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When Oneok Partners LP recently pulled its proposed $1.8 billion, 1,300-mile pipeline -- to connect North Dakota’s Bakken crude oil production with refineries in Tulsa, Okla. -- many people here were caught off guard. There had been a steady drum beat of demand for more pipelines to get the state’s crude to market and reduce price discounting for sweet Bakken crude.
What changed?
Oneok’s official statement said, “We did not receive sufficient long-term commitments under the terms we needed to construct the Bakken Crude Express Pipeline.”
Just days before, a 103-car train carrying Bakken crude arrived in Tacoma, Wash.
The postponement of the pipeline and the North Dakota-Tacoma oil-by-rail connection are directly related. They open another chapter in the state’s relationship with the railroad and oil development.
Much of the focus had been on moving North Dakota crude to refineries in Tulsa. But the big increases in domestic oil production have created an over supply in the Tulsa area. That’s where the Bakken Express was headed, and that’s where Keystone XL intends to connect before heading to the Gulf.
Not only that, oil companies in North Dakota are pumping crude and need to move it now. Those pipelines are years from reality.
The stars aligned for BNSF Railway. The railroad company has rapidly developed the industrial infrastructure to load unit trains with crude oil and move them to the West Coast, which has felt the slowdown in Alaskan production, or the refineries in the northeast. While pipelines may be more efficient and less expensive means of moving crude oil, the railroad is here now and gives producers choices in where to ship based on price.
BNSF recently said it will spend $1.1 billion on locomotives, cars and equipment to improve its crude-shipping capability from the Williston Basin. BNSF shipped 1.3 million barrels of oil in 2008, and this year has increased that to 88.9 million barrels. A National Geographic News story indicates “more oil is being transported by rail than by pipeline” from North Dakota.
The decision to postpone the Bakken Express is a set back, but not nearly as significant as it might have been, because the railroad has stepped up to carry an ever increasing volume of oil to refineries that want and need it. North Dakota still would like to see the Bakken Express constructed, as well as pipelines connecting to oil hubs and refineries in the northeastern tier states.
Meanwhile, the railroads that carry grain to market, can also carry crude oil.
