Dakota Access Pipeline Shutdown May Revive Oil-by-Rail Industry

NEW YORK (Reuters) — Companies that transport oil by rail are prepping for a business surge after a federal judge ordered the largest crude pipeline out of North Dakota to shut within a month, market sources said on Monday. 

Shipping by rail will be among the few options left for oil producers in the second largest oil producing U.S. state, providing a boon for transport firms forced to furlough workers during the coronavirus-triggered economic downturn.

A U.S. district court ordered pipeline operator Energy Transfer to shut the 557,000 barrel-per-day Dakota Access pipeline and empty the line pending an environmental review that would keep it shut for at least a year.

"I think everybody is forming their game plan now, and if they have tank cars, they're probably thanking their lucky stars," said one source familiar with Bakken rail operations.

The line runs from North Dakota's Bakken shale basin to Patoka, Illinois. Bakken crude shippers have been exploring crude-by-rail options on Monday, but it is too early to say how much the closure will affect the rail business, the source said.

There are enough tank rail cars to compensate for DAPL's lost capacity, two sources with knowledge of the matter said, but staffing may be a challenge initially.

"The assets are available but the staffing is not in place to ramp up quickly in my opinion," said Elliot Apland, managing member at MarbleRock Advisors which helps negotiate rail supply chain contracts.

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