Wow: Remember The Individual Who Wrote To Tell Me CBR Was A Fad? 90% Of Bakken Oil May Be CBR In 2014

The Dickinson Press is reporting:

North Dakota’s top oil regulator said railcars could move up to 90 percent of the oil produced in the state next year as differences in crude prices make rail more lucrative for operators than shipping by pipeline.

“We’re expecting 2014 to be soft in the crude price scenario, and so railcars are going to be absolutely vital to what we do in North Dakota,” Lynn Helms, director of the state Department of Mineral Resources, said Thursday.

Railcars carried about 63 percent of the state’s oil production in September, the most recent month for which figures were available, said Justin Kringstad, director of the North Dakota Pipeline Authority.

Meanwhile, the price for a barrel of Bakken sweet light crude fell from about $96 in July to $73.50 this month, Helms said. At that price, it’s still “extremely economical” to drill in North Dakota’s four core oil-producing counties – Dunn, Mountrail, McKenzie and Williams – as well as in Stark and Divide counties, but not in Oil Patch fringe counties, he told the Legislature’s interim Government Finance Committee.

Shipping by railcar to specific markets is netting operators $24 per barrel more than moving it by pipeline, which is helping the state meet its revenue forecast from oil taxes, Helms said. He said one operator that was transporting 75 percent of its oil by pipeline to Minnesota and Wyoming in July is now moving 95 percent by railcar to refineries in Philadelphia and St. James Parish, Louisiana.

“So rail has really saved our bacon in this whole business,” he said. As for the state’s total oil production, Helms said the percentage moved by rail probably won’t reach as high as 90 percent, “but it could if we see continued increases in those price differentials.”

I won't look for it now but I posted two items several months ago foreshadowing this. One was a conversation with a BNSF executive who talked about rail "netbacks." The second was an RBN Energy article. 

There are several other story lines in that article.  This demonstrates the scalability and flexibility of rail, something pipelines don't have.

Second, think Warren Buffett and his decision to by BNI years ago.

Third, a reminder that the TV crawler - crude oil price does not reflect reality -- for many, many reasons.

Fourth, a reminder to Bismarck legislators there is a fine line when it comes to thinking about raising taxes on Bakken operators.

Fifth, it confirms what I've often said -- when folks talk about the Bakken, they talk as if the geography is across the entire state. In fact, the oil patch surface is pretty much confined to four counties in North Dakota. And in two of those counties, only the west half of those counties.