Contact: Jeff Zarling
Phone: 701-577-1100
Email: info@bakkenconference.com

Minot, ND—The Bakken Investor Conference employs Attendee Communication System and the Dawa Events Mobile App to facilitate attendee communications and connections before, during and after the event.

Dawa Solutions Group has partnered Sleep Inn & Suites Minot to host the 3rd Annual Bakken Investor Conference on April 24 through April 26 to connect investors with oil and gas companies and real estate developers to explore investment and development opportunities in the Bakken Shale play.

“The oil and gas industry is driving the economy in the Williston Basin and with it the need for more housing and real estate development. Although the Williston Basin is growing, it still has a local feel,” noted Jeff Zarling, President, Dawa. “If you want to do business in the Bakken, you have to get here. Face-to-face interactions and connections are key factors in successfully doing business in the Williston Basin.”

The Attendee Communication System is a private systems platform that allows attendees to view and connect directly and confidentially with other attendees before, during and after the conference.

Attendees can comfortably contact one another through the system without having to worry about their information being freely circulated. Attendees have complete authority over who receives their information.

The Dawa Events Mobile App gives attendees access to the conference agenda, list of exhibitors, and list of attendees directly from their phone or other Apple or Android mobile device. Like the Attendee Communications System, the app allows users to privately message one another before, during and after the event.

The app is available to download from both the apple store for apple devices and the Google play store for android devices. Instructions to login and use these tools are posted at www.BakkenConference.com/attend.

“It’s paramount for the successful growth and development of our community to bring together these two key industries and their investors,” he added. “With the Attendee Communications System and the DEMA, making connections at an event has never been easier.”

In addition to the technology tools, the conference also hosts an Attendee Connection. The Attendee Connection is a forum which allows each attendee 30 seconds to introduce him/herself and tout any other relevant information. As part of the forum, conference attendees receive a numbered list of attendees, noting their name, title and represented entity. During each introduction, the attendee states what number represents him/her. Using the list, attendees can quickly and easily identify the speaker and make notes next to those attendees with whom they want to personally meet or contact.

“The Attendee Connection is a significant aspect of the conference,” stated Zarling. “It’s the equivalent of speed dating but for business relationships and has been a hit with attendees at our past conferences.”

For more information on the Bakken Investor Conference, please go to www.BakkenConference.com.

# # #

Bob van der Valk recently joined the Bakken Oil Business Journal as their Managing Editor of the bi-monthly print and digital journal editions, connecting business and resources for the greater Bakken area. Bob has collaborated & contributed to the editorial voice of the Bakken Oil Business Journal since its inaugural issue in May of 2012. He has been the source of information on the petroleum industry, as a whole, in addition to paying specific attention to the booming growth of Oil & Gas industry in the Bakken Oil Shale Region. Bob is quoted regularly in the national media for his expertise on petroleum industry matters and fluctuations in the prices of petroleum products.

Bob has over 50 years of experience in the downstream refining and marketing sector of the petroleum industry with particular expertise on the U.S. western region. He is also a regular guest on Tom Egelhoff’s “Open for Business” radio program on KMMS-AM 1450 from Bozeman discussing current events in the petroleum industry for the region.

Mary Edwards is the Publisher of the every other month edition of the Journal teeming with petroleum industry articles about the current news, technology advancements, and information pertaining to the businesses and services operating in the Bakken Oil Shale Region. In addition to the glossy color print edtionof the Journal, a corresponding digital version is available via the Internet designed for today’s popular computer tablets & smart phone mobile devices. Up to 4,000 of the Journal’s print editions are mailed direct to a demographic of businesses & companies active in the regional petroleum industry. They are also being made available to individuals attending the top Bakken Oil Regional Conferences & Energy Trade Shows.

