Hydrocarbon pipelines have existed for centuries. The first historical report of a pipeline comes from ancient Sichuan, China, where people for thousands of years dug or drilled holes to tap a briny aquifer for its salt content. One day, the story goes, a lightning bolt struck one of the wells, sending a pillar of fire into the air—the discovery of natural gas. The villagers began to utilize the water’s “firepower” to produce the brine and eventually expanded their salt-making facilities by building underground “pipelines” of bamboo. There is evidence that natural gas may also have been transported into the nation’s capital, Peking (now Beijing), for lighting at night. I believe that right now, the controversy about pipelines—specifically, the Keystone XL—is shaping up to become a great investment opportunity. Bear with me as I present to you… A Short History of Pipelines in America In 1859, when Edwin Drake drilled his landmark oil well near Titusville, Pennsylvania, the discovery set off an oil rush that drew prospectors to Oil Creek from near and far looking to strike black gold. Drillers soon realized, however, that the bottleneck of profit was not so much in finding oil as in getting the oil they found to market. The nearest rail line was several miles away from the Oil Creek fields, and some difficult terrain lay between. But where there’s a will, there’s a way, as the saying goes. The drillers hired thousands of horse-drawn wagons and their drivers, called teamsters, to haul their crude from drilling site to river, railroad, or refinery. The teamsters, themselves no dummies, sensed opportunity and charged exorbitant prices. In fact, a driller often paid more to move his oil the first several miles by teamster than he did to move it the remaining 350 miles to New York City by rail. The teamsters’ monopoly ended in 1865, when Samuel van Syckel built the first major US pipeline—a two-inch iron pipe that covered five crucial miles between a new field and the nearest railroad station. This first pipeline carried 2,000 barrels of oil every day: not much compared with the million-plus barrels per day the existing Keystone pipeline handles, but a considerable amount in terms of horse-drawn wagons. Building the pipeline wasn’t easy. The roadless, hilly terrain posed a challenge, and the teamsters did everything they could to sabotage the project, including cutting pipes and burning the oil. Van Syckel defended his pipeline in true American fashion: he posted armed guards along its entire length. With firepower now backing the enterprise, harassment stopped, the pipeline began to run at full capacity, and now it was van Syckel’s turn to reap profits. Seeing his success, others raced to build their own. Pipelines indeed proved cost-effective as a means to transport oil, even while they were still short and restricted to localized areas of production. Shale Revolution Reveals America’s Achilles Heel Fast forward to 2010, when the unconventional shale revolution started to increase domestic oil production significantly (by 2014, domestic production of oil and gas would almost double from its lows two decades earlier). All of a sudden, existing pipelines didn’t have enough capacity to transport the vast amounts of “new” shale oil south. But the American entrepreneurial spirit found a solution—even though it was a weak one: eventually, the shale oil was transported via rail. On February 12, 2010, Warren Buffett capitalized on the trend and purchased the second-largest railway in America, Burlington Northern Santa Fe (BNSF), for $44 billion. And that wasn’t his only purchase in the up-and-coming shale oil sector… Buffett Bets Big on Canadian Oil Sands On August 15, 2013, the investing public found out through fund filings that Warren Buffett had bought more than $500 million worth of Suncor Energy Inc. (NYSE.SU), Canada’s largest integrated oil company and the world’s largest oil sands company. Suncor has done quite well since the end of June when Buffett bought it, climbing another 20% and adding C$110 million to Berkshire Hathaway’s net worth. But Casey Energy subscribers were aware of Suncor long before Buffett started buying. We laid out all of the reasons to own the stock in January 2012; we talked about it not only in our newsletter, but also at the Casey Summits—more than a year before Buffett’s big purchase. After Buffett had bought into Suncor, we stated in this missive: “Don’t bother buying Suncor now, though. The stock isn’t cheap anymore and is getting more expensive by the day, as the herd is following Buffett’s example. While we do have the utmost respect for him—if you’re