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Oil Trumps Environment (and the Dollar)

And the winner of Obama's secret pipeline is...
 
ISN'T IT odd that an 800-mile pipeline that runs across environmentally sensitive land has been permitted without any mention in the media? writes Marin Katusa for Doug Casey's Energy Report.
 
Not a word about it from President Obama either.
 
Obama's Secret Pipeline will be built over land that's much more sensitive than that of the Keystone XL pipeline, which gets nothing but front-page coverage. It will actually be 17% (six inches) larger in diameter than Keystone XL (36 inches) and it will transport natural gas, not oil.
 
The Senate of Alaska, the state in which the pipeline will be built, has just passed Bill 138, which makes the state a partner of three of the world's largest oil companies, including one that has a horrible environmental track record on US soil. In a nutshell, Alaska's government is now partners with BP, ExxonMobil, and ConocoPhillips.
 
Only one more signature is required – Governor Sean Parnell's – and it's expected that he will sign the deal.
 
For more than 100 years, the US government has been receiving a royalty and tax revenue paid on the amount of oil or natural gas produced on American soil – a fee that is paid in US Dollars. Bill 138 has changed this forever.
 
Instead of Alaska receiving its dues in US Dollars, the state legislature has decreed through Bill 138 that the state will be paid "in kind". In other words, the state will be getting its share of royalty and tax revenue in natural gas instead of US Dollars.
 
For the record, this is the first time ever that a US state has entered into a partnership like this. Essentially, Alaska is now a 25% equity partner with BP, ExxonMobil, and ConocoPhillips – which also requires the state to cough up cold, hard cash to build the entire project, including the 800-mile-long, 42-inch-wide pipeline.
 
Overall, the project is currently estimated to cost north of $50 billion, and we expect that when all the capital expense overruns and government inefficiencies are accounted for, the whole project will come in at more than $75 billion, using the total costs of similar projects for comparison.
 
But it will be 2015 before the final negotiations and the specific details of the partnership are agreed on, and remember, the devil is in the details. Who do you think will get the better end of the deal – a bunch of government bureaucrats with zero oil and gas experience, or the world's top oil- and gas-producing companies? I know whom I'm betting on.
 
We already know which company will be building and operating Obama's Secret Pipeline. The company I'm talking about has a lower price-to-earnings (P/E) ratio and a better yield than all of its peers. That's good, because shareholders get paid a monthly yield for owning the stock while sitting back and watching the share price rise as well.
 
Think of it this way: this company charges the world's most powerful oil and gas producers for every barrel of oil that passes through its "road network," and now it can also charge the state of Alaska. Regardless of the price of oil or natural gas, this company gets its fee.
 
It's a low-risk way to benefit from a high-risk enterprise. This company is a current Buy in our Casey Energy Dividends portfolio. The Energy team is currently working hard on the upcoming issue, which will in detail cover the company that's bound to gain big from Obama's Secret Pipeline.
 
I know you haven't heard about this pipeline yet, but you will soon enough.

Doug Casey is a world-renowned investor and author, whose book Crisis Investing was #1 on the New York Times bestseller list for 29 consecutive weeks, a record at the time.

He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, NBC News, and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People and the Washington Post.

His firm, Casey Research, LLC., publishes a variety of newsletters and web sites with a combined weekly audience in excess of 200,000, largely high net worth investors with an interest in resource development and international real estate.

See full archive of Doug Casey articles

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