CenterPoint Energy Bakken Crude Services LLC (CEBCS) said on Tuesday that it has entered into a long-term agreement with XTO Energy Inc., a subsidiary of Exxon Mobil Corporation, to gather XTO’s crude oil production through a new crude oil gathering and transportation pipeline system in North Dakota’s liquids-rich Bakken shale.

CEBCS is an indirect, wholly owned subsidiary of CenterPoint Energy Inc. The agreement with XTO is the first agreement entered into pursuant to the open season announced by CEBCS on Feb. 19.

Under the terms of this new agreement, which includes volume commitments, CEBCS will provide service to XTO over a gathering system to be constructed in Dunn and McKenzie counties, N.D. The gathering system will have a capacity of up to 19,500 b/d.

CenterPoint Energy Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission and distribution, natural gas distribution, competitive natural gas sales and services, interstate pipelines and field services operations.

The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. Assets total more than $22 billion. With over 8,700 employees, CenterPoint Energy and its predecessor companies have been in business for more than 135 years.

–Edgar Ang, eang@opisnet.com

by Ryan Carlyle, BSChE, engineer at an oil company

 My top 5 oil industry facts:

1) Oil is important. Shockingly, sometimes horrifically important.

The world economy has been developing with oil as its lifeblood for over a hundred years. Oil is directly responsible for about 2.5% of world GDP [1], but accounts for 1/3rd of humanity’s primary energy supply (>5 terawatts out of 15 terawatts total) [2]. It’s over half if you include natural gas.

World Energy Consumption by Source, in Terawatts

World energy consumption

Oil/gas powers 100% of all transportation, within a few significant figures of rounding error. Transportation, in turn, directly accounted for 1/6th of world GDP in 1997 [3] and is heavily involved in every other type of economic activity. Except for a minuscule number of electric-powered vehicles, you can’t move anything anywhere faster than about 25 mph without oil. You can’t operate a modern military, and you can’t run a modern economy. There is no doubt in my mind whatsoever that modern civilization would collapse in a matter of months if oil stopped flowing. Oil is about as important to the developed world as agriculture. It’s truly a condition for the continued existence of most of humanity today.

2) It’s big. Capital B-I-G BIG. You have no idea how big oil is.

The world’s oil & gas transport infrastructure is a globe-spanning spiderweb of pipelines and shipping routes. The natural gas distribution pipelines in the US alone could stretch from Earth to the Moon 7-8 times [4]. There are millions upon millions of miles of pipe on the planet to distribute crude oil, refined products, and natural gas. (Mostly gas.) Consider this: if your home has natural gas heat, it is connected via a continuous network of pipes to tens of thousands of wells drilled into subterranean rock strata that were laid down tens of millions of years ago. That’s pretty cool, really. Your house is directly connected to the Pliocene era — by the world’s oil & gas infrastructure.

About 40% of all seaborne cargo is oil [5], and there is literally more seaborne cargo at any given time (by weight) than there are fish in the sea [6]. Oil is in transit for a much shorter amount of time than the lifespan of most fish, so the total amount of oil that moves via water each year is much, much higher than the total amount of fish biomass. Think about what that means for a minute. The ocean isn’t full of fish, it’s full of oil cargoes.

Unfortunately, that scale makes it next-to-impossible to technologically disrupt the oil industry. This is going to make some people mad, but it’s reality. Not only is oil/gas critical now, but there are no viable replacements in our lifetime. People who think renewables can replace oil with a few decades of Manhattan Project style effort are simply ignorant of how big oil really is.

Even if we assume the energy-storage problem is solved soon, there is no reason whatsoever to think any feasible amount of renewables growth can displace fossil fuels in a couple generations. Wind and solar are growing exponentially, yes, but from such a small base that it doesn’t even make a dent — the use of renewables as a percentage of total world energy consumption only increased by 0.07% from 1973 to 2009 [7].

Let me break down some numbers.

