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Big Profits Coming to Investors in Big Bakken Infrastructure

NEW YORK (TheStreet) -- The Bakken oil and gas shale play in North Dakota delivered over 1 million barrels of oil per day in May, the state says,  and the number is still heading up.

But producers aren't getting anything like the prices, or margins, of foreign suppliers, due to a shortage of pipeline capacity, according to the Congressional Research Service.

Pipelines would deliver oil to refiners for $5/barrel but producers are paying $10 to $20 per barrel to move it out by rail.  Rail is more flexible, with shorter contracts. Rail is also faster, meaning faster payments. Rail currently has over 60% of the market, according to the North Dakota Pipeline Authority.

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But the cost differences are driving a move toward pipelines.

While two pipeline new projects have been cancelled in the last year due to lack of demandEnbridge (ENB - Get Report) has gotten regulatory approval for its Sandpiper line to Minnesota, which could go into service by early 2016. 

Energy Transfer Partners (ETP - Get Report) thinks it can get a pipeline to Illinois done by late 2016, pending regulatory approval.  Iowa environmentalists oppose the plan but both parties' candidates for the U.S. Senate have spoken in favor of it, says the Des Moines Register

Enterprise Products (EPD) also wants to build a line that would run through Wyoming and Colorado. says the "spread" between the price of Bakken crude and crude from Texas is already narrowing, to as little as $6.50/barrel, and should narrow further when the new lines are done.

For investors looking at Bakken infrastructure, the best play is the equity units of Energy Transfer, which trade under the symbol (ETE). They are up over 300% over the last five years and yield 2.5% in dividends on top of that.

The other players are also doing well. EPD is up 207% over five years, ENB is up 176%, and even the basic Energy Transfer shares, traded as ETP, are up 40%.

Energy Transfer moved toward building its latest line after a successful "open season" seeking long-term commitments of crude deliveries. And it's "open season" that is frustrating efforts to bring out more natural gas.

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