BISMARCK — While efforts to boost the capacity of the Dakota Access Pipeline to nearly double its original volume press forward, some critics of the oil industry have argued that a forecasted slide in Bakken production could soon render the controversial project unnecessary.
The expansion of Dakota Access to 1.1 million barrels of capacity per day is still ramping up, executives at the pipeline’s parent company Energy Transfer Partners told investors on a quarterly earnings call this week. The company announced in August that the addition of pump stations along the pipeline’s nearly 1,200 mile route had covered about half of the planned expansion, bringing capacity to 750,000 barrels per day.
Energy Transfer Partners Co-CEO Mackie McCrea said Wednesday, Nov. 4 that production out of the Bakken, which has plateaued for much of this year, has meant that all of the pipeline’s new capacity isn’t being used yet, though he added that charges have come in since August to reserve a significant portion of the incremental capacity for future use.
“The drilling needs to pick up in the Bakken to really see those volumes grow,” McCrea told investors.
Operations of Dakota Access have been vigorously opposed by members of the Standing Rock Sioux Tribe since construction of the pipeline began near their reservation in south-central North Dakota in 2016. The tribe has long argued that the pipeline endangers their water supply at its Missouri River crossing just off the reservation.
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Energy Transfer Partners’ expansion progress comes as North Dakota’s oil output has been middling over the course of this year , slipping to third in the country, and as some industry watchers have suggested that producers in the Bakken may never return to their pre-pandemic highs.
Researchers at the Institute for Energy Economics and Financial Analysis, a think tank critical of fossil fuels, released a report earlier in the day Wednesday arguing that the Bakken formation may be seeing the beginning of a long-term production decline that they suggest could negate the need for the Dakota Access in the first place.
The report, titled, “Has the Bakken Peaked?” found that the Bakken has just over 700 remaining of what the authors classify as “top-tier” oil wells, a stock that the report argues could be exhausted in just a year if the region’s producers return to pre-pandemic drilling rates. As the industry is forced to rely on wells further and further from the sweet spots of the Bakken, the report predicts that producers may begin to curtail production because of climbing operations costs, bringing output to levels low enough that they would negate the need for the $3.8 billion Dakota Access Pipeline.
“Pipeline regulators may need to reconsider the economic rationale for existing pipelines, particularly the controversial Dakota Access Pipeline,” wrote the authors Clark Williams-Derry and Cathy Kunkel. “Even modest declines in production could render DAPL’s capacity superfluous.”
Current transport capacity in the Bakken out-matches production by around 1.7 million barrels a day, or more than double today's output, according to IEEFA’s findings, and the report argues that even at current drilling rates production levels may be "impossible to sustain economically for more than six years."
The findings highlight a broader debate among oil industry analysts in the last year over the future of the North Dakota oil industry, which hit historic production highs in late 2019 but which has struggled to regain its footing in the pandemic economy.
Oil industry backers in North Dakota have acknowledged the obstacles facing the Bakken in the pandemic recovery, both in the geology and in competition from other states, but they maintain that technological innovations will ensure that the region's most productive days are still ahead.
“That’s a myth. A complete myth,” said North Dakota Petroleum Council President Ron Ness of the IEEFA analysis, adding that he hasn’t seen analysis concluding that the Bakken has hit its peak.
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IEEFA’s findings contrast with research recently presented at the Petroleum Council’s annual meeting in September . That analysis , compiled by McKenzie County commissioner Joel Brown, who is also the co-founder of the energy analytics company MineralTracker, concluded “the tiers of the Williston Basin are expanding” as technological advancements have dramatically improved the production of wells outside of the Bakken’s core.
Ness noted that the growing potential for longer underground laterals, which allow producers to tap hard-to-reach oil pockets, as well as newly-developed surfactants that juice the output of older wells, have combined to open new doors for the Bakken. Many of the wells that even a year ago would have been economic only at lofty oil prices north of $70 or $80 a barrel are now profitable in the $40 to $60 price range, Ness said.
Ness pointed to the ongoing expansion of Dakota Access even in the face of the recent Bakken output as evidence of the industry’s continued confidence in North Dakota as a top-flight oil state. The Petroleum Council president has predicted that the state will begin to see oil production gains again in 2022.
Energy Transfer Partners executive chairman Kelcy Warren said at an oil conference in Bismarck in May that he expected Dakota Access to reach 1.1 million barrels of daily capacity by the end of this year.
The pipeline’s expansion is a subject of an extensive environmental review underway by the U.S. Army Corps of Engineers, which is slated for completion in September of next year. Last summer, federal district court Judge James Boasberg revoked Dakota Access’s permit at its Missouri River crossing and ordered an immediate shutdown of the pipeline until the completion of the environmental review. That shutdown order was later overturned by an appeals court, but the mandated environmental assessment has stood.
Dakota Access carries oil from northwestern North Dakota to Illinois. Regulators on the North Dakota Public Service Commission approved the pipeline for expansion after a high-profile hearing in Nov. of 2019 , and the plan cleared its last regulatory hurdle with a green light from Illinois regulators last fall.
Readers can reach reporter Adam Willis, a Report for America corps member, at awillis@forumcomm.com .
