March 27, 2007: Windfall for pipeline MLPs in ethanol

The Internal Revenue Service ruled that ethanol blending can be considered Master Limited Partnership qualified income under tax code section 7704(d)(1)(E). The ruling was given to an unidentified MLP, but the ramifications are huge for alternative energy blends.

This favorable ruling could encourage additional ethanol infrastructure development, and will give all MLPs contemplating investing in ethanol infrastructure the encouragement they need to go forward. Thus, blending ethanol with petroleum product(s) provides a solid growth opportunity.

The three companies set to reap benefits are KMP, VLI and TPP. Each of these companies have a large footprint in refined ethanol product terminals and also have a close proximity to proposed plants.

I like Teppco (TPP) but Kinder Morgan (KMP) can never be diminished due to outstanding management.

All have a nice tax advantaged dividend.