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North Dakota plans lawsuit against Washington state over new crude-by-rail restrictions

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North Dakota plans lawsuit against Washington state over new crude-by-rail restrictions

Washington — North Dakota plans to sue the state of Washington over a new law there expected to effectively cap Bakken crude-by-rail supplies, which account for roughly one-third of the crude refined in the state, a North Dakota government spokesman said Monday.

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The North Dakota Industrial Commission plans to sue Washington over the law, claiming it violates the US Interstate Commerce Act. The commission is yet to file the lawsuit, the spokesman said.

Washington Governor Jay Inslee on Thursday signed the bill, SB 5579, into law. Effective January 1, 2020, it prohibits Washington's five existing refineries, all along Puget Sound and with a total capacity of nearly 638,000 b/d, from unloading any crude from a rail tank car unless the oil has a vapor pressure of less than 9 psi, potentially setting a de facto ban on Bakken crude shipped by rail.

Washington produces no oil.

North Dakota's top oil and gas regulator, Lynn Helms, has said Bakken operators would not be able to condition Bakken crude to below that 9 psi level without removing valuable product, including butane, from the crude stream.

The 9 psi standard only goes into effect after a refinery increases its crude-by-rail imports by more than 10% from 2018 reported volumes. The changes essentially place a cap on a refinery's imports of crude shipped by rail through the state.

The Washington Department of Ecology last week reported that more than 15.9 million barrels of crude were transported by rail through the state in Q1 2019, or about 174,400 b/d. About 164,400 b/d, or roughly 94%, of crude transported by rail through Washington in Q1 originated in North Dakota, according to the state department's latest data. About 9,300 b/d, or about 5%, originated in Alberta and about 700 b/d, or less than 1%, originated in Saskatchewan.

In 2018, Washington imported about 28%, or roughly 184,000 b/d, of its crude by rail, including more than 90% from North Dakota and the rest from Alberta. The state imports about 45%, or 262,000 b/d, by sea and about 27%, or more than 81,000 b/d, through the Trans Mountain Pipeline across the Canadian border.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com