The In's and Out's of a Pipeline Broker
By David Howell
Pipeline Broker Definition- one who brokers pipelines, a buyer and seller of pipelines, one who acts as a middle man between a buyer and a seller of pipelines, a commissioned agent in a transaction representing a buyer or a seller of a pipeline.
About twenty years ago, I received a routine call from a Dun and Bradstreet caller who was updating the credit files of Pipeline Equities. In the course of the conversation, she asked the usual questions about sales, revenues, employees, own or rent, etc. and finally she asked exactly the nature of my business and I replied that I was a pipeline broker. She was unable to find a standard industrial classification number or code for pipeline broker and she inquired if this category had to do with securities (being a broker) and I replied that it did not, but I bought and sold pipelines of the oil and gas sort. Unable to place my category in a slot that already existed, the caller determined to create a new category. That is how I became the only pipeline broker in the Dun and Bradstreet database.
Having such a lofty title in such a lofty organization as D & B, I needed to live up to that name and decided to go after and legitimize it.
I had always used direct mail as my primary means of getting the word out on whatever endeavor I was involved in and so I began talking about buying and selling pipelines. I really was the only pipeline broker in the Dun and Bradstreet database and after a time received calls inquiring about this pipeline or another. The fact is I did know a lot about pipelines and where they were and if they were active or not because it was my business as a pipeline salvage operator. To add on the title of Pipeline Broker or one who acted as an agent or bought and sold pipelines was a natural move. Shazam! A job was created!
In the years since that creation, I have acted as agent or broker in many pipeline transactions. Oftentimes these transactions have occurred because of my association with the salvaging of idled or abandoned pipelines. I bought a pipeline for salvage which had been out of use, but found a use before demolition. The use was not the intended use, but maybe something totally different so as switching a gas pipeline over to become a conduit for fiber optic cable. In another case we converted a crude pipeline to a electricity conduit and ran a 3/8" cable from a electricity producing wind turbine to the national grid. That was extraordinarily more economical than running aerial cables in the conventional manner from one point to another.
Now twenty five years later, we have developed a database of transactions of pipelines that have sold or been bought that we may or may not have been involved in. Nevertheless it is a superb collection of data that helps greatly in the transactions of finding pipelines to buy or sell. This proprietary database also makes the difference in determining value for our appraisals when ever we are using a comparison approach to finding value in a pipeline system.
Recently, we assisted a city government convert an abandoned crude oil line of eighty years of age to a transport system to carry treated waste water to irrigation sites along the corridor. This simple transaction saved the city millions of dollars in taxpayer moneys not spent on a new and needed system.
Our company was called to salvage a jet fuel line that ran twenty miles through a major metropolitan area. The project looked to be profitable, but before demolition, I made one phone call to a company that provided natural gas to this city. It turned out the jet fuel line ran beside their main line and would work perfectly as a back up manifold to their local distribution system. The acquiring company saved millions, the sellers got rid of an asset or liability that was an irritant and the broker made a nice fee by finding a buyer for a property that had been considered junk. The pipeline was recycled and might serve that city and that company another twenty or thirty years.
I find a great need in the oil and gas pipeline industry is for trained personnel in the asset management sector.
The International Right of Way Association is one that certifies and educates in this area, but they are one of the only organizations that do so.
In this era of consolidation, companies are being bought or sold and assets are being pruned and discarded. Often when an acquiring company obtains another, it is for a particular line of business or a central group of assets that fits well with the purchaser's current structure. The remaining inventory is left behind and in many cases forgotten or turned over to a business development manager who has other fish to fry that he understands a lot more. I don't really use the term pipeline broker much, I just say that I buy and sell pipelines. And that is what I do, sometimes for salvage and sometimes for conversion to another use, but I still am only serving as the middleman and hopefully satisfying a need on both sides of the transaction.