Investing in U.S. Infrastructure

The mandate came down from President Obama on January 9, 2014…

Conduct a Quadrennial Energy Review that focuses on energy infrastructure, thereby enabling the federal government to translate policy goals into a set of integrated actions.

As an unapologetic libertarian, I can tell you that any time the government “translates policy goals into a set of integrated actions,” that means it’s gearing up to spend more of your money.

And as an unapologetic capitalist, I can also tell you that any time the government is gearing up to spend more tax dollars on pretty much anything, there’s an opportunity for us to make some money.

So you better believe I’ll be taking full advantage of this opportunity.

Exciting Profits, Boring Sector

When it comes to this nation’s infrastructure, here’s what we’re dealing with…

• 2.6 million miles of interstate and intrastate pipelines
• 414 natural gas storage facilities
• 330 ports handling crude petroleum and refined petroleum products
• More than 140,000 miles of railways that handle crude petroleum, refined petroleum products, LNG, and coal
• The electrical component of the Nation’s TS&D infrastructure links more than 19,000 individual generators with a capacity of a megawatt or more (sited at over 7,000 operational power plants), with over 642,000 miles of high-voltage transmission lines and 6.3 million miles of distribution lines

For most, this is boring stuff. And I know this to be true, as every time I alert folks to new opportunities in infrastructure, all I hear are crickets…

This despite the fact that every time we uncover a new opportunity in infrastructure, we make a boatload of cash.

So I do hope the potential profits here are exciting enough to keep you focused on the incredibly boring world of infrastructure.

$15 Billion Up for Grabs

Sifting through this new Quadrennial Energy Review, I discovered a list of recommendations from the DOE that came with cost estimates associated with implementing these recommendations. This is where it gets interesting…

• Establishing a competitive program to accelerate pipeline replacement and enhance maintenance programs for natural gas distribution systems — Estimated Cost: $2.5 billion to $3.5 billion.
• Providing state financial assistance to promote and integrate TS&D infrastructure investment plans for electricity reliability, affordability, efficiency, lower carbon generation, and environmental protection — Estimated Cost: $300 million to $350 million.
• Promoting grid modernization — Estimated Cost: $3.5 billion.
• Investing to optimize the Strategic Petroleum Reserve emergency response capability — Estimated Cost: $1.5 billion to $2.0 billion.
• Supporting a new program of competitively awarded grants for shared energy transport systems — Estimated Cost: $4 billion to $5 billion.

And these are just the recommendations that came with estimated costs attached. There were plenty of others that didn’t include estimates, which means they’re likely to be the most expensive.

Long story short, the U.S. government is likely to spend in excess of $15 billion on infrastructure upgrades and improvements.

Although these are just recommendations at the moment, few of these things are likely to get much pushback because they’re not politically divisive issues.

Aside from a few climate change-related recommendations, most of this stuff is pretty mundane. It’s all stuff that both Republicans and Democrats will agree on because both sides of the aisle know it’s hard to get votes if the power’s out and the gas tanks are empty.

As well, these types of investments spur job creation and tax revenue for individual states. While some politicians may sneer at government spending, few ever oppose it.

I’m not saying this is a good thing, but it’s a reality. And that reality is providing a pretty good indicator for investors looking to make a few bucks off of government spending.

So here are some sectors you want exposure to in anticipation of a major infusion of cash into infrastructure:

• Grid storage
• Transmission and distribution
• Energy intelligence
• Rail
• Pipelines

Invest accordingly.

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.