Exxon Mobil Corporation (XOM): It Reminds Us of the Risks of Pipelines

Enbridge Inc (USA) (NYSE:ENB) and its affiliates have had its share of pipeline problems over the past couple of years. One of the worst was a 2010 spill in the Kalamazoo River system. In that spill the EPA says more than 1.1 million gallons of oil and 200,000 cubic yards of oil-contaminated sediment and debris were removed. That spill is believed to have cost the company more than a billion dollars to clean up. Given Enbridge’s size and scale, it was able to absorb those costs. The question you need to ask yourself is if the company you’re considering could do the same.

The key takeaway here is to be aware that a pipeline rupture is a real risk. As an investor, you can mitigate this risk by not over allocating your portfolio to pipelines, no matter how tempting the distribution. Further, take a deeper look to see where the company derives its income. If a large portion of your distributions are coming from one major asset that’s not partnered with another operator, it might be wise to swap out that company for a more diversified operator.

The article ExxonMobil Reminds Us of the Risks of Pipelines originally appeared on Fool.com.

Fool contributor Matt DiLallo owns shares of Enterprise Products Partners L.P. The Motley Fool recommends Enterprise Products Partners L.P.

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