Western Railroad Discussion > Article: "Buffet's railroad beats ONEOK's pipeline"

The recent announcement by ONEOK Partners to not proceed with the Bakken Express Pipeline was apparently a bit shocking to people in both the pipeline and oil industry. See here:

http://seekingalpha.com/article/1042471-bakken-crude-buffett-s-railroad-beats-oneok-s-pipeline?source=yahoo



Allen

It's called competition, and sometimes it produces surprises, although there are some in the highest places (ahem) who fail to understand for whatever reason...including willful ignorance and odd beliefs about who builds things. This news has to to be rattling some cages, as well it should. ONEOK is a sharp operator. If they can't get the commitments they needed, they either didn't sharpen their pencils sufficiently (and uncharacteristically)....or, they have been beaten competitively. At least for now. I'd call this a huge win for rail and BNSF, and a credit to the efforts they have made to win the business. Hope they stay sharp and keep winning it. ONEOK will be back. Count on it. Vigilance is not only the price of liberty, but sustained commercial success. And credit for who really builds it.

No resting on the laurels, guys. You got a win, Keep it. And keep rattling the cages. We love it when you do. And so does Uncle Warren.



Edited 1 time(s). Last edit at 12/08/12 20:30 by ironmtn.

One thing any pipeline builder would have to face is getting the land to build the line. While that may sound easy; it really isn't. Since its not a common carrier it doesn't have rights of imminent domain. The slurry pipeline people found that out 25+ years ago, when they were promoting a Wyoming to Texas slurry pipeline. The other thing is the environmental and NIMBY issues which railroads have to face when they want to build anything.While the chance of a break is probably minimal, the thought of oil leaking out and getting into the ground water tends to raise the ire of environmentalist's.The company will probably be back, but the longer they are delayed ; the more expensive its gets.

Is this the 'famous' pipeline from the political discussions of last year or so?

Sounds like a major demonstration win for the railroads, in that RR's are not inflexible as many may think.

tends to raise the ire of environmentalist's.

Unfortunately, must about everything raises the ire of environmentalists.

TCnR Wrote:
-------------------------------------------------------
> Is this the 'famous' pipeline from the political
> discussions of last year or so?
>
> Sounds like a major demonstration win for the
> railroads, in that RR's are not inflexible as many
> may think.

Different. That was the middle leg of the Keystone XL.

The oil and gas industry in the US is going through a huge amount of turmoil. In the past, somebody would consider building a pipeline. They'd ask around for commitments for volumes over 20 years. You'd get a few companies to commit and sign the agreement.

Now, there are huge differences. More oil and gas being pumped in unusual places. Not being shipped to Cushing or Hugo (the traditional junction points). Very difficult to anticipate where the market will be in 5 years, let alone 20 years.

Lackawanna484 Wrote:
-------------------------------------------------------
> More oil and gas
> being pumped in unusual places. Not being shipped
> to Cushing or Hugo (the traditional junction
> points). Very difficult to anticipate where the
> market will be in 5 years, let alone 20 years.

And therein is what railroads are able to capitalize on.

czephyr17 Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > More oil and gas
> > being pumped in unusual places. Not being
> shipped
> > to Cushing or Hugo (the traditional junction
> > points). Very difficult to anticipate where the
> > market will be in 5 years, let alone 20 years.
>
> And therein is what railroads are able to
> capitalize on.

Yes.

Very few people anticipated the flood of oil from North Dakota in 1990, or the ocean of natural gas now flowing out of Pennsylvania, although both places were known to have energy underground. Add technology like fracking and horizontal drilling, more effective processing of sour and heavy crudes, and the railroads have a shot at locking down a profitable business for a while.

Lackawanna484 Wrote:
-------------------------------------------------------
> czephyr17 Wrote:
> --------------------------------------------------
> -----
> > Lackawanna484 Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > More oil and gas
> > > being pumped in unusual places. Not being
> > shipped
> > > to Cushing or Hugo (the traditional junction
> > > points). Very difficult to anticipate where
> the
> > > market will be in 5 years, let alone 20
> years.
> >
> > And therein is what railroads are able to
> > capitalize on.
>
> Yes.
>
> Very few people anticipated the flood of oil from
> North Dakota in 1990, or the ocean of natural gas
> now flowing out of Pennsylvania, although both
> places were known to have energy underground. Add
> technology like fracking and horizontal drilling,
> more effective processing of sour and heavy
> crudes, and the railroads have a shot at locking
> down a profitable business for a while.

AND Colorado, where especially in western Colorado hundreds if not thousands of already-drilled wells are shut in, or producing one day a month to keep lease commitments. This country is drenched, saturated, flooded, suffocated, crushed, buried with excess energy right now, use whatever metaphor you want. Whatever the reason for our continued economic doldrums, it has nothing to do with a lack of energy in whatever form you want it, except for speculation and politics -- especially since in most cases there is more than enough competitive capacity to move it.

Although the drying-up Mississippi is getting to be a problem.