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North Dakota crude elbows Alaska oil out of Washington refinery

Alex DeMarban

They stole our women. They stole our workers, some of them anyway. Will North Dakota oil soon elbow Alaska crude out of nearby refineries, too?

Starting in September, light-and-sweet crude from North Dakota's Bakken deposit will be shipped to Washington state for refining by Tesoro, the Petroleum News reports. There, it will replace at least 30,000 barrels per day of the more-expensive and harder-to-clean Alaska North Slope crude.

A state official expects no impact to North Slope oil production or state coffers. The ousted North Slope crude can find another refinery. But the switch does appear to be one more come-uppance favoring North Dakota, which recently surpassed Alaska to become the country's second biggest oil producer.

Also, the Petroleum News article cites an unnamed source who says Bakken oil prices are low enough that Tesoro is even considering shipping North Dakota crude oil to Alaska for refining. It would replace North Slope crude processed at Tesoro's refinery in Nikiski, according to the article.

That may be profitable temporarily, if the price spread between North Slope crude and Bakken remains large enough, said Joyce Lofgren, petroleum economist with the state Department of Revenue.

But it may not be profitable in the long run because the costs of getting it to Alaska are so high. Expenses include sending the Bakken oil by rail to Washington, then north to Alaska by tanker, two costly forms of transportation.

However, such a trip might be more feasible one day, if a pipeline to carry Bakken crude to Washington is built to replace the rail shipments, she said. Applications requesting just that are before the Federal Energy Regulatory Commission.

Tesoro may find other advantages to refining Bakken crude in Nikiski. Tesoro's refinery was originally built to handle light, sweet crude from Cook Inlet. That's fallen to a trickle in recent years, and there might be savings in producing Bakken oil at the facility, instead of the Slope's more sulfur-laced oil, Lofgren said. 

If Bakken crude was refined in Alaska, state coffers would again sidestep any impact. The Nikiski refinery is small, and North Slope crude could be shipped to the huge refineries on the West Coast, said Lofgren. 

But Nikiski processes about 72,000 barrels a day of crude, producing aviation and motor fuel for in-state use, including gas. If Bakken oil was refined in Alaska, wouldn't that be sad? Just think, Alaska cars guzzling North Dakota's gas.

Contact Alex DeMarban at alex(at)alaskadispatch.com