of the Keystone XL pipeline. Manchin claims the pipeline provides well-paying union jobs and that it is safer than transporting oil using railways and trucks, according to Reuters.

“Pipelines continue to be the safest mode to transport our oil and natural gas resources and they support thousands of high-paying, American union jobs,” Manchin stated.
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MY TAKE: Most of the job losses are in Red States, which Biden doesn't care about.

mrbill:
To answer your questions. My recommended midstream companies are in the High Yield Income Portfolio. Keep in mind that the majority of my background is in upstream companies. What I've done is try to find midstream companies that are generating solid distributable cash flow, so that they can maintain their quarterly dividends.

I think Antero Midstream (AM) is very attractive for dividends because its growth is tied to Antero Resources (AR), which is in much better shape today than it was a year ago. AR is the largest producer of NGLs and NGL prices have a lot of upside.

For safety, the larger companies like KMI, MMP, MPLX, OKE and PAA & PAGP look good. PAA reported somewhat disappointing Q4 results, but it will be fine and it has plenty of DCF coverage.

Inland river barges do haul some oil, but I don't have any ideas in that niche.

Thanks Dan, have a good share of AR in my modest group and have been in and out of AM, which I like. I shall return. Hoping to get some more gains and go after your other mid streams too.

Tank barges go up and down the Inland waterways, was just wondering about the carbon emissions from Buffet's trains and trucks. Granted, towboats have diesels too.

Thank you for pointing out the "side effects" from tanker trains and tanker trucks. It needs to happen more.