“Let’s Build Our Own Pipeline”

So, now it is up to the President. The Keystone Pipeline will be built, or not, depending on, unfortunately, which political faction he wants to believe. Sadly, it has come to that. President Obama was elected partly, maybe even substantially, by people who believed he wanted to protect the environment and people who believed he wanted to create jobs.

Both sides right now can claim the other side’s arguments ring hollow. Both, I suppose, would be partly right. I’ve tended to side with those who believe this particular pipeline is a bad idea. I’m staying with that side, and I’ll tell you why. Not why the pipeline is a bad idea, but why I’ve stayed with that side. And what I think we ought to do instead. At least from a North Dakota perspective. I’ve written about this before if you want to go back and review.

I am really tired of all the bullshit I keep hearing from our politicians about why we need to build this pipeline. John Hoeven, Heidi Heitkamp and Kevin Cramer continue to stick with their line that the Keystone XL pipeline is good for North Dakota. That’s the bullshit I’m tired of. Most of their argument stems from a promise by the people building Keystone that they will take 100,000 barrels of oil a day from the Bakken and send it to refineries in the Gulf of Mexico. TransCanada, the company building the pipeline, extended that offer a few years ago in order to get some U.S. support for the pipeline. The pipeline has the capacity to transport more than 800,000 barrels of oil per day. When they opened up the season for Bakken companies to contract for part of that capacity, up to 100,000 barrels, the industry here only committed 65,000 barrels. So there wasn’t a lot of enthusiasm in the industry here for the project. Just in the last few months, the Bakken’s biggest player, Harold Hamm of Continental Resources, said he didn’t need the Keystone Pipeline. He said trains are doing a good enough job for him. Now, before you get on a rant telling me trains are dangerous, let me finish, and then we’ll address that point. I want to stay on this “bullshit” point a bit longer.

I’ve seen two newspaper reports stating that building the Keystone Pipeline could take 500 trucks a day off North Dakota highways, one of those by Sen. John Hoeven a year or so ago and the other, just this morning, by Ron Ness. I don’t know where they get that number. I think they made it up. Because the Keystone pipeline doesn’t come to North Dakota. The closest it gets is Baker, Montana, just west of Bowman, North Dakota, down in the southwest corner of our state, a long way from the Bakken.

And that’s where the TransCanada people say they will let the Bakken crude into the pipeline to mix with the Alberta tar sands oil. Thing is, the oil has to get to Baker somehow. There are a couple of smaller  pipelines (you can look at a map of all the oil and gas pipelines in the state by clicking on that link), running from North Dakota out to Baker now, the Belle Fourche and Bridger Pipelines, both owned by True Oil Company out of Casper, WY, but, based on this notice from the True Oil website, I’ve got to guess they’re already being used:

NOTICE TO SHIPPERS IN THE WILLISTON BASIN 

Belle Fourche and Bridger Pipeline (“the Pipelines”) have recently received crude oil shipments containing high levels of H2S which have materially affected the common stream and created safety hazards at certain delivery locations. The Pipelines’ Rules and Regulations allow the Pipelines to reject such crude oil from any injection facilities.  

If a shipper or facility owner delivers crude oil with high H2S into the Pipelines without the Pipelines’ prior approval, the Pipelines reserve the right to shut down such injection facility and will seek reimbursement for any damages caused by the unauthorized delivery.  

If a safe accommodation can be found, which shall be determined in the Pipelines’ sole discretion, the Pipelines will accept the high H2S crude oil into its system.  The Pipelines’ prior approval must be obtained before a shipper can inject any crude oil with H2S into the system.  

                So you’ve got to imagine the oil companies are scrambling right now to clean up their act, to keep those pipelines full of Bakken crude. Well, then how does any new oil from the Bakken get to Baker? Only thing I can think of is trucks. By truck, it’s about a hundred and fifty miles from either Watford City or Williston, and much further from the northern reaches of the Bakken or Mountrail County, where the big play is right now. Any way you look at it, it is a full-day trip for a truck full of oil on North Dakota’s two-lane highways. So maybe Hoeven and Ness just got mixed up and meant to say there would be 500 MORE trucks per day on the North Dakota highways if we build Keystone. Or, maybe there’s already enough oil running through those pipelines to Baker to fill up the capacity TransCanada says it will take, which would mean no change in the number of trucks on the road today, doing what they’ve already been doing. Either way, the “taking 500 trucks a day off the road” is bullshit.

