It's a bittersweet reality for oil producers in North Dakota: As oil production grows, the means to transport the black stuff shrinks.

That "bottleneck" could mean a significant loss of revenue for producers and the state as early as this winter, as the state's infrastructure to transport the oil fills to capacity, according to officials who testified at a U.S. Senate field hearing in Bismarck on Wednesday.

"We need to unlock the possibility of moving our product from where it's produced to where it's needed," said Sen. Byron Dorgan, D-N.D., who chaired Wednesday's Senate Energy and Water Appropriations Subcommittee hearing.

North Dakota wells are pumping out 166,000 barrels of oil a day, while the state's current method of moving the oil -- through pipes and in railcars and trucks -- can only carry about 189,000 barrels a day, Dorgan said.

Enbridge Pipelines is expected to add another 50,000 barrels a day capacity when it completes its $130 million expansion in 2010.

Lynn Helms, director of the Department of Mineral Resources, said without the added capacity, oil producers could see "steeper discounts."

Because of the increased distances to market, North Dakota sweet crude generally fetches about 10 percent less than a barrel produced elsewhere and sold on the New York Mercantile Exchange, Helms said.

Harold Hamm, CEO of oil producer Continental Resources, estimated those discounts could be as high as $10 or $11 a barrel.

"It's going to get pretty severe pretty quick," Hamm said, adding a lacking infrastructure could make companies such as Continental scale back production.

More routes to ship the oil via railcar also are in the works.

But it won't happen soon enough as oil production continues to soar in North Dakota, said state Rep. Shirley Meyer, D-Dickinson.

North Dakota has increased its annual oil production from 30 million barrels in 2003 to what is expected to be more than 50 million by the end of 2008, Meyer said.

"At this rate of production, any discounts whatsoever amounts to huge losses of revenue to the producers, the royalty owners and the state," Meyer said. "We are told, 'the pipelines are full, the trucks are full, the trains are full and we are going to have to shut down production of our wells.'"

To ease the building pressure as well as plan ahead for potential fuel shortages, Meyer said a task force she co-chairs is aiming to build more oil refineries in North Dakota.

The state's only refinery is in Mandan.

Dorgan added that Congress should create more incentives to spur production on pipelines to help move oil from North Dakota to refineries.

Copyright (C) 2008 The Bismarck Tribune, N.D.