Enbridge: Its Economic Moat Has Widened

Enbridge's economic moat widens: Morningstar at SeekingAlpha (a twofer)

I posted the above at my "What you will be talking about Wednesday morning," but it is too important to be buried. This is an incredible story, and posted by Morningstar, no less. 

This is not an investment site. I post articles on the Bakken for education, information, entertainment. But I generally post more stories on companies that have impressed me for various reasons; I actually invest in very few companies I mention.

Obviously, CLR gets a lot of posts, drilling one out of every six or seven Bakken wells, either operated or non-operated; CLR knows the geology of the Bakken.

WLL gets a lot of posts: I really enjoy following its business model.

I love watching the head-to-head competition between OAS and KOG, as it plays out in Wall Street.

When I started the blog, two subjects did not interest me: natural gas and pipelines. Then ONEOK came along and all of a sudden I'm really interested in natural gas. I've never invested in ONEOK but it's probably an opportunity I missed. I love following that company; it saw an opportunity in North Dakota and took it.

Pipelines interested me even less, I suppose; I don't remember. Oh, now I remember: my interest in the natural gas story started with that infamous article in the New York Times, but I digress.

Back to pipelines. I don't recall when I got really interested in pipelines. I know I had not planned to post the TransCanada Keystone XL story when it first came out -- that the pipeline was being proposed. I had planned to completely ignore it; I think I even said that when I posted the first link regarding Keystone XL. I had no clue that this would become the biggest story following the 2010 spill in the gulf.

I had never invested in TransCanada (Keystone XL) either. I had accumulated shares in Enbridge, however, long before the Keystone XL debacle. I bought shares in Enbridge for the same reason I bought shares in Burlington Northern Railroad thirty years ago: I saw both of those companies operating in North Dakota and saw them grow, literally in front of my eyes.

So, I continue to accumulate Enbridge shares. But that's not why I'm posting the link to the Morningstar/SeekingAlpha article.  I'm posting that link simply because it provides a lot of information regarding pipelines and the Bakken.

It's a great article. The Keystone XL debacle has worked out very, very well for Enbridge.

Let's see if I can find one thing in the article that stands out:

Processing plants are traditionally constructed near liquids-rich gas fields, such as the Granite Wash play in Texas and Oklahoma and part of the Horn River in northeastern British Columbia. Enbridge has been expanding its processing plant business and building off its success with the Aux Sable processing plant, which removes NGLs off the gas stream that flows down the 50% Enbridge-owned Alliance Pipeline. The Alliance Pipeline transports liquids-rich natural gas from northeastern British Columbia to Aux Sable. Once the liquids are removed, the natural gas stream from the Alliance Pipeline is of sufficient quality for use in local gas distribution networks or storage facilities that feed these networks.

That was probably one of the most mundane paragraphs in the entire article, and it didn't even mention the Bakken.  This is why I posted it:

Earlier this week Don suggested that we might see a buildout of natural gas processing plants along the natural gas pipeline network; that's why I posted the wiki map of natural gas pipelines across the US.

The second reason I posted that particular paragraph: it didn't mention the Bakken. Next time around, I wouldn't be surprised to see Enbridge build a processing plant in North Dakota.

"$1 million is real cash" -- North Dakota regulator

Did anyone else catch that? Even though I agree with the decision to delay granting the $1 million to N-Flex,  the quote "$1 million is real cash" really bothers me. It will be comforting to others. Harold Hamm must have said "what?"when he heard that quote. Harold Hamm is drilling 20 wells a month and each well is costing him upwards of $10 million. The royalties pouring into North Dakota state coffers are staggering, measured in billions, not millions. $1 million may be "a lot of cash" for some, but for the oil and gas industry it's nothing. That kind of thinking bothers me because it suggests the state still does not have the folks with the vision and leadership ability to take North Dakota to the next level. It appears that they feel more comfortable shipping its natural resources out of state for further processing. But as noted, that will be comforting to others. Maybe we don't want the state to go to the next level. But maybe that was what the Federal Reserve president from Minneapolis was suggesting: North Dakota needs to re-invest through local diversification. Just rambling.