U.S. Governors Seek "Onramp" to Pipeline for Booming Bakken Shale Output

Governors of Montana and North Dakota met with TransCanada Corp. officials this week in an effort to convince the builder of a nearly 2,000-mile pipeline from Alberta to the Gulf Coast to tap into the burgeoning oil production from the Bakken Shale in their states.

Govs. Brian Schweitzer of Montana and John Hoeven of North Dakota enlisted the help of domestic oil producers drilling in the Bakken Shale to get TransCanada to consider an “onramp” to the Keystone XL pipeline as it passes through Montana near the North Dakota border.

The Bakken Shale, an oil-bearing formation that spreads under the two states as well as Canada’s province of Saskatchewan, contains an estimated 4.3 billion barrels of crude oil reserves. Producers have encountered transportation bottlenecks due to insufficient pipeline capacity.

The pipeline expansion comes in response to booming oil production in North America as new technologies make previously unproductive reserves economically accessible. The Keystone XL pipeline is designed to transport production of the estimated 1.7 trillion barrels of oil in Alberta’s oil sands to refineries on the U.S. Gulf Coast.

The two U.S. governors have encountered resistance from TransCanada in their efforts to tap into the pipeline and Schweitzer has threatened to hold up construction of the pipeline in its 280-mile passage through Montana. The meeting in Billings on Wednesday was to help bring the parties closer to an agreement.

The Bakken Shale, which lies two miles deep in eastern Montana and western North Dakota, was discovered in the 1950s, but has become more productive only through the techniques of hydraulic fracturing and horizontal drilling pioneered in the recovery of shale gas in Texas’ Barnett Shale and other formations. The new techniques have enabled North Dakota to double oil production over the past three years to 80 million barrels in 2009.

TransCanada is investing $12 billion to build the pipeline and to pump up to 1.1 million barrels of oil a day from the Athabasca oil sands in northeastern Alberta to U.S. refineries. The expansion project, which will link in to the existing Keystone pipeline is due to be completed in 2012.

North Dakota is also looking at a project with Enbridge Pipeline to expand capacity northward toward Berthold, N.D., by 115,000 barrels a day. The project could cost up to $300 million.

By. Darrell Delamaide