Editor’s note: This is part four of a series of stories about a renewed interest in the oil located in several counties West River and the impact this will have on Northwestern and North Central South Dakota.)
The passionate anti-pipeline demonstrations against the Dakota Access Pipeline (DAPL) in 2017 became a worldwide news event. People from all over the world joined the Standing Rock Sioux’s fight against the project with the demonstration growing faster and larger than anyone would have imagined, through the use of social media. The protests continued for seven months and 22 days. According to Morton County authorities 709 protesters were arrested during that time. For a while in 2017, the national media paid close attention to what was happening near Cannon Ball, N.D. on the Standing Rock Reservation.
The protest failed to stop the construction of the pipeline and when Donald Trump became president he cleared the way for the completion of the project, although the protest has kept the DAPL on the national radar.
Energy Transfer Partners built the $3.8 billion project to send crude oil from the Bakken oil fields, 200,000 square miles of the Williston Basin in Montana, North Dakota, Saskatchewan and Manitoba, to Illinois. The pipeline route begins in the shale oil fields in northwest North Dakota and travels in a more or less straight-line southeast, through South Dakota and Iowa, to an oil tank farm near Patoka, Ill. The pipeline is planned to carry 500,000 barrels per day of crude oil based on contractual commitments. The capacity may be increased up to 570,000 barrels per day, according to what happens in the oil industry.
When on Jan. 24, 2017, President Donald Trump signed an executive order to advance the construction of the pipeline. It expedited the environmental review that Trump described as “an incredibly cumbersome, long, horrible permitting process.”
The president’s push to be the energy dominant nation of the world, on the back of the DAPL opening, has had an impact on the oil industry. According to a story in the Houston Chronicle printed in February 2016, the need for the DAPL was falling along with the production of oil from the Bakken oil field. The lower oil production levels coupled with crude oil coming from West Texas would mean there would be less demand for the pipeline.
But, Harold Hamm, CEO of Continental Resources, Oklahoma’s fourth largest public company, said with the lifting of the 1977 crude oil export ban, the sale of North Dakota oil to China would be a game changer to the industry.
Hamm is best known for pioneering the development of the large shale oil resources of the Bakken formation. In 2012, then presidential candidate Mitt Romney named Hamm his energy advisor. Hamm later held the same position for presidential candidate Donald Trump.
As of late November 2017, according to an oil industry’s Midstream Business, 6 million barrels per day of crude and petroleum products are now being exported.
Hamm has predicted that in the near future, 30 percent of U.S. oil production could beU.S. oil production could be going to foreign countries. He said the U.S. is a dependable partner for other nations. The U.S. can provide the oil, has the banks, the rule of law and the courts because international contracts matter.
The DAPL has been operating since June 1, moving oil to Illinois. From there it is shipped to the Gulf Coast and the lucrative markets abroad. It has the capacity to move half of the oil produced daily in North Dakota, the nation’s second-leading producer behind Texas. Bakken barrels are attractive to refiners because they produce more diesel, something a Chinese refiner would find more appealing.
United States crude oil exports are soaring this year, and China is its single largest buyer for sales shipped by tanker, according to the Houston Chronicle.
The United States has become a major exporter with the rapid growth of U.S. light, sweet shale crude production coupled with a U.S. refining system that operates most economically with a heavier slate. Once restrictions on U.S. exports were lifted in late 2015, exports increased rapidly to destinations around the world.
When the shale fracking boom started a decade ago, North Dakota didn’t have much in the way of pipelines to get oil to market. Back in 2014 when rail reached its peak, roughly 11 oil trains left North Dakota each day. One of the major factors in the importance of the DAPL is that Bakken oil is not being shipped by rail, which was very expensive. Shipping by rail added as much as $12 per barrel in transportation costs, according to Hamm. He told Midstream Business that this nation needed infrastructure and now it is available with the addition of the DAPL. With the oil moving through pipelines from the Bakken fields oil companies can make money when oil is below $50 per barrel, according to Hamm.
North Dakota continues to produce over 1 million barrels of oil per day, according to the state’s Department of Mineral Resources, shipping it out through the pipeline system. As the DAPL builds up to carry 570,000 barrels per day to Illinois, will there be enough oil to keep the pipeline filled and flowing to capacity?
This is where Western South Dakota comes in. With oil at $50 a barrel the less expensive pumping costs of the rigs built for shallow, light crude would widen the profit margin. The pipeline is here. Getting the oil from fields in Western South Dakota to the DAPL would be faster, less expensive and more profitable for oil companies. It is a win-win for big oil.
The oil is here, according to geological and anecdotal evidence, including oil showing up in water wells in Corson and Dewey counties.
Another reason western South Dakota is desirable to big oil is the contracts to obtain mineral rights on reservation land is less complicated for oil companies because they have only one agency, the BIA, to deal with for tribal owned lands. Standing Rock tribal government has already made moves to consolidate land under its control with the buy-back programs. With that control, the tribe can sign leases with oil companies and the tribal members have little say.
There is a difference between the percentage of mineral royalties paid to Native Americans and those paid to non-native land owners, according to documents obtained from an individual working in the oil industry.
This aspect of the importance of the oil in western South Dakota will be explored in the next part of this series.