North Dakota has a good thing going with oil, but in the business world it’s not enough to simply have a good product. Getting the best possible price for that product is important, too.

Lynn Helms, director of the North Dakota Industrial Commission Department of Mineral Resources, explained that oil from North Dakota gets less money per barrel than oil from some other states. This is known as a discount, and it means that North Dakota oil producers make less of a profit than their counterparts in other states.

“We get a discount per barrel in North Dakota because our refinery and pipeline capacity is less than our production,” Helms said.

Helms said transportation costs are high because the major markets for crude oil are relatively far away. That cost is increased when pipelines are full and trucks and trains are used to haul the oil instead.

The extra transportation costs account for about a 10 percent discount on the oil per barrel, Helms said. Getting oil into pipelines that are already full could take another 10 percent deduct.

While government incentives and programs can help, energy businesses are taking the initiative to deal with the problem directly.

“We just need more pipeline capacity,” said Jeff Herman, regional land manager at Petro-Hunt, a Texasbased company that trades oil from both North Dakota and Texas.

Ron Ness, president of the North Dakota Petroleum Council said that the industry is starting to see a growing amount of movement toward building new pipelines to ease the current and future oil transportation bottlenecks.

Both the Bridger Pipeline and Belle Fourche Pipeline continue to expand in North Dakota, said Tad True, vice president of Bridger/Belle Fourche Pipelines.

True said the Parshall Gathering System in Mountrail County allows oil from the northwest part of North Dakota to connect to the Enbridge pipeline and flow east to a major market in Clearbrook, Minn. There are already 100 miles of pipeline in operation at the system, with another 100 miles to be finished within the next nine months.

“It’s a huge project and I think one of the issues it’s going to solve besides an economic form of transportation is the ability to get production off the lease,” True said, explaining that there haven’t been enough available trucks to haul oil that wouldn’t fit into the pipelines during the past six months.

Bridger Pipeline recently finished an expansion of its partially-owned Butte pipeline, as well. Capacity increased from 92,000 bpd in August to 115,000 bpd in January and provides surplus capacity to the Williston Basin. True said the pipeline currently has space for an additional 20,000- 22,000 bpd.

“That’s helped out quite a bit,” he said. “It’s taken the pipeline capacity out of the discount formula” for that portion of the state, which he said positively affects oil prices across the state.

Belle Fourche Pipeline has expanded to Alexander, North Dakota. A 16-mile pipeline that connects the Belle Fourche gathering system with the Bridger gathering system has also been completed. True said these two expansions allow oil from the southwest corner of North Dakota to flow both east and west to major markets rather than mostly to the east as it has in the past.

Larry Springer, a spokesperson for the Enbridge pipeline, said expansions are happening there, as well. The company is finishing phase six of a North Dakota expansion that he said should be in operation by early 2010. “That will add 51,000 barrels per day of capacity,” he said. The expansion is on schedule and should increase the total capacity of the pipeline up to 161,000 bpd.

Rumors flow about what could happen when phase six is finished. Among them is the idea that part of an Enbridge pipeline that currently isn’t being used could be reversed, taking North Dakota oil north into Canada. Springer emphasized that the company is looking at all options.

“Nothing has been decided,” he said. “It’s all in discussion right now.”

One thing being discussed among all the industry players is whether or not the pipeline expansions are helping to ease the discounts on North Dakota oil.

“I think it has in the respect that the discounts we were seeing two and three years ago we haven’t seen since that time.” True said.

Justin Kringstad of the North Dakota Pipeline Authority said the issue of getting oil to market and reducing discounts has been taken up by the industrial commission. They recently asked for a study concerning whether or not it would be feasible to send North Dakota oil through the Keystone and Keystone XL pipelines, jointly owned by TransCanada and ConocoPhillips. The Keystone pipeline will run south through the eastern side of North Dakota.

The Keystone XL will pass near the southwest corner of the state. Both will carry crude oil to major U.S. markets.

Kringstad said that among other things, the study looked at costs for construction, operation, and maintenance of connecting pipelines as well as the return on investment and how long the payback period would be.

Bids for the study opened up in December of last year. The project was awarded jointly to Kadrmas, Lee and Jackson and Rooney Engineering. The findings were scheduled to be presented to the industrial commission on April 21.

Three possible routes running west, east and north were studied. According to the executive summary, a 12-inch diameter pipeline running north to the Keystone pipeline in Canada was the most economically feasible and had the most potential for future expansion. The northern option would also have the ability to connect to Enbridge pipelines in Canada.

Kringstad said once the results of the study were made public, companies could begin looking at whether or not constructing a connecting pipeline would be a good business investment for their company. All three options would take about three years to construct.

“I would say there are at least a handful of people who are interested in the results,” Kringstad said. It’s something to look at. Helms said oil from North Dakota, particularly from the Bakken area is the crude oil of choice.

It’s also a great export product. Investing in pipelines that could help reduce the discounts on North Dakota oil seems to make a lot of sense.

“Anytime we can move crude oil on a pipeline is the most economic route,” Kringstad said. “It would most definitely decrease our discounts.”

Story by GWEN BRISTOL