More Black, Now Comes The White -- November 1, 2014; ONEOK Announces Completion Of Projects

A reader sent me a nice article from The Minneapolis Star-Tribune: we're going to see a bit more color on the regional railroads. It used to be all black oil tankers; now we'll start seeing white propane tank cars. There just is not enough pipeline for all the propane that needs to be shipped:

More propane is shifting from pipelines to railways this fall as Minnesota marketers bulk up supplies of the fuel for crop-drying and winter heating.

At least three rail terminals in the state have expanded their unloading and storage areas in recent months, and a new rail terminal in central Wisconsin is scheduled to open in two weeks.

Driving the changes was the closure in May of the Cochin Pipeline from Canada that carried 40 percent of the propane used in Minnesota. An estimated 230,000 homes, farms and businesses in the state depend on the product.

The pipeline’s owner, Kinder Morgan Energy Partners of Houston, halted propane shipments late last spring and began sending light petroleum condensate the other direction: from Illinois to Canada’s booming oil industry in Alberta.

Helping to fill the void left by the pipeline has been CHS Inc., the nation’s largest farmer-owned cooperative and a major wholesaler and retailer of propane. The Inver Grove Heights-based company is investing $24 million to develop a more robust network to supply propane in the northern tier region of North Dakota, Minnesota and Wisconsin.

And the Minnesota governor has signed an executive order temporarily easing propane delivery rules:

Governor Dayton signed an executive order Friday that allows propane delivery drivers a longer daily window to transport the product. They would still face limits on the amount of time they can spend behind the wheel. The order is similar to ones he's signed in the past to combat distribution shortages. Last year, propane shortages drove up heating costs.

I guess propane is less volatile, less dangerous this time of year. But our grocery store across the street here in Texas is taking no chances; the sign reads: no propane containers inside the store. 

Another article from the same newspaper has a story that I posted earlier; in fact, it may have been the very same article. I don't recall. But it's an extremely good article, coming at a time when there is a slump in oil prices. North Dakota looks to huge new investment in the state: plastics and fertilizer.

Even as it fills the railroads of the Upper Midwest with oil tank cars, the Bakken has allowed its natural gas riches to languish.

Less profitable than oil and more difficult to transport, natural gas has been so secondary in North Dakota that drillers still burn off more than a fourth of what rises from the ground. In satellite pictures, the flames sprawl across the Williston basin, lighting it up like a giant suburb.

A quiet transformation is underway, however, as the state bids to turn natural gas into a native business and drive down flaring.

A growing network of pipelines and processing plants has made North Dakota a recent target for billions of dollars of investment toward factories that convert natural gas into other products like fertilizer and plastic.

“It’s the natural progression of OK, now we’re pretty fully developing on the drilling side of things, and now comes the next component, which is the value add,” said Cullen Goenner, an economist at the University of North Dakota. “That’s where you really get the biggest bang for the buck, in terms of the employment and all those supplemental jobs, is in the value-added industries, more so than in just the extractive industries.”

A group called Badlands NGL announced in a news conference with Gov. Jack Dalrymple two weeks ago that it wants to convert cheap, abundant ethane into polyethylene, the raw material of plastic bags and bottles. The $4 billion factory would churn out rail car loads of the tiny, milk-white plastic beads.

A month earlier, Inver Grove Heights-based agriculture giant CHS Inc. said it will build a $3 billion fertilizer plant 90 miles west of Fargo. Another group with board members from the North Dakota Corn Growers Association, called Northern Plains Nitrogen, is trying to raise money for a $2 billion fertilizer plant just north of Grand Forks.

This could be a huge decade for North Dakota.

It should be noted that Hillary should get credit for these new projects. She never gets enough credit for all she has done building the Bakken. 

This really is quite exciting for North Dakota. These are huge projects. Had there been just one such project announced years ago, it would have been a big deal, but it seems very month another story comes out of North Dakota for a huge project.

For example, ONEOK just announced:

Tulsa-based ONEOK Partners LP announced it has completed work on three major projects in the oil and gas-rich Niobrara and Bakken shales of the Rockies and northern Plains.

Work is done on the Garden Creek III natural gas processing facility in North Dakota, the Bakken NGL Pipeline expansion in Wyoming and the Niobrara NGL lateral pipeline, also in Wyoming. These projects totaled more than $500 million in capital expenditures.

Completion of the Garden Creek III brings the company’s Williston Basin processing capacity to more than 600 million cubic feet per day in natural gas. ONEOK has increased its processing thereby 500 million daily cubic feet since 2010.

The three projects are part of the partnership’s previously announced $8.3 billion to $9.0 billion capital-growth program through 2016. ONEOK Partners has natural gas and natural gas liquids pipeline and processing assets throughout the central U.S.

And again, please send a thank you note to Hillary, Barry, and Pocahontas for building these plants.

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Ahead Of The Curve
A Note For The Granddaughters

This is so cool: in today's WJS Review section. The new buzz on Wall Street -- two phones - a phablet and a clamshell. It turns out the writer -- a slim-suited tech minimalist -- felt silly when making a phone call on his Samsung 5.5-inch-long "slab." His solution: a clamshell for making phone calls. He still carries his phablet but makes his calls on his clamshell. As regular readers know, I only carry a clamshell. It took about two weeks to find a replacement battery but now I'm connected again.

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The 800-Pound Gorilla

The front-page story in this week's Bloomberg Business: Stimulate This! John Maynard Keynes has the last laugh on what works for the global economy.

This segment is particularly interesting:

If Keynes were alive today, he might be warning of a repeat of 1937, when policy mistakes turned a promising recovery into history’s worst double dip.

This time, Europe is the danger zone; then it was the U.S.

What’s called the Great Depression was really two steep downturns in the U.S. The first ended in 1933. It was followed by four years of output growth averaging more than 9 percent a year, one of the strongest recoveries ever.

What aborted the comeback is still debated. Some economists blame President Franklin Roosevelt for signing tax hikes and cuts in New Deal jobs programs. Others blame the Federal Reserve. Dartmouth College economist Douglas Irwin argues that the Roosevelt administration triggered the relapse by buying up gold, removing it from the U.S. monetary base. The move to prevent inflation succeeded all too well, causing deflation.

Whatever the cause, Britain and other trading partners were dragged down, and U.S. output plunged and didn’t fully recover until America’s entry into World War II.

“We are really at a kind of 1937 moment now,” says MIT’s Temin. “It’s a cautionary history for us.”

The writer's focus is on the global economy and emphasizes "this time Europe is the danger zone."

I wonder if the the writer should be so sanguine about the US economy.

The writer notes the three "things" that economists blame for the US Great Depression:

• FDR raises taxes just as recovery was taking off (this, by the way, is the #1 accepted explanation)
• the Federal Reserve
• buying up gold

The latter two seem to have little relevance today (comparing what the Fed did in 1937 with what the Fed is doing now) and the gold story certainly has no relevance.

The 800-pound gorilla? The nation's biggest tax hike is yet to go into effect. Most of ObamaCare was deferred, delayed, or waived by executive action and won't go into effect until 2015 and 2016.  The good news: it's very possible, that tax hike will be offset by the fall in US energy prices.