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Alaska, North Dakota Energy Competition Heats Up

State officials and industry stakeholders from the nation's No. 2 and No. 3 oil producing states, North Dakota and Alaska, are stirring the pot of competition, speculating that Bakken supplies may soon be edging out Alaskan crude from West Coast refineries, particularly Tesoro Corp.'s facility at Anacortes, WA.

With his state having been surpassed earlier this year as the second largest oil producing state by North Dakota, Alaska Gov. Sean Parnell at an interstate industry conference earlier this month in Vancouver, BC, talked about how Alaska, which has been steadily declining in production for more than a decade, wants to "stem the decline."

Whether more North Dakota Bakken crude delivered overland or Alaskan supplies delivered by tanker end up in Washington's refineries is still problematic. Some analysts in both states have indicated publicly that the Bakken prices are low enough to support transport to the West Coast, although they note that a new pipeline from North Dakota to Washington state would be a most likely way to make that happen.

Nonetheless, increased rail capacity is being developed, and rail deliveries can reach Tesoro's Washington refinery where Alaska North Slope supplies are now processed. Separately, Musket Corp. recently said it had finished its rail expansion project in the Bakken, increasing total takeaway capacity to 60,000 b/d, and Tesoro and Phillips 66 also have invested in expanded rail shipping capacity.

"The [Bakken] oil can hit all markets in the United States and Canada wherever it is needed most," a Musket spokesperson said earlier in June.

While competition between the two states, which combined still produce less than half of Texas' average daily oil production, is healthy, the rankings are where North Dakota is focused, according to Gov. Jack Dalrymple. More important is improving the state's production steadily over time to help the United States reduce its dependency on foreign oil. Dalrymple recently called for a boom in pipeline construction in his state to fill the growing gap between production and takeaway capacity via pipeline (see Shale Daily, June 18).

At the recent Interstate Oil and Gas Compact Commission meetings in Vancouver, Alaska's Parnell congratulated North Dakota on its production growth, but also noted that his state intends to regain its former ranking as the second biggest producer next to Texas.

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