The mood was reportedly upbeat at the 22nd Annual Energy Infrastructure CEO & Investor Conference (known as the EIC) in Aventura, FL last week. Performance has been good. The American Energy Independence Index, which reflects the overall industry, has a five year trailing return of 27% pa, easily beating the S&P500’s 16%.

Management teams provided plenty to support an optimistic outlook. The election brought a welcome reset of government policy towards reliable energy. One of the president’s first moves was to lift the poorly conceived ban on new LNG export terminals. Energy Secretary Chris Wright has a background in oil and gas, having founded Liberty Energy. Among the many sensible policies being embraced is support for nuclear energy. President Trump signed an executive order intended to boost nuclear, although actual progress will require a rethink of the current approval process.

The opposition of the Sierra Club and the rest of their left-wing climate cohort to nuclear energy has always betrayed a desire to impoverish humanity with mandatory solar and wind. Their irrelevance to public policy is to everyone’s benefit.

Ignoring that wretched little girl Greta and the rest of the Progressives can be hard, but it’s worth the effort.

Natural gas demand was a big topic of conversation at the EIC. This is coming from data centers and LNG exports. Energy Transfer seems to report more interest every week – the company reports discussions covering gas supply to up to 150 data centers just in Texas, although they do caution that only a modest percentage of these will be completed.

The AI story began to resonate with pipeline investors early last year. It’s not just the Mag 7 that were the beneficiaries. Midstream is the seller of pickaxes to gold miners. Those data centers need electricity, 43% of which in the US comes from natural gas.

It’s caused the sector to become bifurcated. There’s no AI-angle in liquids – improving vehicle efficiency has capped transportation gasoline demand for years.

This has shown up in the performance of the Alerian MLP ETF (AMLP) , which tracks the Alerian MLP Infrastructure Index, albeit from a distance. AMLP, like its index, is underweight natural gas exposure and has half its assets in oil-based names as well as gathering and processing, because that’s generally where the remaining MLPs are to be found. Since the beginning of last year, AMLP has returned 19% pa, slightly ahead of the S&P500 because it does have some gas exposure via Energy Transfer and Cheniere Energy Partners (CQP).

The midstream sector returned 31% pa over this time, led by corporations such as Williams Companies (returned 70% pa since the beginning of last year), Targa Resources (59% pa), Kinder Morgan (47% pa) and Cheniere Inc (25% pa, ahead of its MLP CQP at 19% pa).

AMLP’s underperformance of the sector does overstate the case somewhat, because fees and expenses (5.5% over the past year) create a significant gap versus its own index. Unusually for an ETF, those fund expenses include corporate taxes, whose calculation sometimes trips them up (see AMLP Fails Its Investors Again).

The point remains though that neither a diversified portfolio of MLPs nor the concentrated form offered by AMLP provides much AI exposure (see There’s No AI in AMLP). AMLP is 49% allocated to just four holdings (see AMLP Is Running Out Of Names).

A couple of midstream companies reported some interest from New England states (not mentioning names) in improved gas supply. Perhaps the challenges with offshore wind or the rising costs of power to their residents are a cause for concern.

Attempts to connect the region with gas from Pennsylvania were abandoned several years ago because of regulatory impediments at the state level. The list of canceled projects includes Williams Companies’ Constitution Pipeline, which faced years of delays over a water permit in New York.

Interior Secretary Doug Burgum suggested that there may be an agreement with New York State governor Kathy Hochul that would allow construction of a new pipeline.

A gas pipeline from Pennsylvania across New York could potentially reach Massachusetts. Using more Appalachian gas would at least save Boston from relying on expensive and embarrassing LNG imports. But no midstream company is likely to commit to a large infrastructure project across a swathe of liberal states without clear support from state governments.

Properly maintained, gas pipelines last for decades. For an example, here’s a 1950 documentary about the Panhandle Eastern Pipe Line Company. I love these old videos. They remind us how long energy infrastructure lasts. Seventy five years later Panhandle is still operating, owned by Energy Transfer. Its construction costs were undoubtedly fully depreciated a long time ago, and it’s still making money.

We have two have funds that seek to profit from this environment:

Energy Mutual Fund

Energy ETF

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