Enbridge -- Crude-By-Rail -- The Bakken, North Dakota, USA

Update

January 5, 2011: see comments near end of the original. One day after posting the information below, we get the reason why Enbridge entered the crude-by-rail industry.

The US government continues to tighten controls on fossil fuel pipelines.

Original Post 

This story was reported back on December 7, 2011, but was in today's monthly Oil and Gas Journal update.

Enbridge Energy Partners LP will expand its Berthold rail terminal capacity in the Bakken shale by 80,000 b/d and include a rail car loading facility to accommodate the additional volume.

EEP has contractual commitments for 70% of the rail loading capacity and anticipates it will soon finalize agreements for the remaining capacity.

The Berthold Rail Project includes construction of a double-loop unit-train facility, crude oil tankage, and other terminal facilities adjacent to its existing facilities near Berthold, ND. The project will have capacity to stage three unit-trains at Berthold at any given time. After an initial 10,000 b/d Phase I start-up in July 2012, the full 80,000 b/d of rail export capacity will enter service in early 2013.

EEP described the $145 million project as complementing its Bakken Expansion Program, integrating gathering pipeline capacity in western North Dakota and eastern Montana with increased North Dakota export capacity.

EEP expects Bakken Expansion, announced August 2010, to add 145,000 b/d of takeaway capacity from the Bakken and Three Forks formations in Montana, North Dakota, and southeast Saskatchewan, 25,000 b/d of which is already available.

The company expects the remaining 120,000 b/d to enter service by early 2013, a slight delay from initial predictions of late 2012. The Bakken Expansion will cost roughly $370 million for the US projects and $190 million (Can.) for the Canadian projects.

Data points and comments:

• Enbridge positions itself as as a transporter of oil, not a pipeline company (I've talked about that before; the analogy -- the railroads saw themselves as transportation companies, not railroads -- huge difference)
• Enbridge pipelines: Bakken sweet, light oil only
• Enbridge unit trains: flexible product; flexible destination
• The double-loop unit-train configuration looks like the standard in the Bakken; I saw three other such facilities 4Q11; such a configuration can stage three unit-trains at any given time

The crude-by-rail was absolutely essential for Enbridge if it wanted to be as the "go-to" oil transporter in the Williston Basin. I assume a lot of operators were discouraged when Enbridge would not take their sour oil (Madison, Spearfish).

Everyone is aware of the Spearfish activity north of Minot. My hunch is that the Madison will be the next big story once the takeaway capacity is there.

But the biggest reason, Enbridge got into CBR in the short term? If there is an pipeline oil spill, no matter how small, a) the media blows it our of proportion; b) the EPA shuts down ALL the pipelines that might be related; c) pipelines are not re-opened until the government gives its okay; d) the government won't give its okay until the mainstream media accepts the decision (internal political polling); and, e) a pipeline company can come to a complete stop, affecting a financial quarter's bottom line.

Now, if the government shuts down an Enbridge pipeline, it can still meets it contractual arrangements with its customers. This is not rocket science.

Long term: Enbridge realizes that there may simply not be enough pipeline capacity ten years from now.