Pipelines, Politics and Profits

02/11/2019 5:00 am EST


Tony Sagami

Editor, Weiss Ratings LLC's Weiss Ultimate Portfolio

According to the U.S. Energy Information Administration, domestic oil production is at an all-time high, and it's set to increase by another 2 million barrels per day by 2020, explains Tony Sagami, contributing editor to Weiss Ratings.

That's just oil. The natural gas story is even better. The U.S. is now a net exporter of natural gas, and we are quickly turning into a natural gas superpower. The EIA expects natural gas production to increase by 8% this year to 90.2 billion cubic feet per day and hit 92.2 Bcf per day in 2020.

Of course, after you produce all that oil and gas, you need to deliver it to the people and businesses that need it. That's a problem because of the aggressive opposition to pipeline projects. Remember all the Keystone XL and Dakota Access pipeline protests?

Frankly, I've never understood the objection to pipelines, which have a substantially safer record than trucks, railroads or ships. However, I do understand that there are lots of intelligent, reasonable people who vehemently object to pipelines.

Unfortunately, this constant opposition to pipeline projects is unrealistic. And it's a serious economic headwind to meeting this growing energy need.

Meanwhile, companies that own existing oil and gas pipelines are swimming in money. I'm talking about companies like Enbridge (ENB), Energy Transfer LP (ET), Kinder Morgan (KMI), TransCanada Corp. (TRP), ONEOK Inc. (OKE), Plains All American Pipelines (PAA) and Magellan Midstream Partners (MMP). And if you like dividends, each one of the above stocks pays an annual dividend of 4% to nearly 9%.

If you're more of an ETF investor, there are two ETFs that focus on pipeline stocks: Alerian MLP ETF (AMLP) and JPMorgan Alerian MLP (AMJ). In fact, the more the environmentalists oppose pipelines, the better for the above companies and funds.

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