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Rock the Boat, Don’t Rock the Boat—Crude-by-Water and the Jones Act

Much like the “crude-by-rail” phenomenon, the burgeoning interest in transporting crude oil by tanker or tanker barge to U.S. refineries represents an innovative answer to a simple question: What is the best, most cost-effective way to move growing domestic and Canadian oil production from the wellhead to refineries? Using waterborne transportation to move crude to market requires a comprehensive understanding of the Merchant Marine Act of 1920—better known as the Jones Act—which regulates maritime commerce in U.S. waters and between U.S. ports. RBN’s latest Drill-Down Report provides a thorough review of the law and its impact on crude oil markets.  In today’s blog we examine the highlights of – Rock the Boat, Don’t Rock the Boat— Impact of the Jones Act on U.S. Crude Oil Markets.

The Night They Drove Old Dakota Express Down – Crude Pipeline Wars in the Bakken – Part 2

In the latter half of 2013 two very similar pipeline projects dueled it out with shippers in North Dakota to secure commitments to move crude out of the Bakken into the Midwest and points south. After addressing some concerns raised by federal regulators about tariff structure, the Enbridge and Marathon Petroleum Company Sandpiper proposal appears to be on track for approval. The rival Koch Dakota Express project was abruptly cancelled in January of this year. In pure capacity terms both these pipelines were “nice to have” not “need to have”. Today we complete our analysis of the fate of these competing projects.

The Night They Drove Old Dakota Express Down – Crude Pipeline Wars in the Bakken

Since the start of 2014 two competing pipeline projects designed to provide crude producers in North Dakota with additional takeaway capacity have met with very different fates. The first proposal – the Sandpiper project launched by Enbridge in late 2012 has completed a successful Open Season and petitioned federal regulators for approval of its tariff structure. Sponsor Koch Industries quietly canceled the second competing proposal – the Dakota Express pipeline first proposed in July 2013. Looking at rail and pipeline takeaway capacity versus crude production in North Dakota, both these pipelines are “nice to have” not “need to have”. Today we begin a two part analysis of these competing projects.

Could New Tank Car Rules Derail the Bakken Crude Boom?

The recent tragic spate of four rail accidents involving crude-by-rail, three of them carrying crude from North Dakota, have increased pressure for regulation of rail tank car standards. The railroad industry- through the Association of American Railroads (AAR) - proposed improved safety standards in 2011 for tank cars carrying hazardous materials including crude oil. These standards have been adopted by US tank car builders and were mandated this week by the Canadian Government for new tank car construction. If the new standards applied to all existing tank cars then at least 75,000 cars manufactured before 2011 would require retrofitting. Today we examine the impact hastily implemented new regulatory requirements might have on Bakken crude oil takeaway.

Charge of the Light Brigade – Turner Mason Assesses the Onslaught of Light Sweet Crudes

According to a new study just released by Turner Mason titled “North American Crude and Condensate Outlook” (NACCO), U.S. crude oil production could nearly double between early 2012 and 2022.  At least that is the Study’s “high case” production scenario.  That is very good news for U.S. refiners.  Perhaps less good is the fact that 80% of the volume growth is light sweet crude, super-light crude, or even lighter condensate.  How will refiners digest all of this light crude and what impact will the growing supply have on price differentials?  What will the surge of light crude mean for waterborne and Canadian heavy crude imports?  Today we start a two-blog series that will examine some of the findings of TM&C’s  “2013 North American Crude and Condensate Outlook” (NACCO).

Last Train to Bakkenville? Will Narrowing Price Differentials Kill the Crude-by-Rail Boom?

Narrowing price differentials between inland crudes tied to West Texas Intermediate (WTI) and coastal crudes tied to Brent are resulting in a move away from rail shipments and back towards pipelines by producers in North Dakota. The switch away from rail is already having an impact on the lease rates for rail tank cars. Which could call into question the huge backlog of orders for new tank cars. Today we ponder the possibility of a bust in crude-by-rail shipments.

To the Pipelines, Robin! – Bakken Producers Come off the Rails as Price Differentials Narrow

Data from Genscape showing rail terminal loading volumes in North Dakota and pipeline receipts into the Enbridge North Dakota pipeline suggest that shippers are switching barrels from rail back to pipeline this month (May 2013). The apparent switching follows a narrowing of crude price differentials between coastal destinations and the Midwest from $17/Bbl in April to less than $9/Bbl last week.  Today we ask whether narrowing differentials are driving a reduction in crude by rail shipments.

Smells Like Rotten Eggs – The Bakken Crude Hydrogen Sulfide Challenge

Recently there has been a spate of pipeline tariff filings to the Federal Energy Regulatory Commission concerning crude oil quality specifications for Bakken crude in North Dakota.  While the immediate disagreement between pipeline company Enbridge and shipper Plains Marketing appears to have been resolved, it has highlighted an issue which has not received much attention until now. Today we detail the concerns.

Too Wrong for Too Long? How 2011 Bakken Crude Forecasts Compare to Today

Two years ago in June 2011 Bentek forecast that crude production in the Williston Basin would grow to 900 Mb/d by 2016. Today’s production in North Dakota and Montana is already at that level. What we are learning about US shale production is that it has been growing at twice the rate of every forecast out there.   Today we begin a new series looking at what we are learning about the accelerating pace of North American shale production.

Crude Loves Rock’n’Rail – 154 Terminals Operating – BNSF the Dominant Oil Transport Railroad

During the past two years the US domestic crude transportation business has been revitalized by a huge increase in shipments of crude oil by rail. In the Bakken region alone over 600 Mb/d of crude is shipped to market by rail. The number of rail terminals in producing regions loading crude oil onto rail tank cars has increased from a handful at the end of 2011 to 88 and growing today. A further 66 crude oil unloading terminals have been built or are under construction. Today we summarize the crude oil terminal build out by region and by railroad.