• World oil production was 82 million barrels per day in 2010 [8]. At roughly 6 gigajoules per barrel, that’s about 5.7 terawatts of power production.
• World wind power production in 2010 was 0.3 petawatt-hours [9]. Averaged over a year, that’s about 34 gigawatts.
• World solar power production in 2010 was 0.03 petawatt-hours [9]. Averaged over a year, that’s about 3.4 gigawatts.

So world energy production from oil alone is 2 orders of magnitude higher than wind power, and 3 orders of magnitude higher than solar power. Let me pick on solar power a little, because it’s downright embarrassing to compare the two:

• The difference in power generation between solar power and oil production is more than the difference between a professional bicyclist and a Formula 1 racecar.
• If solar power generation doubled every decade for 100 years, it would still be pretty far behind oil today.

These numbers get significantly worse if you add in natural gas and coal. And much worse still if you allow for expected demand growth.

Sorry guys, but regular old exponential growth isn’t even enough. Tomatch oil, you’ll need half a century or more of clear energy superiority. That means cleaner and cheaper and more concentrated for storage. Nothing fits the bill yet. To replace oil, you’ll need a century to allow the entire economy to retool and realign around the new technology.

[Update: I am greatly simplifying the solar issue to illustrate the point that oil is big, which lots of people have objected to in the comments. Based on historical energy system uptake rates and continuing price declines, 50-200 years is a realistic time range for solar to hit 5TW generation. I think it’ll take 100 years, and many people think it’ll be a lot faster. That’s fine; this isn’t an answer about solar power, because you can’t use solar power as a transport fuel in any practical way. Mass adoption of electric cars is still pretty far down the road. Pun intended.]

3) Oil is wealth. Not just wealth for producers, but wealth for everyone who uses it.

The historical use of cheaper, more-concentrated, and cleaner energy sources seems to be one of the most direct causes of economic growth. Even more importantly, it causes vast improvement in the human condition. Simply put, better sources of energy increase productivity and produce fewer negative externalities. This effect is huge. Cheap, abundant energy lifts nations out of poverty. China understands this. Failure to secure energy supplies dooms nations to collapse. The Mayans found this out too late.

Energy efficiency is powerful and highly desirable, but it can’t compete with increasing the primary energy supply. Most of the time, increased energy efficiency actually results in increased energy consumption, because of cheaper costs (per unit output) and faster economic growth. This is called Jevon’s Paradox (Jevons paradox). Highly-developed nations can use advanced technology to increase quality of life while using less energy, but less-developed nations cannot. Getting to developed-nation status required a lot of high-quality energy.

And oil is indeed high-quality energy. It’s liquid, which makes it easily moved and stored. It’s stable, and it releases a huge amount of energy. It’s also much, much cleaner than coal. If it weren’t for CO2 emissions, oil & gas would be a nearly-perfect energy source. Look at what their growth has done to the world’s wealth:

World per Capita Real GDP vs World per Capita Energy Consumption by Type

World Energy Consumption Since 1820 in Charts
File:World GDP per capita 20th century.GIF

Those two charts don’t match by accident. Every transition to a cleaner, cheaper, more-concentrated energy source causes dramatic improvements in real global wealth (and quality of life). Electrification caused most of the growth from 1900 to 1950. Oil enabled the post-war boom from 1950 to 1970, and natural gas strongly contributed to the growth from 1970 to 1995. The growth since 2000 has, unfortunately, been largely been due to increased coal consumption in Asia. The digital revolution and Great Recession have played a large part in global wealth trends, but mostly in the parts of the world that were already wealthy by global standards.

Ok, so maybe you don’t care about GDP, and want to know about quality of life. Energy is fundamentally required for a high quality of life, as measured by the UN’s Human Development Index. There is a range of energy consumption that depends on climate and population density, but broadly speaking, high-consumption countries have the highest quality of life.

Energy Consumption in Kilogram-Oil Equivalent per Year vs Quality of Life

HDI, Energy Consumption and CO2 Emissions

Sure, the biggest energy consuming nations could reduce per capita consumption a lot, and still have high quality of life. The US could learn a lot from Denmark. And current trends show that they are steadily moving in that direction — energy consumption per capita and per dollar of GDP is steadily dropping in the developed world. That’s a good thing.

