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Crude Rail Buzz Continues to Pick Up in North Dakota

As industry players continue to expand their ability to move North Dakota's Bakken crude oil via rail, state officials on Monday were making final plans for a public hearing and eventual rulemaking regarding crude-by-rail shipments.

The major crude gathering system operator in North Dakota said that new pipeline links to a major crude rail terminal will be completed by the end of October, and Royal Dutch Shell moved ahead with rail terminal facilities for handling Bakken crude near its state of Washington refinery on Puget Sound.

On Friday, North Dakota's top oil/gas regulator, Lynn Helms, director of the Department of Mineral Resources, said he hoped to establish a hearing date for the Industrial Commission to look at the crude-by-rail state responsibilities prior to establishing draft rules for the state's part of regulating oil rail shipments, which are primarily overseen by the federal government.

The U.S. Department of Transportation's Pipeline Hazardous Materials and Safety Administration (PHMSA) regulates tracks, train routes and speeds involved in crude-by-rail shipments, rail tank car specifications and funding for training of emergency responders.

PHMSA share the latter training responsibilities with states, so Helms indicated North Dakota's funding programs for training emergency personnel will be one of the topics tackled in the upcoming public hearing. The only major one -- a state-only jurisdiction -- is measuring, monitoring and ensuring the quality of the Bakken crude supplies shipped via train.

"That's what we hope to accomplish with the public hearing and subsequent rules -- to make sure that the crude oil content going into rail cars is what everyone expects [from Bakken crude]," Helms told news media on Friday, reporting more increased oil and natural gas production in the state.

In response to a specific question, Helms said that most of the oil/gas industry in North Dakota wants the close scrutiny of the Bakken crude supplies' content before shipping. "The majority of the operators whose big production is Bakken crude look forward to Bakken crude becoming a name brand, just like West Texas Intermediate does, so they will get a premium price when the oil meets all the right specifications," he said.

Going into the upcoming hearing state officials have PHMSA data on Bakken crude's characteristics, along with the North Dakota Petroleum Council-backed study by North Dakota-based Turner, Mason & Co. that showed that Bakken crude is consistent throughout the basin with only "minor geographic variability" in gravity (see Shale DailyMay 21).

Bakken crude continues to be sought after as evidenced by Dakota Plains Holdings Inc. and Hiland Crude LLC on Monday announcing an interconnection agreement that will allow an added 15,000 b/d of Bakken crude to get to the Dakota Plains' Pioneer Rail Terminal in New Town, ND. Hiland operates the state's largest crude gathering system.

Officials for both companies indicated the capacity for oil deliveries to the Pioneer terminal could eventually grow to 60,000 b/d.

Meanwhile Shell has indicated it will not have to undergo a long environmental review process for its plans in Skagit County, WA, to move up to 60,000 b/d of Bakken crude to its 145,000 b/d refinery that is adjacent to Tesoro Corp.'s 120,000 b/d Anacortes facility that increased its rail shipments by 50,000 b/d two years ago.

Without the need for a full-blown environmental impact review, Shell has indicated that it expanded rail handling facility should be operational sometime early next year.

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