Had fun talking about how anti-fossil fuels conflict groups have made the pipeline industry their newest boogeyman target for demonization earlier today with Ryan Mills at @AFPM:
“It’s the new reality,” said Taylor Robinson, president of PLG Consulting. “Unless there’s an unforeseen event, like a supply disruption, there will be no economic incentive to rail Bakken to the East Coast.”
Thus, the DAPL has already begun to improve the economics of drilling for and producing oil from the Bakken Shale, whose rig count has begun to rise over the last few months. And while the aggressive and often-violent protesters who spent half a year opposing the project’s completion would never admit it, DAPL is also already improving the safety of moving Bakken crude out of the basin to be sold and refined.
While rail companies and regulators have moved in recent years to improve the safety aspects of shipping crude by rail following several high-profile incidents, the truth remains that pipelines are far and away the safest means of moving crude oil to market. Rail will remain a part of the transportation mix for Bakken oil – it represented about 25% of that mix during February of this year – but its market share there will grow smaller in the coming months. That’s a positive for producers, refiners and the public.
Unfortunately, the good news about oil and gas pipeline safety has apparently not made its way to the governor’s office in Albany , where Andrew Cuomo continues to cost his constituents billions of dollars each year through his efforts to obstruct the building of needed natural gas pipelines in the Empire State. Gov. Cuomo is of course most famous for orchestrating a statewide ban on hydraulic fracturing, a ban that has denied New Yorkers to share in the riches provided to Pennsylvanians, West Virginians and Ohioans by the massive Marcellus Shale resource, which also extends into Southwestern New York.
Some thoughts on the domestic oil and gas situation as we move into April…
The rigs just keep on coming…: The industry activated more than 70 additional drilling rigs during the month of March, bringing the total new rigs activated during the first quarter of 2017 to more than 200. My “bold” prediction as the year began was that it would take four months, not three, for the U.S. industry to bring that number of new rigs onto the market. So, ok, I was too timid.
Interestingly, more than a dozen of these newly-active rigs have moved into the Haynesville Shale region, which is experiencing a somewhat surprising resurgence of activity, even in the seemingly interminable weak price market for natural gas. The play’s abundance of pipeline takeaway capacity and proximity to major export facilities are two of the main reasons for this uptick in activity, as detailed by Forbes contributor Jude Clemente in his piece of March 25.
March’s increase in rigs drilling for oil was also less focused on the Permian Basin than in prior recent months, with other basins like the Eagle Ford, the SCOOP/STACK and the DJ Basin also seeing significant upticks in activity. How much longer this rising rig count can last is anyone’s guess, but it was a major reason why…
A U.S. Court of Appeals ruling rejecting the latest appeal by the Standing Rock Sioux and Cheyenne River Sioux Tribes on Saturday means that oil could begin flowing through the completed Dakota Access Pipeline (DAPL) this week. Once fully operational, the 30-inch pipeline will carry more than 400,000 barrels of crude oil per day out of the Bakken region in North Dakota to market, mitigating the current process of carrying the oil out of the basin via trucks and rail cars.
The commencement of flow through the DAPL represents the closure, of sorts, to one of the most hotly-contested pipeline construction projects in U.S. history, although a number of protesters remain in the area, presumably in the hopes of mounting efforts to disrupt operations in the future. But all is quiet on the protest front for now, and the announcement early in March that cleanup of the huge mess the protesters left behind at the Oceti Sakowin protest site is complete also represents a sort of closure.
But as one source of controversy has closed, another has opened. The question now is, with the State of North Dakota estimating that it and local authorities have incurred more than $38 million in costs related to the policing of the protesters and cleanup of the massive mess they made at Oceti Sakowin and other protest camps, who is ultimately going to pay the bill?