The demonized Dakota Access Pipeline will go into service soon, likely early this week, and will begin delivering 470,000 barrels of Bakken crude oil every day to a distribution hub, providing better access to important markets. In all the pandemonium over the pipeline, with months of noisy protests, the importance of the pipeline to North Dakota has been overshadowed.
The Dakota Access Pipeline will make North Dakota’s roads and railroad crossings safer, a big plus for public safety. It has the capacity to eliminate 500 to 740 rail cars or more than 250 trucks each day.
The $3.8 billion pipeline will bring as much as $100 million a year in additional tax revenue to North Dakota, a welcome infusion as the state struggles with low prices for energy and farm commodities. It will transform the economics of oil production by reducing transportation costs an estimated $3 a barrel. By increasing the competition among existing pipelines, it will help to further alleviate transportation costs. High transportation costs have long dogged Bakken producers.
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A new analysis by The Associated Press finds that North Dakota will gain over $110 million annually in tax revenue after oil begins flowing through the Dakota Access Pipeline. The $3.8 billion pipeline, which is set to come online later this month, will provide a safer, cost efficient avenue for Bakken drillers to ship product to key refining markets in Illinois and the Gulf Coast.
North Dakota in the past decade has become the second-biggest oil producer in the United States, behind Texas. But its location in the northern Plains, far from major oil markets, means less profit on each barrel of oil. North Dakota lowers its tax on each barrel to keep its crude competitive with other states.
Much of North Dakota’s oil is shipped by truck or train. The 1,200 Dakota Access pipeline would carry the oil through South Dakota and Iowa to a shipping point in Illinois. It could shave shipping costs by more than $3 a barrel, according to Ron Ness, president of the North Dakota Petroleum Council. State tax officials estimate every dollar saved means about $33.6 million in added tax revenue each year.
In addition to oil tax revenue, the Dakota Access Pipeline also stands to generate upwards of $55 million annually in property taxes, including $10 million in North Dakota. “It’s going to benefit schools and counties and more valuation means lower property tax bills for everybody,” said North Dakota tax commissioner Ryan Rauschenberger.