BISMARCK — North Dakota's Industrial Commission was grappling to formulate a game plan for the state’s oil industry Tuesday, July 7, after a federal judge halted operations of the Dakota Access Pipeline earlier this week, a sudden blow to oil companies already limping through the pandemic.
In a meeting that touched on the state’s new multimillion dollar oil well reclamation project, this week's pipeline ruling and an auditing report from the Bank of North Dakota, conversation frequently returned to questions of how to rescue the state's oil industry from the recent onslaught of obstacles.
Commissioners bemoaned "activism on the bench," which they said has doled out poorly considered penalties to the oil industry in North Dakota. At one point, Gov. Doug Burgum criticized the decision of Judge James B. Boasberg, the U.S. District Court Judge whose ruling requires DAPL to shut down for a 13 month environmental review, calling it “a dangerous precedent” at a time when the country should be adding to existing infrastructure.
“This is the kind of risk that would just chase capital out,” Burgum said, warning of the effects that the decision may have on North Dakota’s oil output and arguing the hit to North Dakota oil production will “hand a gift to all of our competitors” in overseas oil-producing countries.
Voices across North Dakota’s oil industry have spoken out against the DAPL ruling over the last 24 hours, and Energy Transfer Partners, the pipeline’s parent company, said it plans to appeal the decision to a higher court. Industrial commissioners also expressed the importance of filing an amicus brief that could elevate the case to the D.C. Circuit Court.
As the commissioners expressed hopes that they could get a reversal on the DAPL ruling, the meeting explored the suddenly urgent alternatives to pipeline oil transportation.
"Until Dakota Access were to come back online, we are going to be in an environment of inadequate pipeline capacity," said J.J. Kringstad, director of the North Dakota Pipeline Authority, noting he is preparing for at least a one-year shut down to DAPL operations.
An extensive environmental review of the pipeline could shut off operations for the long term, an outcome that would require North Dakota oil industry officials to significantly rework their export system to compete with other oil producing states.
Presenting on the "theoretical alternative," Kringstad laid out the challenges ahead if North Dakota has to shift a share of its oil transport from pipelines to railroads.
While North Dakota once relied on railroads to ship as many as 850,000 barrels of oil per day, Kringstad said railroads today have the capacity to move only 300,000 barrels a day, citing the “reactivation costs” of moving rail infrastructure back into the region as a primary obstacle to resuming rail transport for oil.
Although North Dakota could match its recent pipeline productivity with time, Kringstad said, this feat is only possible because of the current depressed conditions in the oil industry: “If we were producing 1.4 or 1.5 million barrels per day, and we were already short on pipe capacity, and DAPL had not expanded yet, and this happened, then we would have a much more difficult time.”
Kringstad estimated the DAPL ruling has the potential to deliver "at least a $5 hit" to the price of oil per barrel in North Dakota.
In a separate effort to salvage oil industry jobs, Department of Mineral Resources director Lynn Helms addressed the commission to outline the next steps for the Bakken Restart Task Force, which rolled out an economic stimulus plan to keep oil field workers employed through the pandemic.
Helms noted the industry was on an upswing since reporting 9,700 unemployment claims on June 26, a trajectory interrupted by the DAPL decision.
“But with the decision that happened yesterday, we’re headed back to this,” Helms said, referring to the late June figures.
After Helms defended the success and environmental impact of the DMR’s oil well reclamation program, which recently got the greenlight to put tens of millions in CARES Act funding behind an oil industry jobs program, Burgum expressed a need to improve branding on the reclamation project.
The effort has attracted criticism from those who “may see (this) as $66 million going to an industry that they may mistakenly think has got a lot of money right now. So I think we just need to keep working on the communications side of this thing," the governor said.
Bids for well plugging and reclamation open over the next two weeks, with reclamation scheduled to begin in early August.
Meanwhile, DAPL has until August 5 to clear all crude oil from its system and cease operations.
Readers can reach Forum reporter Adam Willis, a Report For America corps member, at firstname.lastname@example.org.