Exactly what’s a barrel of Bakken worth?

North Dakota is the second largest U.S. oil producing state behind Texas, but the primary product, Bakken crude, is not traded on any major, public exchange such as the New York Mercantile Exchange. While North Dakota Light Sweet crude is traded on the Flint Hills Resources market (reflecting the price paid for Bakken crude at the Flint Hills refinery in Minnesota), most Bakken crude oil is transported to coastal and Midcontinent markets where prices are consistently but not uniformly higher than Flint Hills. Bloomberg tracks Bakken crude pricing at the Clearbrook, Minnesota, hub, but those data are not publicly available. Consequently, it is difficult to pin down a Bakken crude oil price index.

However, Lynn Helms, director of North Dakota’s Department of Mineral Resources, said in a Nov. 14 monthly press conference (see stories on page 1) that the realized price for a barrel of Bakken crude oil determined by the Office of the Tax Commissioner typically runs 5 to 10 percent above the Flint Hills price. Helms said the reason for the difference is that Bakken operators get prices that are closer to Brent North Sea or West Texas Intermediate by transporting their crude oil from the Williston Basin to coastal or Midcontinent markets.

As an example, in September, the most recent month for which North Dakota’s average realized price data are available, North Dakota Light Sweet averaged $74.50 on the Flint Hills market and the actual realized price the North Dakota tax commissioner’s office saw was $80.30, an 8 percent difference.

While not a perfect tool, Helms said it’s the best one available. “We don’t know what everybody’s getting paid today - we know what the posted price is and we can estimate what they’re getting paid by multiplying that by 5 to 10 percent - that’s about the best we can do.”

- Mike Ellerd

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