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Oklahoma investigates Cushing oil glut
Sean Murphy Associated Press Writer
Oklahoma Attorney General Drew Edmondson is investigating concerns that Canadian oil is pouring into Oklahoma markets, driving down the price Oklahoma oil producers receive for their product.
Edmondson’s office confirmed March 4 he has opened a preliminary inquiry into whether the oil dump is a violation of state and federal antitrust laws.
“Attorney General Edmondson last week met with a group of Oklahoma oilmen to discuss the Canadian oil situation,” said Charlie Price, a spokesman for Edmondson. “The information was given to our antitrust attorney for his review.”
Price said they also are seeking a petroleum market and pricing expert to consult with their attorneys on the issue to determine how best to proceed.
Cushing major storage hub A pipeline that carries Canadian oil from Chicago has nearly overwhelmed the storage capacity in Cushing, a major oil hub where nearly 10 percent of the nation’s oil is stored, said Cody Bannister, a spokesman for the Oklahoma Independent Petroleum Association.
“There’s a whopping amount of oil (in Cushing),” Bannister said. “The big issue is takeaway capacity. If there is sufficient takeaway capacity added to send it away to other places, it’s really not a big issue.
“But if you’ve got a bunch of stuff coming in and nothing going out, you’re going to get backlogged.”
As a result, independent oil producers in Oklahoma, who produce 96 percent of the crude oil in the state, along with producers in Kansas, Illinois, Texas and other states are seeing the price of domestic oil sold at Cushing being driven down below market prices, said Harold Hamm, chairman and chief executive officer of Enid-based Continental Resources.
“Everything that’s fed into the Cushing market is basically disadvantaged,” Hamm said. “It’s not just Oklahoma, although Oklahoma is taking the brunt of it.”
Pipeline reversal blamed Hamm singled out Canada-based Enbridge’s Spearhead pipeline, which has reversed its flow to pump tens of thousands of gallons of Canadian oil into Cushing each day.
“The flow of crude normally is to Cushing and on up to the northeast and the Midwest refineries,” Hamm said. “What’s changed is reversal pipelines coming the other direction and the lack of takeaway capacity.
“They don’t know when to quit.”
Larry Springer, a Houston-based spokesman for Enbridge, said less than 8 percent of the company’s 16.7 million barrels of storage capacity at Cushing is taken up by Canadian oil and that the company simply ships oil where its customers want.
“It’s fair to say that a vast majority of the oil in our terminal at Cushing is not from Canada,” Springer said. “We would not be doing this unless the customers on this pipeline were asking us to.
“There was a real demand, apparently, for bringing this crude down into the Cushing hub.”
Because the sale of oil is taxed in Oklahoma, Hamm said the deflated price for oil sold at Cushing also impacts state coffers.
“Oil and gas is Oklahoma’s most important resource,” he said, “and so I think this inquiry is something that for sure needs to be done.”
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