Mar
06
2017

Pipeline Benefits Consumers, North Dakota

The Dakota Access Pipeline remains a highly visible, highly controversial energy infrastructure project. As news reports convey, the pipeline project has been hotly contested by environmental groups and Native American tribes who live near the area where it is being built. Meanwhile, the State of North Dakota has supported the pipeline’s construction, believing it to be a safe means of transporting crude oil and a source of massive potential revenue for the state.

Helping to reinforce the state’s position, a new report from the Associated Press has confirmed that the state stands to gain $110 million per year in tax revenue from the pipeline. Keep in mind that the state’s General Fund is about $6 billion.

The pipeline, built by Dallas-based Energy Transfer Partners, will carry oil more than 1,000 miles to a shipping point in Illinois and will be in service in the coming days. This is good news for the nation’s energy infrastructure, as drillers have needed a cheaper means of transporting oil. The State of North Dakota, suffering through budget cuts due to declining tax revenues, could also use a shot in the arm from the pipeline project.

“Every dollar they get extra is good for the state as well,” state tax commissioner Ryan Rauschenberger said recently.

Over the past decade, North Dakota has become the second biggest producer of oil in the United States, with only Texas producing more. Its location is far from major oil markets, though, making transportation expensive and lowering profits from the oil’s extraction. This restricted transportation environment has forced the state to lower its taxes on each barrel of oil.

Today, North Dakota’s oil is shipped by either truck or train. Using the Dakota Access Pipeline to move oil instead would save $3 per barrel on shipping costs according to Ron Ness, president of the North Dakota Petroleum Council. State tax officials estimate every dollar per barrel saved on shipping costs means about $33.6 million in added tax revenue each year.

“Every dollar back is a win for producers, the state and mineral owners,” said Ness, who called the Dakota Access pipeline the most important infrastructure project in North Dakota since the interstate highway system.

The pipeline will link to existing pipelines that serve Gulf Coast refineries, which will pay a premium price for high quality oil from North Dakota.

Additionally, the pipeline is expected to generate $55 million in property taxes each year in the four states that it crosses, including $10 million in North Dakota that will provide much-needed revenue to the state’s rural areas. Adding the property taxes to the $100 million in oil taxes generates the $110 million in additional revenue for North Dakota.

The U.S. needs more energy infrastructure to make sure that domestic energy sources get to market. Specifically, we need more pipelines that can bring raw product from extraction sites to refineries. Having those pipelines in place helps reinforce our nation’s energy independence and security. As energy consumers, we all benefit when energy resources get to market more quickly with fewer costs.