BISMARCK, N.D. (AP) — The percentage of North Dakota oil shipped by rail will likely jump significantly in the next year as producers increasingly turn to trains to reach U.S. refineries where premium prices are fetched, the state's top oil regulator told lawmakers Thursday.
Lynn Helms, director of the Department of Mineral Resources, told the Legislature's Government Finance Committee that he expects as much as 90 percent of the state's crude will move by rail in 2014, up from about 60 percent at present.
North Dakota, the nation's No. 2 oil producer behind Texas, is on pace to surpass 1 million barrels daily early in 2014, Helms has said.
North Dakota oil prices have been slipping since July, from about $96 a barrel to an average this month of $73.50. The benchmark price for light sweet crude is set in Cushing, Okla. Oil from North Dakota and Texas is "flooding" that major crude hub where most U.S. shipments are sent, Helms said.
Crude shipped by rail to East, West and Gulf Coast refineries can fetch up to $30 more per barrel than the benchmark set at Cushing, Helms said.
It costs about $6 per barrel to ship by pipeline and about $12 per barrel by rail, and even with the higher shipping, producers are able to net about $24 more per barrel by sending it on trains, he said.