A key reason for the resurgence of North Dakota's Oil Patch is 1,172 miles long and 30 inches in diameter. The Dakota Access Pipeline, thoroughly vilified by protestors, has been capable of carrying 470,000 barrels of Bakken crude oil daily since the $3.78 billion pipeline started operating in May, providing access via a hub in Illinois to refineries near the Gulf Coast. It's no accident that oil production, slumping since prices plunged several years ago, has rebounded since the pipeline went online.
Because of the great distances to major refineries, often located in coastal regions, Bakken oil faces a shipping penalty called a discount. That discount has typically shaved $7 or $8 per barrel from the price Bakken producers get for their crude. Since the Dakota Access Pipeline went to work, however, the discount has dropped to around $5 per barrel, leaving producers and royalty owners with a bigger profit. Multiplied by millions of barrels of oil, it makes a significant difference. Beneficiaries also include state government. State tax revenues increased about $43.5 million for the first five months the pipeline was in operation.
Petroleum production in the Bakken is once again on the rise. Production in October flirted with the record 1.2 million barrels a day set in December 2014, falling 42,000 barrels short. The increase, industry representatives say, also is attributed to advances in technology and the rollback of regulations in Washington. But the better transportation and access to markets afforded by the Dakota Access Pipeline has been called a "game-changer" in the economics of Bakken production.
One crucial barometer of oil activity is the drilling rig count. As the year winds down, North Dakota has about 53 rigs in operation; that's 28 percent more than the average count in January, 38 rigs. Natural gas production also has been booming, setting a record high in October of 2 billion cubic feet per day. That comes with a challenge, however: The industry will have to scramble-and invest heavily-to meet gas flaring limits that become more stringent in November 2018.
Pipelines are never popular. They come with real risks. They can leak, and leaks can contaminate land and water. But they are the safest, and most efficient, method of carrying crude oil long distances. Period. The Dakota Access Pipeline has been a boon to North Dakota's oil industry. It is helping Bakken crude to be more competitive. That's good not only for the state budget, but the state's economy. And by removing countless rail cars from the tracks, it also has made a significant contribution to public safety. The Dakota Access Pipeline, for all the controversy it has sparked, is paying dividends.
Editorials represent the views of Forum management and the Editorial Board.