Oil Battle Royal

Oil Battle Royal

Northern Minnesota is a main highway for transporting crude oil. Does the state benefit?

Minnesota an oil state? In a way, it is. Not by drilling petroleum, but by transporting it from the highly productive oil fields of North Dakota—now the number-two oil-producing state in the country—and central Canada to the Calumet refinery in Superior, Wisconsin, the Flint Hills refinery in Rosemount, and other oil-to-gasoline facilities. And the vast majority of that transport is occurring on the railroad rights of way as well as in the pipelines that cross northern Minnesota. Both the railroads and the pipelines are battling to transport more of the expanding production in North Dakota and Canada.

northernexp_f01.jpgRight now, rail is ahead in the race. According to the North Dakota Pipeline Authority, more than two-thirds of the oil pumped out of the state is transported by rail. The chief carriers are BNSF, Canadian Pacific, and CN. (BNSF alone transports more than half of all crude produced in North Dakota.) Though numbers are unavailable, some of this petroleum goes through Minnesota.

But the pipeline side is hoping to deliver much more than it is doing now, particularly with North Dakota supply increasing beyond current pipe capacity. Two new pipelines for transporting crude have been proposed. One, called the Sandpiper, is a $2.2 billion project that would run from North Dakota to Superior. Houston-based Enbridge Energy Partners, which has proposed the Sandpiper, has a pipeline already running through Minnesota: the Alberta Clipper, which takes crude from the oil sands of central Canada to the Enbridge terminal in Clearbrook, Minnesota (about an hour east of Crookston) as well as to Superior. Enbridge has plans to boost the capacity of the Clipper; the plans are under federal environmental review.

The other, the $650 million High Prairie pipeline, would take North Dakota crude to Clearbrook. Texas-based Saddle Brook Pipeline, which wants to build the High Prairie pipe, has been stymied by Enbridge’s refusal to connect the pipeline to its Clearbrook complex. Saddle Brook and Enbridge are battling over the issue in court.

Shipping petroleum by pipe can cost about half of what rail does. Rail’s main argument is that it’s more flexible—it can carry oil not only to Superior but to refineries all over the United States. What’s more, environmental concerns have held up approval of new pipelines. Piping crude is no simple matter: Some types of crude can be very thick and need to be cut with lighter grades to be able to move efficiently.

And neither rail or pipelines has a spotless record on oil spills. In late March, a Canadian Pacific train with a mixed load of crude oil and other cargo derailed near Parkers Prairie, about 20 miles north of Alexandria. No one was hurt, but one tank car disgorged 20,000 gallons of crude. And in early May, Enbridge reported two small leaks in the North Dakota section of its pipeline, which it said were quickly repaired. Three years earlier, in July 2010, an Enbridge pipeline ruptured in Michigan, dumping 840,000 gallons of oil.

In the past, several environmental groups have sought to block pipeline expansion in Minnesota. They’ve had no luck. What’s slowing pipeline development now aren’t environmentalist lawsuits but the federal approval process.

Whenever those pipelines may go on line, North Dakota will be unearthing more and more oil over the next few years. According to the North Dakota Pipeline Authority, the state now produces about 11 percent of the country’s supply. In that sense, Minnesota is an important key in the United States’ booming oil economy.

So does the Northland derive much economic benefit as an oil transport powerhouse? The Clearbrook complex employs about 20 people, and Enbridge is a major contributor to local taxes in the area; in 2011, the company paid $27 million in property taxes in Minnesota. As of mid-May, Enbridge had 648 employees and contractors in seven local offices supporting company operations in Duluth and Superior. Numerous other engineers and professionals in the Twin Ports work on pipeline development. Becky Haase, an Enbridge stakeholder relations specialist, says that during Enbridge’s last major construction project in Minnesota (2009 and 2010) more than 3,000 workers were employed. Overall, though, the Northland is playing largely a secondary role in the petroleum boom.

Minnesota could produce more home-grown energy, however. International Falls, for instance, is looking into developing a facility to use biomass to generate energy. That would put wood pulp and other byproducts of timber production to good use. The timber industry has been suffering, with wood-products and paper plants either laying off workers or closing completely. International Falls is home to a long-established Boise Paper plant that laid off nearly 300 workers in early May.

Thanks largely to North Dakota, oil will remain the king of energy in this country for years to come. Still, it’s worth noting that despite Northland Minnesota schlepping all that petroleum, gasoline prices in Duluth were 70 cents above the national average as of May 20, and Minnesota’s prices were the highest of all states in the Lower 48.

Gene Rebeck is TCB’s northern Minnesota correspondent.

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