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Pipeline Straight Talk

Energy and Capital's Weekend Edition

Written by Nick Hodge
Posted January 21, 2012

Here's some rare straight talk about the Keystone XL pipeline, which would carry oil from Alberta's tar sands to refineries and distribution hubs in Illinois, Oklahoma, and the Gulf Coast.

There's been a ton of spin, so I'd like to give you the facts and the best investments for the eventual outcome.

Pipeline Nuts and Bolts

In 2011, after vicious opposition from environmental journalist Bill McKibben, the Natural Resources Defense Council, and the World Wildlife Fund, a decision on the pipeline was delayed until 2013.

At issue were the emissions associated with tar sands and the route of the pipeline, which crosses ecoregions and the all-important Ogallala Aquifer.

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Waiting until 2013 was too long for pipeline proponents in Congress.

So when they passed the temporary tax cut bill in December, they added a provision giving Obama until February 21st to make a decision on the pipeline.

The president, siding with a State Department announcement made last month, said this week that:

The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment.

And Obama made clear this wasn't a permanent killing of the project, adding: "This announcement is not a prejudgment of the merits of the pipeline," and further that this decision "does not change my Administration's commitment to American-made energy that creates jobs and reduces our dependence on oil."

What he's saying is that this is a temporary denial, pending submission of an alternate route by TransCanada (NYSE: TRP), which it says it will submit.

This man has an election to win over the next ten months. He can't kill a pipeline that would create thousands of jobs, break a supply logjam in Oklahoma, and carry between 500,000 and 1 million barrels of secure Canadian oil to the States every single day.

It will happen... eventually.

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Global Market

Right now, 99% of Canada's crude exports come to the United States.

It has 90% of all proven reserves outside of OPEC.

And as Canada made clear this week, there are plenty of places to sell that oil.

In addition to the Keystone XL, Canada wants to build the Northern Gateway Pipeline, which would take Alberta oil to ports in British Columbia.

Canadian Natural Resource Minister Joe Oliver affirmed this fact when he said the “decision by the Obama administration underlines the importance of diversifying and expanding our markets, including the growing Asian market.”

Billions of barrels of shale oil are going to be sold to someone.

Whether on Main Street, America or the streets of Shanghai, the companies selling it will be equally profitable.

Call it like you see it,

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Nick Hodge

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Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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