American Oil and Gas Reporter - September 2017 - 85

ConventionSection: North Dakota Petroleum Council

NDPC Helps To Explain
DAPL's Importance
By Danny Boyd
Special Correspondent

BISMARCK, N.D.-The North Dakota
Petroleum Council insists that shutting
down the Dakota Access Pipeline will
"pull the rug out from under the state's
oil industry" and hurt royalty owners
and citizens statewide, warns an amicus
brief NDPC filed in federal court on
July 17.
As NDPC members prepare for their
annual meeting, Sept. 26-28 at the Alerus
Center in Grand Forks, N.D., pipeline
operations crucial to helping keep the
price of Williston Basin crude oil more
in line with other U.S. grades are threatened by a federal lawsuit that aims to
break the vital transportation link, association leaders say.
While NDPC continues to monitor a
variety of issues at the state and federal
levels, concerns over DAPL are frontand-center for member operators who
produce about 98 percent of North Dakota's oil, says Chairman Eric Dillé.
"The pipeline is transporting about
500,000 barrels of oil a day now, which
is 50 percent of North Dakota's production," points out Dillé, who works in
Denver as vice president of government
relations for EOG Resources Inc.

Value Implications
Co-plaintiffs in the DAPL case, which
include the Standing Rock Sioux and
Cheyenne River Sioux tribes, are suing
the U.S. Army Corps of Engineers and
Dakota Access LLP in U.S. District Court
for the District of Columbia to shut down
the pipeline, owned by Dallas-based Energy Transfer Partners.
In a June 14 ruling, U.S. District Judge
James E. Boasberg left open the possibility
of a shutdown when he ruled that, although
the Corps' pipeline permit had complied
with much of the National Environmental
Policy Act, it failed to adequately assess
the potential impact of an oil spill on
tribal fishing and hunting rights, published
reports indicate.
In early August, Boasberg had not
handed down a final decision, but NDPC

President Ron Ness insists that closing
down the pipeline will deprive members
of safe, economic access to hubs and refineries. DAPL extends from the oil fields
of Northwest North Dakota to a tank
farm in Patoka, Il.
"Our amicus brief focuses on direct
pipeline opportunities to run these barrels:
lower transportation costs, better markets
and significantly higher netbacks to producers," Ness describes. "It also has a
significant impact to the state of North
Dakota in terms of nearly $100 million a
year in tax revenue from the increased
price of Bakken crude oil, by as much as
$2-$3 a barrel. It has a huge impact
throughout the value chain from the oil
well to the royalty and mineral owner
and operators, to the entire state of North
Dakota."
Killing the line would force many
producers to find a different way to transport their oil, which would entail additional
unit trains and, consequently, higher shipping costs and greater safety risks, Ness
relates, not to mention production losses
and the prospect of damaged wells that
could dent numerous wells' production
permanently.
"In 2005 and 2006, when the Bakken
started going, people were trucking oil to
Oklahoma from North Dakota," Dillé recalls. "The economics were terrible and
would be especially bad in a low-price
environment. There are also safety issues
with more trucks on the road or increased
rail traffic. Pipelines are the safest and
most efficient way to transport oil."
Real Risks
Even a temporary DAPL stoppage
threatens to greatly disrupt North Dakota's
oil producers, an issue the plaintiffs fail
to address adequately, NDPC's brief contends. "None of the parties are North
Dakota oil producers, and NDPC is best
positioned to speak to the serious consequences that North Dakota producers will
face in the wake of a DAPL shutdown,"
the filing states.
The brief refers to a July 6 radio interview in which Justin Kringstad, the
executive director of the North Dakota

Pipeline Authority, said that since 2008,
the basin has lacked adequate pipeline
infrastructure. As a result, the state's
crude oil has been discounted by as much
as $20 a barrel compared with West
Texas Intermediate and other domestic
crude grades. The discount averages about
15 percent to WTI, Ness reports. DAPL's
completion marks the first time in almost
a decade that North Dakota and the region
have enjoyed adequate pipeline capacity,
the brief maintains.
In a public statement released on his
first day in office, North Dakota Governor
Doug Burgum insisted the pipeline was
good for the economy and was the safest
way to transport North Dakota products,
the brief notes. "Failure to finish it would
send a chilling signal to those in any industry who wish to invest in our state
and play by the rules," Burgum said.
After DAPL went into service, many
producers and oil purchasers stopped
transporting crude by rail, which reduced
the demand for rail service in North
Dakota, Ness points out. Now, he says,
excess train cars either are employed in
other states or are stored in rail storage
locations, most of which are outside
North Dakota.
Any disruption in the pipeline's service
would require a massive mobilization
consisting of rail cars, engines, crews and
associated administrative support, and
would require at least several weeks to
accommodate the volume DAPL carries,
NDPC's brief indicates. Moreover, it continues, there is no guarantee that sufficient
rail resources will be available in the near
term, and with the shift to rail, producers
facing transportation constraints have no
choice but to choke back production.
Railroaded
A sudden shift in rail volumes also
may cause rail congestion, forcing members to curb production further as trains
back up and bottleneck, NDPC's brief
warns, with a shut-in raising the possibility
of damaging wells and requiring expensive
rework to bring them back on line at
comparable levels.
The brief points to studies from the
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