Northern Border Pipeline

The Bakken Shale needs more natural gas takeaway capacity, North Dakota wants to encourage more in-state consumption of Bakken-sourced gas, and two entities — WBI Energy and a combo of Intensity Infrastructure Partners and Rainbow Energy Center — have each proposed similar (but not identical) cross-state pipelines that would help achieve those aims. But, assuming that two new pipelines would be overkill, which of the two proposals is the more likely to advance to a final investment decision (FID), construction and operation? In today’s RBN blog, we discuss the two competitors and the state of North Dakota’s impending decision on which pipeline project to support.

Crude oil prices and, just as important, the availability of pipeline takeaway capacity, have supported continued production growth in the Bakken. Good news, right? Except, that’s led to sharply increased output of associated gas in a region that for years has been playing catch-up on the gas processing capacity front. As a result, gas-flaring volumes have soared this year, putting pressure on crude-focused producers to slow down their drilling-and-completion activity. Things are finally getting better, though — 670 MMcf/d of processing capacity has come online in western North Dakota since late July, and another 200 MMcf/d will start up next month. That gives Bakken producers some room to grow but also poses a problem for Western Canadian producers, namely that more pipeline gas out of the Bakken means less room for Alberta and British Columbia gas on pipes to the Midwest. Today, we begin a short blog series on incremental Bakken gas processing capacity and its impacts on producers — and natural gas prices — up in Canada.

The battle between Bakken and Western Canadian natural gas supplies for the Chicago market seems to be advancing toward a final showdown of sorts. Associated gas production from the crude-focused Bakken has been rising sharply, but capacity on the Bakken’s two gas takeaway pipelines — Northern Border and Alliance, also utilized by Western Canadian Sedimentary Basin (WCSB) supplies — has been maxed out for a few years now. The result is that Bakken gas is increasingly encroaching on — and pushing back — imports from the WCSB. Bakken gas flows already overtook Canadian gas receipts on Northern Border a year ago. Since then, the gas-on-gas competition and the resulting pipeline constraints have escalated, and things are likely to get worse. Today, we break down the forces at play in the competition for market access.