But the energy required to lift 3 billion people out of poverty is far, far more than the potential energy savings from eliminating energy waste in the developed world. I’m not talking about stretch-SUVs and 60″ TVs, I’m talking about refrigeration for vaccines, irrigation for agriculture, and fuel for school buses. The planet cannot support 7 billion people at a low-energy agrarian level of existence — we have long since passed the point where we can revert back to a low-tech, low-energy form of civilization without billions of people dying of starvation.

All those green and red dots in the chart need to move past the blue dotted line — it is truly a moral imperative to allow the world’s poor to enjoy the basic fruits of development. That will require an enormous amount of new energy production capacity. Thankfully, the world mostly needs electricity, which is much easier to expand than oil. But we need a lot of oil too.

Oil is energy, and energy is wealth.

4) The oil industry is a really safe place to work.

Despite the Hollywood stereotypes, oil rigs are actually quite safe. Don’t get me wrong, there are lots of extremely hazardous activities at a drill site, but they’re exceptionally well-managed. Working on an oil rig used to be pretty dangerous — lots of older guys in my office are missing parts of their fingers. But the industry has made huge strides in safety improvements over the past few decades by increasing automation, providing comprehensive safety training, and changing the work culture. It’s a different world now.

Accident rates have been dropped steadily since the 1990s, to the point the oil industry is now safer than many regular occupations. The OSHA statistics prove it. “To really put safety in perspective, the average 2.1 TRIR for rig operations is lower than [OSHA’s] 3.3 TRIR for real estate. You are safer statistically on the rig floor than driving around with a real estate agent.” [10]

Land rigs have about the same injury rate as a regular construction job, and offshore rigs have a lower injury rate than being a teacher. In the chart below, the oil industry is rolled up into “mining”:

http://www.bls.gov/iif/oshwc/osh…

Jobs that are actually dangerous include truck-driving, logging, fishing, and nursing. I’ll happily deal with swinging cranes, high-pressure chemicals, toxic oil fumes, and offshore helicopter flights — but you couldn’t pay me enough to be a nurse. They have it rough.

5) Oil companies don’t really make that much money.

Contrary to popular belief, the Oil “Majors” — ExxonMobil, Chevron, BP, Total, ConocoPhillips, and Shell — don’t actually make all that much money. Yes, it’s a lot in absolute terms because the companies are so large, but the profit margins are pretty sad in agood year. Bad years (like most of the 1990s) cause crippling contractions and mass layoffs.

Recent Profit Margins at Exxon, Apple, Microsoft

WolframAlpha: profit margins of exxonmobil, apple, microsoft

[Update: Lots of people have objected in the comments to using two large, well-established tech companies as comparison points for ExxonMobil. I think they’re very good comparisons. All three are extremely large, world-class engineering organizations, operating in high-risk, high-tech, capital-intense markets with long supply chains. They are all affected by the business cycle more than the norm, and have long development times for new ventures. Their production facilities cost immense sums and steadily become obsolete. They have a lot of competition from overseas companies who copy their ideas, and they have to repeatedly take large financial gambles on new technology and markets to stay in business. Oil is more like the tech sector than it’s like other extractive industries. On the other hand, “national” oil companies (OPEC etc) are a very different story, and I’m not talking about them here.]

Oil Companies Underperformed the S&P500 through the 1990s

Google Finance

Go ahead, accuse me of cherrypicking data. You have a point, but the same can be said about the recent high profits that everyone complains about. Yes, profits have beat the S&P500 lately, because oil prices are very high right now. Guess what? Exploration & development costs are rising faster than the price of oil. Net revenue per barrel at the Majors (not profit, just revenue) is only running about $20/bbl even though oil has gone up from ~$40/bbl to ~$100/bbl. What happens when China’s big recession hits, and oil demand drops significantly? The price will plummet by 2-3x, just like it did at the start of the Great Recession. This is an incredibly capital-intensive industry, in which large projects take longer to execute than the length of the business cycle. That’s fundamentally difficult to manage.

