With crude prices in the $60s, oil-producing basins other than the Permian are finally seeing signs of life, and that includes the Rockies. But volumes flowing through the most important Rockies crude oil hub — at Guernsey, WY — are down. Moreover, the price of oil at Guernsey is up, trading at least flat and sometimes at a premium to the downstream market at Cushing, OK, suggesting that committed shippers are having to bid up the price at Guernsey to secure barrels for their downstream pipeline commitments. What about production from the nearby Powder River Basin? Well, Powder River oil production is up, and the rig count there is double what it was this time last year, so you might think there would be more than enough barrels at Guernsey. But not so. Who’s to blame? We need to look no further than the Bakken and the Dakota Access Pipeline (DAPL) to discover our culprits. Today, we check in on the market at Guernsey and consider the impact of DAPL, the implications for Rockies crude oil outflows, and what it all means for Guernsey price differentials.
The tiny town of Guernsey (population 1,147) in eastern Wyoming’s Platte County is home to the most active crude trading hub in the Rockies, and serves as an important clearinghouse for Canadian, Bakken and Powder River Basin barrels. Tankage and pipeline routing at Guernsey provide an outlet for an array of crude types making their way to the much larger Cushing, OK, hub; to refining markets at Wood River and Patoka, IL; and to refineries in the Salt Lake City area. Most of the volume that trades at Guernsey is sourced from either (a) the nearby Powder River Basin located in northeastern Wyoming and southeastern Montana (although most Powder River production is within 11 Wyoming counties, and is centered in Converse and Campbell counties, just northwest of Guernsey), or (b) from Enbridge, Kinder Morgan and True Companies pipelines delivering barrels from Canada, North Dakota and Montana.
Enbridge’s 280-Mb/d Express Pipeline (dark green line in Figure 1) carries Canadian and Bakken volumes to Casper, WY, where it meets up with Enbridge’s 164-Mb/d Platte Pipeline. Some of the Express volume is diverted at Casper and travels southwest on the Frontier Pipeline system (orange line) to Salt Lake City refineries. From Casper, the Platte Pipeline (neon green line) continues to Guernsey, where volumes can be stored in tankage, moved to other area pipelines, or continue further downstream on the Platte system. Kinder Morgan’s Double H Pipeline (pink line) originates in Dore, ND, and has multiple access points in the Bakken and Powder River production areas; Double H terminates at Guernsey. True Companies’ Butte Pipeline system (maroon line) also has an array of gathering points in the Bakken and the middle of the Powder River Basin and terminates at the Guernsey tank farm. [The Rocky Mountain Pipeline (blue line) helps deliver Powder River crude and also provides access to Salt Lake City.]