By Bette Grande and Isaac Orr
Western North Dakota has a history of oil booms and busts. The cycle began when oil was discovered in the region in the 1950s and again in the 1980s. Today, global oil prices and a lack of pipeline transportation have put the crunch on oil production, putting the industry at risk once again. But all that might change now that President Donald Trump has signed executive actions designed to speed the construction of the Keystone XL and Dakota Access pipelines, thereby extending a lifeline to the western North Dakota economy.
The approval of these pipelines is a stark break from the previous administration’s policies, which obstructed the construction of vital pipeline infrastructure. These pipelines greatly improve the economics of transporting oil and make the North American energy industry more competitive in the global marketplace.
Transporting oil from North Dakota via pipeline is less expensive than transporting oil by rail. It costs approximately $15 a single barrel of oil by rail, but it is estimated transporting oil via the Dakota Access pipeline (DAPL) will only cost $7 to $8 per barrel. Reducing transportation costs will significantly affect North Dakota oil producers. They are currently forced to sell their oil at a discount compared to other areas, because they pay higher transportation costs, so the pipeline’s potential savings will improve business dramatically.
The Keystone XL Pipeline will likely extend a similar lifeline to oil producers in Western Canada, many of whom are dependent on oil exports to the United States to gain access to greater global markets. Western Canadian oil has sold at a discount of about $14 per barrel compared to West Texas Intermediate oil over the past year, data compiled by Bloomberg shows.* That may shrink to $5 to $7 per barrel should more pipelines be built.
Although it now appears these pipelines will be constructed — thanks to the support given by the Trump administration — multiple roadblocks imposed in the past have delayed their completion and driven up costs for energy companies and local governments. For instance, the protests against the completion of DAPL have so far cost taxpayers and construction companies tens of millions of dollars—and this does not include clean-up costs (to avoid the environmental disaster left behind by the protesters) and the still-accumulating court costs.
Like Keystone XL, the site of the Dakota Access pipeline became the epicenter of the national anti-pipeline protest in 2016. Thousands of protesters occupied land near the Standing Rock Sioux Reservation to prevent the completion of the project. Although many of the protesters were peaceful, others — including some who were paid to protest — swarmed construction sites, burned vehicles, killed livestock, and damaged construction equipment.
In some cases, the protests caused schools to be put on lock-down, making it impossible for parents to get to their children. The nature of the protests overwhelmed local law enforcement and necessitated additional law enforcement from multiple jurisdictions to be brought in to ensure safety and protect property, all at an enormous cost.
According to the North Dakota Department of Emergency Services, the cost of the protests, as of February 10, 2017, is about $33 million—and it’s still rising.
North Dakota oil production dipped below one million barrels per day in September, October, and December of 2016, but that it is less likely to occur again now that it appears the Dakota Access pipeline will finally be completed. DAPL will vastly improve the economics of producing oil in the Bakken. It’s also likely a major reason Continental Resources has announced it will invest $700 million in North Dakota in 2017.
Pipeline protesters often say, “water is life,” but it seems they do not realize oil is also life. The United States gets 35 per cent of all the energy it uses from oil. Oil is what powers the ambulances taking our loved ones to the hospital, and it is the fuel that transports protesters’ organic vegetables to the grocery store.
In fact, energy independence is national security. We can either produce our oil domestically, creating hundreds of thousands of jobs for American workers, or import it from other countries, many of which use the funds to support causes most Americans totally oppose.
Bette Grande (Think@heartland.org) is a research fellow at The Heartland Institute. She represented the 41st District in the North Dakota Legislature from 1996 to 2014. Isaac Orr (IOrr@heartland.org) is a research fellow specializing in hydraulic fracturing at The Heartland Institute.