Oil is a widely-traded, high-competitive commodity market. That means basic economics causes profits margins to go as low as they can without companies exiting the industry. In this case, 8-10% profit margin is the minimum risk premium you can offer a company to convince it to continue doing business in:

• A market where your product is almost completely interchangeable with the next guy’s product
• A cyclic industry that sees 4-5x swings in the price of finished goods, with steadily-rising input costs
• A business where each $100 million exploration well has a 50-90% chance of being a failure
• A business where a bad mistake means $40 billion in fines & damages
• A market dominated by government-run companies who are held to lower environmental and legal standards
• Countries with a history of illegally nationalizing oil infrastructure
• A fairly hostile regulatory environment
• A fairly hostile PR environment

Frankly, it’s a miracle anyone wants to be in this business at all. I truly think the major oil companies are underpaid. The risk-adjusted returns are crap compared to most sectors. The only way oil companies survive this kind of business environment is by consolidating, so that the risks are spread out over a wider base. That’s why oil companies are some of the largest publicly-traded companies in the world — because they have to be huge to survive.

So where does all the oil money actually go? To national oil companies — mostly OPEC. They have control of all the cheap oil that’s easy to get out of the ground, so they have a combination of high net revenue per barrel and some semblance of cartel pricing power. Don’t make the mistake of thinking the Majors and the Nationals are in the same league — Saudi Aramco is estimated to be worth about four times as much as the top ten publicly-traded corporations put together, which includes ExxonMobil, PetroChina, Shell, and Chevron [11]. Oil is such a behemoth of an industry that the big players dwarf the world’s largest corporations.

There’s lots to know about the oil industry — people spend their entire careers learning small slices of it — but if more people understood the facts above, we would have much more productive public discourse about the world’s energy systems.

[1] A Primer on Energy and the Economy: Energy’s Large Share of the Economy Requires Caution in Determining Policies That Affect It
[2] World energy consumption
[3] http://www.nssga.org/government/…
[4] Natural Gas Pipelines, Distance from Earth to Moon
[5] http://www.whoi.edu/science/MPC/…
[6] Ships
[7] The Rising Renewables ” CSBE
[8] World, U.S. Oil Production Rises in 2010
[9] Scientific American, April 2013, “The True Cost of Fossil Fuels”How to Measure the True Cost of Fossil Fuels
[10] SPECIAL REPORT: Oil, gas safety statistics mark progress.
[11] Saudi Aramco,

wikipedia.org

List of corporations by market capitalization

Click here & be heard by US Secretary John Kerry. … do it right now, it only takes 30-seconds.

Please approve the Keystone XL pipeline as quickly as possible. Every day we continue to delay this important piece of U.S. energy infrastructure inhibits our economic growth and weakens American security.

As a military veteran and a well-known supporter of military personnel, veterans and their families, you understand the importance of protecting our national security. Approving the Keystone XL pipeline would directly enhance America’s security, diminishing our dependence on unfriendly foreign oil states and strengthening our relationship with our next-door neighbor and longtime ally, Canada.

The full Keystone XL pipeline would bring in an additional 830,000 barrels of North American oil per day, reducing our need to import oil from places like the Middle East. With Keystone XL, our crude imports from Canada could reach 4 million barrels per day by 2020, twice the amount we now import from the Persian Gulf.

Canada will develop and market their oil reserves regardless of what we do about Keystone XL. It just makes sense to approve this pipeline and bring that fuel to the U.S., to grow our economy, provide jobs for our workers and power our businesses and homes. Americans have waited nearly five years for this pipeline to be approved and for America’s government to increase our energy security. After all the delays, it is time to act.