The other thing I keep hearing from politicians is the phrase “energy independence.” Getting rid of our dependence on foreign oil. More bullshit. Even our own Heidi Heitkamp said in a press release “The Department of Energy confirms that the transported oil will be refined and used in the United States.”

Well, I can’t find that anywhere on the Department of Energy’s website.  What I CAN find is dozens of stories that dispute that fact. The Energy Department’s own website does say that gasoline is one of the nation’s largest exports, going mostly to Latin America, mostly from Gulf coast refineries, and that exports of refined products increased from 1.8 million to 3.2 million barrels from 2008 to 2011.  The fact is, Keystone XL is an export pipeline. The industry has said repeatedly that Gulf Coast refiners plan to refine the cheap Canadian crude supplied by the pipeline into diesel and other products for export to Europe and Latin America. Proceeds from these exports are earned tax-free. Much of the fuel refined from the pipeline’s heavy crude oil will never reach U.S. drivers’ tanks. Read this story from CNN if you want your eyes opened.

Even our own Harold Hamm says that. Speaking at the Williston Basin Petroleum Conference a couple years ago, Hamm said he’s bothered by the $15 per barrel differential between Bakken crude and other oil caused by transportation bottlenecks, according to this Bismarck Tribune story. “What we need is pipeline to get oil to water so we can export it. People ask me which pipeline I support and I say I’m going to support all the pipelines to get rid of that differential,” Hamm said.

Finally, most experts agree that the completion of the Keystone will result in higher gas prices for those of us here in the Midwest, as cheap Canadian oil bypasses Midwest refineries and goes directly to the Gulf for export. Here’s a good analysis of that.

So that pretty much takes away whatever arguments North Dakota politicians are using to blast the President. The President is a pretty sharp guy, though, surrounded by some pretty sharp people. I have to hope, and think, that he’s got the correct information in front of him as he makes his decision.

But I’ve said here before that I am going to try to not just offer criticism here without offering an alternative. Besides, we’re being beat over the head these days, rightfully so, on how much safer it would be to ship out oil in pipelines instead of trains. Well, no matter what we do, we’re not going to see a decrease in train traffic. We’re only a fourth of the way to the 40,000 oil wells the industry tells us we’re going to get, and the trains are pretty much full, so if we don’t find an alternative way to get the oil out of North Dakota, to whatever refineries will take it, the industry is at some point going to have shut down. We need additional means of transporting it, and a pipeline is probably the best bet. Just not Keystone. Because North Dakota is now producing a million barrels a day, out of just ten thousand wells, and we’re going to forty thousand wells, so even if all 100,000 barrels a day that Transcanada says they will put in their pipe from the Bakken was going to come from North Dakota, that would be, well, a drop in the bucket of what we’re producing.

Some people say we should build more refineries. Well, that really doesn’t solve anything, because we’d still have to ship the refined product. And shipping gasoline and diesel is certainly more dangerous than shipping crude.

But more and more people are starting to say “Let’s build our own pipeline.”

Well, why not? We could afford it. If we owned the pipeline ourselves, we could send our crude  oil anywhere we want it to go. We wouldn’t have to ship it to the Gulf for export. We could put the oil in our own pipeline right here in North Dakota, instead of trucking it to Baker, Montana, and we could ship it to refineries nearer population centers, which could indeed refine it for use right here at home. We’d just say to the oil industry “Here’s the deal: We’ll build you a pipeline, you’ll save a bunch of money shipping your crude to refineries, but it’s going to go to domestic refineries for domestic use.” Y’know what? I bet we could make some deals.

We’d create a bunch of jobs. About as many as Keystone would create, I’d guess. We’d start down the road to energy independence. We really would get 500 (or maybe even 5,000?) trucks a day off our roads. We wouldn’t have to wait six years for a president to sign off. Gee, where have I heard all those arguments before?