Biggest News Story of the Week Out of the Bakken -- The Bakken, North Dakota, USA

The Dickinson Press link here .

Enbridge Energy Partners LP will make an additional $145 million investment in North Dakota to expand crude oil capacity and add a rail car loading facility to accommodate the additional volume, the company said Tuesday.

The Houston-based petroleum company, which operates oil pipelines, said that it will increase the holding capacity at the Berthold terminal by 80,000 barrels per day and add a double-loop unit-train facility, oil tanks and other terminal facilities next to its existing facilities.

This story speaks volumes.

Enbridge is a pipeline company. Wrong. Enbridge has smartly realized that it is an oil shipment company. That alone is a huge story. I've opined before that successful companies remain successful by recognizing what business they are in. The railroads moved to a new level when they realized they were in the transportation business and not the railroad business. That insight resulted in development of container cars and intermodal technology.

Enbridge recognizes it is an oil shipping company, not a pipeline company. More on this later.

By moving to pipeline, this tells me that Enbridge sees some advantages in crude-by-rail shipments: first, railroad shipping adds flexibility, not only in giving Enbridge an additional way to ship oil, but also flexibility in destination.

But this is what's really interesting: this tells me that takeaway capacity is still an issue in the Bakken. No company is going to be adding capacity if it's not needed. A corollary to this is that that this suggests to me there is more recoverable oil in the Bakken than officials are publicly admitting.

Another thing this tells me is that Enbridge is listening to the public. The public believes that pipelines are inherently dangerous but accept railroads as being inherently less risky. Of course that is not correct, but that's what the public believes, and if the public is moving toward crude-by-rail, Enbridge will do the same. After all, Enbridge is in the oil shipment business, not the pipeline business.

This may be the top story of the month for what it says about the Bakken; it certainly is the top story of the week.

Look at the amount of money Enbridge is putting into this project: $145 million. That is incredible. Just one more example that the Bakken is for real. That represents the CAPEX for some of the drillers in the Bakken: at $9 million apiece, $145 could buy you 16 wells. Most companies share the risk in wells, so that CAPEX actually represents much more than just 16 wells. Pretty incredible.

One can read more of this story and what Enbridge is doing at Berthold at this link.