Streetwise Professor

August 30, 2012

Want to Know Why Keystone XL is on the Regulatory Siding?

Filed under: Economics,Energy,Politics,Regulation — The Professor @ 10:55 am

Norwegian state oil firm Statoil, which has considerable production in the Bakken, has announced plans to lease 1K railcars to ship oil from ND to refineries throughout eastern North America (h/t Greg L):

Statoil ASA said it is leasing more than 1,000 railroad cars to carry crude oil from fields in North Dakota to refiners across North America, in a bid to overcome pipeline bottlenecks that plague the booming oil-producing region.

The Norwegian oil giant’s railroad effort is a new sign of how the U.S. pipeline network is having a hard time keeping pace with the oil boom triggered by hydraulic fracturing, forcing companies to come up with creative workarounds.

Nowhere is the challenge more apparent than in North Dakota, which this year unseated Alaska as the country’s second-largest oil-producing state. In May the state produced 639,000 barrels per day, or about 10% of the oil produced in the U.S., up from 364,000 barrels per day in May 2011, according to the U.S. Energy Information Administration.

Beginning in early September, the trains that Statoil will have secured with long-term leases will have the capacity to move some 45,000 barrels of crude per day to refiners across North America, more than enough to cover the entirety of the company’s current net production there, company spokesman Ola Morten Aanestad said. Potential destinations include refineries in the East, West and Gulf Coasts and Canada, Mr. Aanestad said.

It would take 14 or 15 days for the trains to make a round trip to Canada, the U.S. East Coast or the Gulf of Mexico, including the loading and unloading of crude, Statoil said. The company didn’t disclose the party it was leasing rail cars from or the price it would pay.

Note what is missing from this story: a mention of the rail carrier that benefits most from all this traffic.  That would be BNSF.  You know, Rail Buffett.

If you don’t believe that fact has anything to do with the Obama administration’s decision to put Keystone XL pipeline running from Canada and the Bakken region to Cushing (and thence to the Gulf) on the regulatory siding, have I got a deal for you!:  Prime oceanfront real estate in the Badlands.

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