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Vol. 19, No. 26 Week of June 29, 2014
Providing coverage of Bakken oil and gas

Pipeline progress

Midstream companies make ‘remarkable’ strides in North Dakota

By MAXINE HERR

For Petroleum News Bakken

Editor’s note: The June 24 North Dakota Governor’s Pipeline Summit also included presentations from a number of industry representatives. Petroleum News Bakken will provide coverage of those perspectives in next week’s edition. —Mike Ellerd

North Dakota Gov. Jack Dalrymple is full of gratitude for pipeline infrastructure investments after tasking midstream companies two years ago to build pipelines, and build them quickly. Dalrymple hosted his second Governor’s Pipeline Summit in Bismarck on June 24, bringing together about 150 pipeline industry leaders, energy industry representatives and federal, state and local officials to share their response to the rapid construction of thousands of miles of pipelines to meet oil and gas industry demands.

“There was a time a few years ago when we said we’re never going to have enough pipelines to deal with this boom,” Dalrymple said at a press conference following the summit. “The assumption was you couldn’t possibly build out enough capacity or redirect existing capacity easily enough to deal with the situation. We learned today that not only have we done that but we will continue to do that.”

Dalrymple said the efforts of midstream companies are “remarkable” and the state can begin to see how pipeline capacity and transport could someday equal production.

“I want to say ‘thank you very much’ for the incredible progress made over the last two to four years,” Dalrymple told industry leaders. “You’ve essentially more than doubled the pipeline capacity, and now we look ahead and see the opportunity to increase it another 50 percent, and possibly more.”

Though rail has played a critical role in moving oil from the Bakken to various refinery markets, he said the state is still looking for the safest and most efficient way to transport crude.

“I look forward to the day when pipelines are providing a large percent of that capacity,” Dalrymple said. “And when takeaway capacity will move into a competitive environment and those with the best opportunities to transport will prevail.”

An answer to the call

Two years ago, Dalrymple told industry leaders who attended the first summit that “you can’t go too fast in getting the gathering systems built, getting the pipelines hooked together, getting them operational. There is no single thing that I can think of that can do more to reduce the human impacts of rapid oil development than pipelines.”

Pipeline companies apparently took it to heart because by the end of 2014, the state’s capacity to ship crude oil to market by pipeline is expected to increase to 783,000 barrels per day. Only five years ago, the state’s total crude oil pipeline capacity totaled 286,000 barrels per day. Pipeline and refinery projects that are proposed for completion by late 2016 could more than double the state’s current oil takeaway capacity to about 1.4 million barrels per day.

“That’s huge progress in a very short period of time,” Dalrymple said.

Director of the state’s Pipeline Authority Justin Kringstad said developing pipeline infrastructure has been “a game of catch-up” but the industry has learned a lot in recent years and is not as concerned about stranded barrels as it is about reaching key markets.

“With refining markets … the Great Lakes markets are saturated by North Dakota and Alberta, so now how do we get to the coasts, as there is no pipeline access to those currently,” Kringstad said. Prices for crude oil are better on the coasts, but he said new energy developments in Texas and California could affect the markets and change the pricing landscape in coming years.

Gas gathering needs

The industry is also working to expand existing natural gas gathering systems to avoid flaring with a preliminary goal of capturing 74 percent of the gas by the end of 2014 and ultimately capturing 90 to 95 percent by 2020. The number Kringstad highlights as an important statistic to battle is the 19 percent of wells that are already connected, but are still flaring due to capacity issues.

Dalrymple also addressed the flaring issue and said the new gas capture plans that went into effect on June 1 which require operators to submit a plan for capturing the natural gas prior to obtaining a drilling permit are already helping midstream companies plan for additional gathering lines.

“We will reduce flaring in North Dakota, it’s just that simple,” he said. “We are catching up, and we will catch up. All of industry is committing to working with us to make this happen.”

Oneok Vice President Kevin Burdick said as more time passes the industry understands the results of wells more clearly and can plan accordingly.

“We’re able to communicate that to the market that some investments will generate the returns we say they will,” Burdick said. “Becoming more predictable is normal evolution to a play like this.”

A wake-up call spurs greater safety measures

A pipeline technology working group was formed by the governor earlier this year that plans to identify the latest available technologies for enhanced monitoring and control of oil and gas pipelines, and the group is expected to have a report available in the next few months for policymakers to review. Dalrymple said the working group is another way to provide solutions to the challenges of pipeline breaks and leaks, particularly after the Tesoro pipeline leak that spilled more than 20,000 barrels of Bakken oil onto farmland in late September.

“That big spill was a big wake-up call for us,” Dalrymple said. “We’re working hard to determine what technology belongs on these various kinds of pipelines.”

The working group is looking at the technology options for greater protection against spills, but he said it remains to be seen what the state will actually require of companies. Whatever safety regulations may be put into place, Dalrymple believes North Dakota will lead the rest of the nation in regard to this issue (see related safety story on page 1).

“This ties in with the whole state’s role in overseeing pipeline safety,” Dalrymple said. “Is there something incremental that we should be doing above and beyond what the feds are doing? I think there’s an opportunity to take advantage of technology.”

Representatives from the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration are also part of the working group, and with their help he said he is “optimistic that we can come up with something worthwhile.”



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