Royal Dutch Shell has scrapped plans to build a West Coast oil train terminal, citing oil market conditions.
According to Reuters, Shell decided last week it won’t construct an oil train terminal in Washington state.
The terminal would have received over 400,000 barrels of crude from the Bakken region and other onshore plays.
The rail project would have been connected to an existing line and would have supplied 145,000 bpd of light crude to Shell’s Anacortes refinery.
Shell told Reuters that global crude market conditions and a “tight capital environment” made the project uneconomic.
According to state data seen by Reuters, the Bakken region has a current pipeline and refining capacity of about 851,000 bpd with about 60 percent of the play’s output leaving the region via pipeline.
Rail loading capacity for the Bakken region is about 1.52 million bpd.
“This development (with Shell), along with the developments regarding the DAPL, will hurt Bakken producers’ netbacks,” Ponderosa Advisors senior energy market analyst Sarp Ozkan told Reuters.
The U.S. Department of Justice, the Department of Interior and the Department of the Army halted construction of the Dakota Access Pipeline (DAPL) in September.
Construction will be paused on Army Corps of Engineers land bordering or under Lake Oahe until the Army Corps can “determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act or other federal laws.”
The order followed a lawsuit filed by the Standing Rock Sioux Tribe earlier this year against the U.S. Army Corps of Engineers that claimed the Army Corps violated environmental and historic preservation laws when it approved the project.
The federal agencies’ decision to halt construction was released just minutes after a U.S. federal court declined to halt work on the $3.7 billion project.
Energy Transfer reiterated its commitment to completing the Dakota Access Pipeline last month despite controversy.
The 470,000 barrel per day pipeline is currently expected to be online in late 2016.