Energy Independence and How We Can Profit From It

We have heard much about U.S energy independence. Various politicians have told us, since the 1970s, that it is a real, achievable goal. Still waiting for that one, eh? While many simply invest in companies like XOM there is so much more going on around us. We have also been told much about Peak Oil – there is little left to extract, it is being wasted on consumption and we must convert to renewable energy sources soon – to save the planet and ourselves.

I have another point of view. Rather than refute the two positions above, let’s consolidate them. We shall become nearly energy independent as a nation in a very short time period through the use of the low impact fuel, natural gas. The U.S. has, in five short years, discovered and begun exploiting the largest natural gas reserves in the world. They are in North Dakota(Bakken Shale),Texas(Eagle Ford),Pennsylvania(Marcellus) and other states. Their presence continues to grow.

Oil is always found in close proximity to gas. Anadarko announced yesterday a new field in Colorado, the Wattenberg Field, with more than 1B in proven reserves of recoverable gas and oil. There are very few billion barrel fields ever discovered. This is enormous, at 1.5 billion barrels. The drilling techniques called horizontal drilling and hydraulic fracturing are responsible for ensuring these finds are quickly recoverable.

These techniques are also the reason why natural gas fields are expanding across the nation. Along with the explosion in discoveries is an equal implosion in the unemployment rate in those states supporting the extraction process. Extraction companies also pay handsome royalties to the landowners of Pennsylvania,West Virginia,Texas and the Dakotas. The rigs are quite a sight to see, beautiful in their pristine presence on a farm.

Natural gas was a poster child of the environmental folks for quite some time. Less so now. Fears regarding local water pollution and chemicals used in the fracturing process have risen at the same rate as the price differential between natural gas and renewable. Natural gas prices are near all time lows; renewable are near all time highs – despite billions in tax payer dollars in ‘sunk capital’.

Oh, the ‘carbon footprint’ of natural gas is 1/3 that of petroleum, which is why the enviros liked it in the first place. It was to be a ‘crossover fuel’ until renewable caught on. A shame this storyline has been cast aside. The opportunity to forgo trading billions of dollars each year for Venezuelan, Nigerian or Middle East oil is an opportunity not to be missed. Send the capital into thousands of holes drilled across America, creating tens of thousands of jobs and providing leased land income to landowners throughout the Midwest.

The Keystone XL project bringing oil from Canada to the U.S remains in legal limbo. Now it has been cast into political limbo. Dozens of well paid lobbyists and technocrats continue to run interference on an energy project that would create thousands of permanent jobs. This project will bring oil from the Canadian tar sands to our distillation plants on the Gulf coast. Virtually everyone involved has signed off on it, yet politics remains the puzzle. The Canadians can sell the oil to Asia, shipping it through a pipeline to their own West Coast then transshipping it to China, et al. They would prefer to ship most of it to us. Apparently we don’t actually want it…

Natural gas is replacing so much oil burning consumption in the utilities business that oil fired electricity generation is being phased out even faster than expected. LNG ports that were built just a few years ago to accept liquefied natural gas from international origins are now being retrofitted for shipment of LNG out of the U.S to international destinations. The biggest holdup in the further exploitation of the NG marketplace is the lack of pipeline. Connecting the thousands of wells and shipping it directly to the utilities end users is moving apace, but will take another decade. Once in place, these pipelines will connect virtually every electricity producer to every natural gas wellhead in a seamless string.

This string is working to your benefit, by the way. It makes gas cheap. It reduces the cost and footprint of electricity generation, allowing the nation to expand. In line with our perpetual ability to grow as a nation, these virtually limitless clean fuel sources enable continued productivity increases, power further technological expansion and reduce dependency upon foreign fuel sources. Let no one tell you we are a nation in decline. Why, even the government revenues from these fuel sources are today in the billions and will grow with the industry. The renewal of the nation is at hand. We are a progressive nation – in the older sense of the word.

This seamless string can also fit quite nicely into your portfolio. Many firms extract, ship, store, convert and transport the gas, oil and liquids from these wells. Many are publicly traded companies. Quite a few have little or no debt, pay substantial dividends and have been increasing these for some time.