Hess, Marathon, and Whiting Face Fines for Bakken Oil Classifications

Oil Rail Car Image

Hess, Marthon Oil, and Whiting Petroleum all face potential fines from the Pipeline and Hazardous Materials Safety Administration (PHMSA). The fines are being pursued as a result of PHMSA's investigation into the transportation of Bakken oil.

Oil taken from cargo tanks en route to rail facilities in the region was not properly classified. PHMSA took 18 samples from cargo tanks, storage tanks, and pipelines. In all, 11 of the 18 samples were not classified properly.

Hess faces fines of more than $50,000, Marathon Oil faces ~$30,000 in fines, and Whiting faces $12,000 in fines.

Also read:DOT's Arm Issues Bakken Sahle Oil Shipping Safety Alert

“Transportation has an important role to play in helping meet our country’s energy needs, thanks to the increased production of crude oil, but our top priority is ensuring that it is transported safely,” said Transportation Secretary Anthony Foxx. “The fines we are proposing today should send a message to everyone involved in the shipment of crude oil: You must test and classify this material properly if you want to use our transportation system to ship it.”

PHMSA requires the use of nine hazardous materials classifications. Proper classification ensures the material is handled properly and that emergency responders can accurately assess accidents.

As a result of the findings, PHMSA has expanded the scope of the testing to include testing for proper vapor pressure characterizations, corrosivity, hydrogen sulfide, and concentration of dissolved gases.

http://phmsa.dot.gov/

North Dakota Oil Production Up 400% Since 2008

ND Oil Production Chart

It's no secret North Dakota oil production has been on an amazing growth trajectory. Recent figures show the state set a new production record in September of 2012 with more than 728,000 b/d of oil production. The state is only second to Texas and the two look to be separating themselves from the pack. Alaska and California rank third and fourth in oil production, but neither has a growth engine like the Bakken.

Production in ND has more than doubled in the past two years. Operators have hit their stride in terms of the development, the play has proven to be larger than most expected (multiple horizons and larger area), and pipeline projects and rail agreements are relieving the midstream problems that have plagued the area.

In the most recent infrastructure development, read more about Enbridge's New Sandpiper Project

U.S. Production Reflects ND's Growth

North Dakota is not alone. Production declines have reversed across the country. The U.S. produced almost 6.5 million b/d in September, the highest level in almost 15 years. You have to go back to September 1997 to find comparable figures. The low was September 2008 when the U.S. produced just under 4 million b/d. Production is up 62% since. Where it goes from here is largely dependent on commodity prices. The resource is there (e.g. Permian, Eagle Ford, Bakken, Offshore), but lingering risk and subsequent questions will shift to economics if oil prices were to fall considerably.