North Dakota oil to be ‘constrained’ until 2010

BISMARCK — Pipeline and refinery construction projects will constrain North Dakota oil exports in coming months, the state’s chief oil and gas regulator told lawmakers Wednesday.

Lynn Helms, director of the state Department of Mineral Resources, said the biggest operators in North Dakota’s Bakken shale oil development don’t plan to cut back on drilling or production plans. But they will not expand those plans by buying or bringing in more drilling rigs until the constraints have passed in early 2010.

He told members of the Legislature’s interim Budget and Finance Committee that the state will have “very slow growth between now and the first quarter of 2010.”

Helms said the Enbridge pipeline, a major outlet for North Dakota oil running from near Williston to Grand Forks and beyond, will shut down soon for pressure testing, in preparation for an upgrade project, in which it will go from a capacity of 110,000 barrels per day to 160,000 barrels per day. Its capacity will be reduced during the upgrade construction.

Also, the Mandan Tesoro Refinery is expected to shut down for several weeks next year while it conducts a major maintenance known as a turn-around. During that time it will refine little to no oil, Helms said.

Helms said the state should still be able to produce and transport 160,000 barrels of oil per day selling at $97 per barrel. Currently the state is producing more than 156,000 barrels per day, and in June its price peaked at more than $136 per barrel before trending down along with the world price drop.

If production goes higher, the extra oil will likely sell at a steep discount, he said.

“We’re working on some ways out of this,” he said.

Plans are being made to ship by rail oil that would normally be in the Enbridge line.

And, Helms said, his office is doing everything possible to help the Mandan Hidatsa Arikara Nation build its new refinery on the Fort Berthold Indian Reservation.

One legislator who works in the oil field thinks Helms is too optimistic.

Rep. Bob Skarphol, R-Tioga, said railroads are already carrying all the freight they can. He wonders if the oil companies will “continue to drill if they can’t get rid of the oil.”

The Budget and Finance Committee is taking input on state revenue and spending trends in preparation for the 2009 session.

Chairman Rep. Al Carlson, R-Fargo, told the committee and audience Wednesday that the panel will make a report to the Legislative Council at the end of this year but is not writing a budget.

“The final product (report) is a big-picture product,” he said after the meeting. It will show revenues and trends and how much money is needed for a sustainable budget and how much money is available for special projects and state initiatives, he said.

The state’s budget director announced Monday in a new revenue forecast that the state will have more than $1 billion in excess revenues by June 30, 2009.

Cole works for Forum

Communications Co., which

owns The Jamestown Sun

Tags: oil, energy, northdakota, bakken