Our view: DAPL pays dividends during slump
Bakken oil is flowing freely through the Dakota Access Pipeline, from North Dakota's oilfields to refineries to the south and east. We were reminded of that with President Trump's visit last week to North Dakota, where he nodded in the direction of the pipeline while speaking to supporters at a refinery in Mandan.
Back in February, Trump pushed final federal approval of DAPL, which had been stalled awaiting results of a lawsuit and as protesters grabbed national attention with a months-long occupation where the pipeline was to cross the Missouri River south of Bismarck.
Opponents of DAPL cited environmental concerns, as well as supposed desecration of cultural lands. Trump took office and pushed through the $3.7 billion project.
What has it meant for North Dakota?
Dollars and sense.
First, the dollars. Thanks to the pipeline, oil companies are saving approximately $4 per barrel in transportation fees. Since about 500,000 barrels of oil are transported daily through the pipeline, this translates into a savings of some $700 million a year.
Again, that's with a savings of $4 per barrel. Industry estimates put the savings anywhere from $3 to as much as $10 per barrel, so it could be considerably more.
Now, if oil was selling for $100 per barrel, that savings wouldn't be so notable. But as oil lingers around $45 per barrel, that's a savings of about 9 percent.
It's making quite a difference to North Dakota's energy industry.
Those are the dollars.
Now, the sense: Had DAPL not been approved, it would have put Bakken producers at a continued disadvantage and, thus, would have had big implications for a commodity-driven state that's enduring a commodity slump. Lower revenues also mean lower taxes being paid to the state, as well as fewer workers employed.
Until prices rebound, DAPL is the best hope to revive the state's oil industry, which has endured sharp revenue declines since 2014 when oil was selling for more than $100 per barrel. That 9 percent savings is quite a boon, especially considering half of the state's oil is flowing through the pipeline.
And a bit more sense: DAPL is just one of many pipelines already in the ground in North Dakota and is among the 2 million miles of pipelines that currently carry oil across the United States. It didn't make much sense to keep it from being built when its impact is not unique and when its construction could mean so much to an important state industry.
DAPL is leveling the playing field for North Dakota oil producers, who were handicapped by transportation costs and distance from refineries. Until the price of oil rebounds, DAPL is the best possible news for oil producers and a state that relies heavily on them.