Dakota Access Proving Its Value to North Dakota

It’s been two and a half years since the Dakota Access Pipeline was placed into service and the benefits of the $3.8 billion project continue to prove its value to North Dakota.

The pipeline, which connects the Bakken oil patch to the U.S. Gulf Coast, has substantially lowered transportation costs for producers and made Bakken oil more competitive with other producing regions like West Texas’ Permian Basin. Moving Bakken oil by train cost producers as much as $25 a barrel, while sending it through the Dakota Access Pipeline is estimated to be below $10 a barrel, according to Lynn Helms, director of the North Dakota Department of Mineral Resources.

The pipeline was a “game-changer” for Bakken producers, wrote RBN Energy, “it eliminated [takeaway] constraints overnight, slashed the need for crude-by-rail, and significantly increased the prices Bakken producers receive for their barrels.”

Production – not surprisingly – has increased nearly 40 percent since the pipeline came online. In its most recent update, the state reported that production had reached a new all-time high of 1.44 million barrels per day in July.

Surging production has been a boon for North Dakota’s economy. As of August, the state had a 2.4 percent unemployment rate – one of the lowest in the nation – and nearly 14,000 job openings, according to Job Service North Dakota.

Meanwhile, the pipeline has also amounted to a windfall for state coffers. Oil extraction and production taxes have increased an estimated $140 million each two-year budget cycle as a result of the Dakota Access Pipeline. Oil-related tax revenues provide critical funding to key state priorities, including education, infrastructure, property tax relief, and wildlife conservation.

This contribution does not include the estimated $10 million in annual property taxes paid by Dakota Access to counties traversed by the pipeline. These revenues are “going to benefit schools and counties and more valuation means lower property tax bills for everyone,” said Rauschenberger.

For North Dakota, the Dakota Access Pipeline has become the gift that keeps on giving. With Bakken production continuing to set new records, the pipeline is quickly reaching its capacity, potentially forcing producers to revert to more expensive railcars. To head off these concerns, Dakota Access has proposed a plan to nearly double the pipeline’s capacity with the addition of new pumping stations. In expanding access to safe, low-cost shipping, this expansion promises a wealth of new opportunities for the nation’s No. 2 oil producing state.