Under Pressure - Will a New Washington State Law Hurt Bakken Crude Oil Producers?

Refineries in Washington state have been reliable buyers of Bakken-sourced crude oil during the Shale Era, receiving an average of about 145 Mb/d — all of it by rail — over the past two-plus years. But a newly approved Washington law slashing the allowable vapor pressure limit for crude being unloaded from rail tank cars could hinder future growth in crude-by-rail shipments from North Dakota to the Evergreen State, or force Bakken producers to remove more butane and other “light ends” from the crude oil they rail west. It’s such a big deal that the state of North Dakota has indicated it will file suit to kill the new law. Today, we discuss Washington’s new law and its potential effects on Bakken crude oil producers.

Besides long borders with Canada, the states of Washington and North Dakota don’t have a heck of a lot in common. Washington is known for its high technology (Boeing, Microsoft and Amazon) and coffee (Starbucks, and Seattle has one of the highest coffee-shops-per-capita ratios of any city), while North Dakota’s claims to fame are its wheat fields, “Fargo” (the movie, not the city) and, yes, the Bakken — one of the nation’s largest oil and gas producing areas. Still, there’s been a consistent link between the two states in recent years: Since the mid-2010s, Washington’s refining industry (combined capacity, about 660 Mb/d) has been counting on Bakken crude for more than one-quarter of its needs. As we said in The End of the Line, until the Shale Era, Washington’s five refineries (red dots in Figure 1) relied primarily on Alaska North Slope (ANS) crude oil shipped down from Valdez, AK, as well as waterborne imports, and piped-in crude from Western Canada. The Western Canadian crude is sent from Edmonton, AB, via the Trans Mountain Pipeline (hot-pink line) and the connecting Puget Sound Pipeline (green line) to four refineries in the Puget Sound area.

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