Enbridge — the Canadian company responsible for the worst onshore oil spill in American history when a pipe near Kalamazoo, Mich., ruptured in 2010 — is suffering from oil companies’ newfound fondness for rail.
From Bloomberg:
Enbridge Inc.’s North Dakota pipeline system has been underused for the past three months as railroads move more oil out of the Bakken shale play, a refining company told U.S. regulators. …
Railways have emerged as a competitor to pipelines as production from shale fields has grown faster than pipeline space. While rail is typically more expensive than pipelines, railcars can reach markets that pipelines don’t, yielding higher prices for producers.
How big is the capacity difference?
The largest oil rail-car shipper in the Bakken is Burlington Northern Santa Fe LLC, owned by Warren Buffett’s Berkshire Hathaway Inc. The company plans to boost its crude-oil shipments by 40 percent to 700,000 barrels a day by the end of this year, Chief Executive Matt Rose told Bloomberg in a phone interview this month.
Enbridge’s North Dakota system can transport 210,000 barrels a day from Minot to Clearbrook, Minnesota, according to the company’s website.
That’s a difference of half a million barrels. Even if Enbridge’s plans to expand its pipeline system go through, it won’t be enough to meet demand.
A possible other factor: I read somewhere that Enbridge was responsible for the largest onshore oil spill in American history. One of the primary considerations of oil companies when deciding how to ship their oil is almost certainly confidence that the oil will get where it’s supposed to go, and not end up in a river somewhere. It is hard to sell river oil, Enbridge! You should write that down.
