As energy demand continues to slow, Bakken Shale producers in North Dakota are working to build more tank farms for oil storage as a hedge against the future when prices turn upward.

North Dakota regulator Lynn Helms, who directs the oil and gas division, said during a monthly webinar discussing production statistics that it could be done rather quickly. “Companies are looking at building large tank farms made up mostly of off-the-shelf 400 bbl tanks.”

Helms said one unnamed company is planning to develop 300,000 bbl of storage, and within six weeks have it permitted, constructed and operating. He noted this carries a double benefit for the state’s economy because several manufacturers based in North Dakota produce tanks that can hold 400 bbl.

The North Dakota Industrial Commission keeps track of the storage facilities and related pipelines. Currently, storage capacity is almost full and downstream capacity is nearly full, Helms said. “It looks like it could be full by the month of June, and we have heard proposals from two developers who want to build significant added storage” from 300,000-500,000 bbl.

“These potential developers see opportunities to arbitrage by buying Bakken crude below $20/bbl and in a year’s time turnaround, they sell it for well above that price.”

Operators would have the tank farms built on land they own. One unnamed company that has an oilfield waste treatment plant, which includes excess acreage that could be used for storage, he said.

“This particular proposal is to group the tanks so they can be contained in case of a leak, and we have been asking about their site security,” said Helms.

Among the steps the companies seeking more storage need to complete are: review by the state insurance commissioner, fire marshall and the Department of Environmental Quality.

“The companies have a series of permits they have to go through, along with construction and commissioning,” said Helms. He noted that operators estimated that within four to six weeks, a tank farm could be operating. “It’s possible if they hit the ground running now since our construction season is starting soon.”