Refining company Flint Hills Resources LLC told U.S. regulators that a North Dakota pipeline system has been losing traffic to railroads as more oil companies ship crude via train.

Flint Hills, a unit of Koch Industries Inc., claimed that Enbridge Inc.'s plans to expand its pipeline network in the Bakken Shale play will not slow business for the region's railroad companies, which have emerged as competitors. "Rail transportation is becoming more competitive and will continue to take barrels away from the Enbridge North Dakota system," Flint Hills said in a filing with the Federal Energy Regulatory Commission, adding that "this trend is not temporary."

Pipeline infrastructure has been slow to catch up to high demand for transport out of the Bakken Shale region in North Dakota, which produced 747,000 barrels of oil per day in October, according to the Energy Information Administration.

"We are seeing reduced volumes on our North Dakota system as some producers seek alternate transportation options to take advantage of favorable oil pricing in other markets," said Graham White, an Enbridge spokesman in Calgary, Alberta.

Rail is typically more expensive than pipeline transport, although its flexibility and existing infrastructure have both contributed to the surging freight business for oil (Edward Welsch, Bloomberg/Fuel Fix, Jan. 16). -- BS