A Glimpse of Life Without Pipelines

For the most part, pipeline companies would rather avoid being in the news. Because when they are in the news, it usually means something went wrong. Either someone is protesting your pipeline, or worse, your pipeline spilled what it was supposed to be transporting.

In the previous column, I discussed the Dakota Access Pipeline project that is being built by Energy Transfer Partners (NYSE: ETP). It has been the subject of high-profile protests that — at least for now — have interrupted construction.

Today I want to talk about the other reason you don’t want your pipeline in the news. Over the past week gasoline prices have spiked across the Southeast as a result of a leak in one of the nation’s most important pipelines. But before I get to that, I want to first provide a high-level overview of the U.S. oil and gas pipeline network.

It became clear to me during the debates over the Keystone XL Pipeline system a few years ago that most people are entirely unaware of the extent of the pipeline network spanning the U.S. There are actually about 2.5 million miles of oil, gas, and refined products pipelines crisscrossing the country, which is about 50 times the total length of the U.S. interstate highway system:   

160923TELpipelinesmap

While some protest new projects out of worry that they will contaminate U.S. waterways, these pipelines already transport millions of barrels of oil across thousands of important waterways daily. If it were easy to contaminate our drinking water, there would clearly be no clean water left in much of the U.S.

But of course with this much infrastructure, accidents do happen. Pipelines have leaked. Waterways have been temporarily contaminated. And that happened earlier this month with one of the nation’s most important energy conduits.  

Colonial Pipeline Company operates the largest refined products pipeline in the United States. Colonial is owned by a consortium of public and private companies including KKR (NYSE: KKR), Shell (NYSE: RDS-A) and Koch Industries.

The Colonial Pipeline runs from Houston to Linden, New Jersey, traversing 11 states in the Southeast and the Mid-Atlantic. Colonial’s 5,500-mile system transports more than 100 million gallons per day of refined products, or approximately 50% of the fuel consumed on the East Coast.

The pipeline ships primarily gasoline, diesel and jet fuel, and directly connects to major airports in Atlanta, Nashville, Charlotte, Greensboro, Raleigh-Durham and the capital region.

160923TELcolonialmap

On Sep. 9, the pipeline was partially shut down after a leak was discovered in Alabama. The leak released an estimated 6,000 to 8,000 barrels of gasoline into the soil and into a mining retention pond. The partial shutdown disrupted gasoline deliveries along the pipeline’s route, resulting in higher prices and some shortages. Six governors declared a state of emergency, and Colonial scrambled to fix the leak.

The impact on consumers underscores our dependence on pipelines. As long as we use fossil fuels, we need to move them around the country. There aren’t that many ways to do that, and despite the occasional high-profile incident, pipelines have the safest track record among the transportation options.

If we aren’t going to build pipelines, we have to prepare for higher prices and/or riskier means of transporting oil and gas.

I am convinced that pipelines are going to continue to serve consumers for many years. In fact, the latest Energy Strategist includes updates for many of the pipeline stocks in our portfolio. Consider subscribing to learn about the most promising investments in this critical sector.    

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