the third-richest person in the world, you must be doing something right—right now we have one up on Warren Buffett again, just like we did in early January 2012. The company we recently highlighted in our Casey Energy Dividend newsletter pays a better dividend, has a better near-term growth profile, a higher revenue per barrel, less debt on the books, and a lower debt-to-cash ratio than Buffett’s bet in the oil sands. In fact, even though this company is also a big oil producer, it pays a dividend three times higher than what Buffett is getting on Suncor right now.” Not only did our oil sands recommendation outperform Warren Buffett’s pick, its dividend was much higher. But we’re not here to gloat—we’re here to lay out what Buffett’s next play is. But you should take serious note of what we are saying next… Warren Buffett’s Next Energy Investment So, this is how Buffett has played the American energy matrix: first, he bought into the railways to exploit the US’s Achilles heel. Then, when rail capacity peaked and serious accidents started giving this method of transporting oil a bad name, he invested $500 million in Canada’s largest oil sands producer. Here’s where it gets juicy—and how you can invest like America’s most famous multibillionaire. Warren Buffett is now pushing for the Keystone XL Pipeline. Coincidence? Hell, no. He did make his move on the Canadian oil sands, but that heavy oil is trapped. It needs the Keystone XL pipeline to transport it to the US refineries—which, by the way, are now being upgraded to be able to refine the heavy oil from Canada. Hollywood’s Anti-Pipeline League vs. Buffett’s Clout—Who Do You Think Will Win? The Hollywood crowd has signed up Jared Leto, Mark Ruffalo, Robert Redford, Daryl Hannah, Julia Louis-Dreyfus, and Jimmy Carter. Buffett’s pro-Keystone XL consortium includes heavyweights such as former presidents Clinton and Bush, oil man T. Boone Pickens, and even someone to kick butt if necessary—Chuck Norris. When I debated one of the founders of Greenpeace, I predicted that moving oil via rail would result in many deaths (if you’re interested, it’s at the 9-minute mark). Just six months after that, 47 people died in a horrible accident. Greenpeace has done some good things in the past, but I have no problem calling them out when they’re wrong. And in the pipeline debate, they are wrong. Warren Buffett has positioned himself to make another fortune from the American energy matrix—have you? We recently took profits on our favorite oil sands producer and positioned ourselves to take advantage of the next stage of the American Energy Revolution. In our current Casey Energy Dividends newsletter, we cover the companies we think will win the race. Get on Board… We’ve Done the Work for You If you get in on the American Energy Revolution with our best guidance, you have two options. Dip your toes in the water for a very low fee and try our Casey Energy Dividends for just $79 a year. This is the right choice for more conservative income investors. As with all of our monthly newsletters, you have 90 days to try it. Love it or cancel for a full refund. Click here to get started. Or, if you’re an investor with a higher risk tolerance who can stomach the uncertainty of speculative investments in return for a chance at triple-digit and higher returns, I recommend you try the Casey Energy Report. This month’s issue, which will be published Thursday, April 24, is about the best energy plays in Europe—companies that Doug and I discovered or confirmed on the weeklong trip to Europe we just took together. You can read about our site visits and see photos, as well as get the Energy team’s deep technical analysis about these opportunities. It’s a must-read for any investor serious about making money in the energy sector. There’s no risk to you: If you don’t like the Casey Energy Report or don’t make any money within your first three months, just cancel within that time for a full, prompt refund. Even if you miss the 3-month cutoff, cancel anytime for a prorated refund on the unused part of your subscription. Click here to get started. Additional Links and Reads Four Years Ago—Do You Remember? I remember hearing the news about the BP oil-spill disaster just as I was about to board a flight from the Nairobi Airport in Kenya to London. After I landed, the news just got worse—I remember watching the broadcast live at the Heathrow Airport lounge, glued to the TV. Four years later to the day, I found myself at the Amsterdam Airport reflecting on the event and learned that BP has finished its final cleanup. Here is a great report from Jon Rees from the UK Mail Online.