Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

TransCanada Corporation (USA) (TRP), Enbridge Inc (USA) (ENB): To Be Profitable, We Need More Regulation

TransCanada CorporationRecently, a Canadian train carrying oil crashed in a small town and killed 50 people. This shouldn’t be a great surprise, as more oil is being transported by trains, and statistics show that the risk of a spill by a train is around six times greater than a spill by a pipeline. There is strong opposition to new pipelines like the TransCanada Corporation (USA) (NYSE:TRP) Keystone XL, but recent events show that the government could easily make crude oil transportation safer by approving more pipelines, requiring better monitoring techniques and increased maintenance.

Train proponents are quick to point out that even though trains leak more often than pipelines, pipelines spill on average three times more oil than trains for the same distance. In 2010, Enbridge Inc (USA) (NYSE:ENB) was a prime example. It caused a huge heavy oil spill of more than 1 million gallons. This spill is not completely surprising, as the pipeline section had a history of corrosion problems that federal agencies did not require Enbridge Inc (USA) (NYSE:ENB) to repair.



ENB Total Return Price data by YCharts

The Call for More Regulation

If regulatory agencies had required Enbridge Inc (USA) (NYSE:ENB) to repair more of the issues it found with its pipeline, then there is a lower possibility that the spill would have occurred. There were multiple warning signs that Enbridge Inc (USA) (NYSE:ENB) choose not to listen to.

Another critical part of preventing and decreasing spill volume is better monitoring. Unmanned Aerial Vehicles (UAVs) are slowly being commercialized. They can easily be outfitted with inferred cameras and remotely piloted to visually inspect potential spill sites. This would allow companies to detect spills without spending the time or money to dispatch human inspectors. If the federal government were to require the use of UAVs for pipeline inspection, pipelines would become an even safer form of transport.

The Benefits for the Bottom-Line

Pipeline operators stand to benefit from greater pipeline regulation. Increased regulation will increase maintenance costs, but the improved safety record would make it easier to get new projects built. TransCanada Corporation (USA) (NYSE:TRP) is fighting tooth and nail to get the Keystone XL pipeline approved, and it continues to be difficult battle. Enbridge Inc (USA) (NYSE:ENB) is in a similar situation with its Northern Gateway Pipeline. Local aboriginal and environmental groups are worried about the effect of potential spills and continue to fight the project.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.