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Posted at 04:52 PM ET, 08/02/2012

Railroad company cries foul over Post story on North Dakota oil boom

If you haven’t been reading The Post’s series on life along the proposed route of the Keystone XL oil pipeline by energy reporter Steve Mufson, I urge you to read it. It’s a compelling portrait of the boom in fossil fuels pulled from the ground from Canada south through North Dakota that is reducing this country’s reliance on oil imported from outside North America.

One part of that series, published online on July 18 and in the paper on July 19, was about the drilling and its economic, lifestyle and environmental effects on western North Dakota. That area sits atop the Bakken formation, an underground reservoir of oil embedded in rock that extends as far as eastern Montana, western North and South Dakota, and southern Saskatchewan province in Canada.

The story nicely blended the economic and industry benefits against the effects on the quality of life in that boom state.

But one of the players in the story, the railroads that help transport the oil southward, eastward and westward — because the pipelines aren’t yet big enough to carry all that new oil and gas to refiners in the United States — called to complain about a couple of paragraphs in the story that, well, made them look bad.

Here they are, with my boldface added:

“Even the oil industry can’t keep pace with itself. While oil companies have rushed to drill, pipeline companies haven’t been able to install enough lines to get the oil out of the area or capture the natural gas found, too.

“Now the producers are getting gouged. Burlington Northern Santa Fe, owned by Warren Buffett’s Berkshire Hathaway, carries three-quarters of the oil transported by rail, often extracting steep fees. [Jack] Ekstrom of Whiting Petroleum estimates that transportation has been costing North Dakota petroleum producers $13 to $19 a barrel, much more than normal.

“‘Keystone would not relieve all of that,’ he said, ‘but it would have eased that number down greatly.’”

John Ambler, vice president of corporate relations for BNSF Railway, called to rebut the charge that producers were getting gouged. Now, Mufson’s paragraph is written pretty carefully. Note that it doesn’t exactly say BNSF is gouging anyone, but it certainly leaves that impression, which is what Ambler wanted to counter.

Ambler says that his company’s published prices for shipping oil range from $4.48 per barrel to ship to Kansas City to $8.18 per barrel to ship to Bakersfield, Calif. He acknowledges that recently a diesel fuel surcharge has been imposed of $1 to $1.50 a barrel. That’s still a distance from the $13 to $19 a barrel that oil producers in North Dakota told Mufson that they are paying.

There are other fees, but Ambler says they don’t come from BNSF. There is a cost to lease the oil railway cars, there are loading and unloading costs, and there are other fees. And Ambler acknowledges that BNSF published prices fluctuate according to market demands.

Mufson has rechecked with one of the biggest producers in North Dakota and with a major pipeline company that competes with the railroads and they have confirmed the total transportation figure in the story. Bloomberg reported on Aug. 2 that BNSF’s volume of petroleum carloads rose 75 percent in the second quarter from a year earlier, as the company hauled in gear for the Bakken oil fields and hauled out oil. 

Ambler says his main point is that Mufson should have called BNSF to get its take on the accusation by producers that they’re getting gouged to transport the oil and gas out of North Dakota.

“I think if The Post is going to write a story where they mention by name a company, suggest that that company is gouging its customers, they at least owe us the opportunity to respond to that and provide factual information that could have affected the story.”

I agree with Ambler that Mufson should have called BNSF to get some more facts. Mufson also agrees that he should have called.

Now, Mufson talked to dozens of people for his story and there comes a time where a reporter has to write and stop making phone calls, but for the serious assertion of gouging — even when oil producers in the region clearly allege that it is happening — it would have been good for Mufson to make that call.

Here’s a part of the letter from Ambler that he wanted The Post to publish to help counter the charge of gouging:

“BNSF’s rail network provides a profitable solution for oil producers and a more flexible solution for the refineries receiving the product. BNSF’s rail service enables producers to access various markets to obtain premium prices for the light sweet crude being produced from the Bakken formation, generating additional revenue for the state’s oil producers and the state of North Dakota. We are also able to move crude oil to market faster than pipeline.

“Crude oil trans-load facilities for rail can be developed faster and at significantly lower capital costs than pipelines to keep pace with the Williston Basin’s record growth in oil production.

“While BNSF supports investment in additional infrastructure to serve this important energy market, including pipelines, we believe rail will continue to provide the more flexible alternative to market.”

Being fair to a company, and getting its response, is always a good practice for journalists.

 

By  |  04:52 PM ET, 08/02/2012

 
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