North Dakota Stuck Using More-Costly Railroads to Move Oil
Subscribe today for Free Enterprise Updates
- Latest business trends and best practices
- News about legislation and regulation impacting business
- Business how-to articles from industry experts
- Commentary and interviews with newsmakers in business and politics
Robert Samuelson sure wasn't pleased with the President's decision to not issue a permit for the Keystone XL pipeline, calling it "an act of insanity." I bet he won't be any happier after reading the news that North Dakota producers who planned on using the pipeline to move their oil to Gulf refiners will have to rely on more-costly rail:
North Dakota oil drillers increasingly will rely on trains to move barrels of crude to market after the Obama administration's decision to reject plans for a pipeline that would run from Canada to refineries on the Gulf of Mexico, state and industry officials say.
"Pipelines are by far the safest and most economically efficient way to transport oil, but we are left with a limited number of options if pipelines are off the table," said Tony Clark, chairman of the North Dakota Public Service Commission. "Once the oil is flowing, it has to go somewhere."
Obama on Wednesday temporarily halted the $7 billion Keystone XL pipeline, saying an arbitrary deadline set by Republican lawmakers didn't give his administration enough time for review.
Calgary-based TransCanada Corp.'s 1,700-mile pipeline is designed to carry crude oil from tar sands near Hardisty, Alberta, through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. The pipeline also would move 100,000 barrels of crude daily, largely from North Dakota's burgeoning oil patch and some from Montana.
Billions of dollars of infrastructure improvements have been made in recent years to allow North Dakota's oil shipping capacity to keep pace with the skyrocketing production. North Dakota is the nation's fourth-biggest oil producer and is expected to trail only Texas in crude output within the next year.
Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said the state's so-called takeaway capacity is adequate, though producers and the state were counting on the on the Keystone XL to move North Dakota crude.
Shipping crude by pipeline in North Dakota adds up to $1.50 to its cost, compared to $2 or more a barrel for rail shipments, producers say.
Right now, about 25% of North Dakota's oil travels by rail. According to the CBS News report that "will increase exponentially with increased oil production and the shortage of pipelines."
[H/T: Mark Perry]