New Bakken Crude Oil Pipelines Not Necessary -- RBN Energy

Updates

March 24, 2015: ETP, Bakken-to-Illinois, Dakota Access Pipeline, miles of pipeline being brought in, stored near Aberdeen, SD; South Dakota state has until December 15, 2015, to make decision.
August 30, 2014: Iowa activists trying to stop the ETP pipeline. 
 

Original Post

Link here.

No sooner had we finished up our analysis of the divergent fates of two North Dakota crude oil pipeline projects - the Enbridge Sandpiper (going ahead after a successful second open season) and the Koch Dakota Express (cancelled in January) – then we learned that competitor Energy Transfer Partners (ETP) had launched a binding open season for a third pipeline proposal following basically the same route. The ETP press announcement provided few specifics but it seems remarkably similar to the cancelled Koch proposal. Today we look at plusses and minuses of this new pipeline proposal.

Just a couple of weeks ago we reviewed the competing Enbridge Sandpiper and Koch Dakota Express pipeline projects that were both designed to increase takeaway capacity from Bakken production in North Dakota. In Episode 1 of that two part series we noted that the Sandpiper project moved forward in February of this year (2014) while the rival Dakota Express project hit the skids when its sponsor Koch Industries pulled the plug in January. Our analysis showed that neither pipeline was absolutely required to move Bakken production to market if you included rail-loading capacity in the takeaway equation – but noted that pipeline options are cheaper than rail and therefore can be more attractive to shippers, particularly when they offer flexibility to reach multiple markets. In Episode 2 we compared the routes and connections that the two rival pipeline projects offered Bakken producers and concluded that the Enbridge Sandpiper project was likely more successful in attracting shippers than Koch because of its greater flexibility of destinations.

Our understanding of the attraction of this new pipeline proposal is that it offers Bakken shippers an alternative direct path to the Gulf Coast that does not use the Enbridge system. To that end, crude producers will benefit from the flexibility. For ETP the Dakota Access leg of the new proposal will help to make the EGCAP leg from Patoka a success by attracting shippers away from the Enbridge system in North Dakota – a task that would be far harder to achieve in Patoka. Finally the outcome of this open season should provide an interesting indication of whether North Dakota producers prefer pipeline routes to the Gulf Coast over rail options to other markets like the East and West Coast in the long term.