For almost three decades you exhibited strong leadership in the U.S. Senate. Bring that same leadership to the Department of State and approve the Keystone XL pipeline without delay.

The theme of the 2013 conference is New Energy Horizons.

When the very first Williston Basin Petroleum Conference was envisioned back in 1993, it was planned as a meeting where researchers and industry leaders could sit down and discuss the latest technologies and science to help improve oil production in North Dakota and Saskatchewan.  That first conference in Minot, North Dakota – spearheaded by Dr. Malcolm Wilson who at the time worked for the Saskatchewan Ministry of Industry and Mines, as well as colleagues across the border at the University of North Dakota – sent out 70 invitations.  Over 160 people showed up.

From the get-go, Wilson and the original planners knew they’d come across something big.

“What can you say when you get almost triple the number of people you initially invited to the first conference asking to attend?” notes Wilson, now the CEO of the Petroleum Technology Research Centre in Regina, Saskatchewan. “As the conferences progressed – and began to be managed by the North Dakota Petroleum Council, the Saskatchewan Geological Survey and the PTRC – they expanded to include more and more companies.  It developed a significant tradeshow component, but it’s been very important to keep the technical and scientific sessions expanding as well.”

The conference now alternates, in even and odd numbered years, between North Dakota and Saskatchewan respectively.  In 2012 over 4000 people registered and attended the Bismarck incarnation (no mean feat, for hotel owners and restaurants in a city of under 60,000) and the 2013 event in Regina is expected to attract around 2500 attendees.

The exponential increase in numbers at the conference speaks to the rise of Bakken exploration and development – a formation that contains often difficult-to-access but high quality oil.  The Bakken has become the backbone of the explosive growth in oil production in North Dakota and southern Saskatchewan, and holds enormous potential for additional growth in southwestern Manitoba and Eastern Montana.

What’s in the works for the 2013 conference, which runs April 30 to May 2^nd at Regina’s Evraz Place?

“We’re excited by the technical presenters, and special guest speakers we have lined up for this year’s conference,” noted Melinda Yurkowski, assistant Chief Geologist at the Saskatchewan Geological Survey, the Government of Saskatchewan group that has been setting the technical program. “Aside from presentations on important emerging technologies, and  the latest in enhanced oil recovery happening in the Williston Basin, our first day of the technical sessions will also report on the latest news from industry and government players.”

To attend the presentations requires registering and paying a fee of 300.00 (this rate goes up on the day of the conference to 500.00, so register early!) but there are also a number of public presentations that don’t require conference registration and are open to everyone.  One of those, on hydraulic fracturing (“fracking”) hopes to provide all the basic information on the technologies employed in this process and discuss in a frank way what it’s all about.  The conference also has two special workshops planned for the conference delegates for a small extra fee – one on core sampling and a second on rock mechanics.  Check out the Williston Basin Petroleum Conference website below for more information.

The some 300 tradeshow booths have been sold out since January, and the tradeshow itself will highlight the best in oilfield technologies.  Special events, a host of receptions, and conference lunches with special-guest speakers will also be provided.

The conference runs April 30 to May 2^nd at Evraz Place.  Visit www.wbpc.ca for full information.

Travis Dewitz - Oil and Gas Industry Photographer - www.travisdewitz.com/crude-oil

Senate Tax heard Senate Bill 295, a bill to repeal the oil and gas “tax holiday” sponsored by Senator Christine Kaufmann (D-Helena) this morning.

Several turned out to testify in opposition of the measure which would kill the oil and gas production incentive passed by the legislature over a decade ago. The incentive, which lasts only the first 12-18 of production, was created to spur economic growth in Montana.

Proponents of SB 295 included the Montana Conservation Voters, Montana Environmental Information Center, and the Northern Plains Resource Council. The chief argument for the bill was that incentives are no longer necessary, and that production taxes are needed to cover the cost of production impacts. Opponents of the bill, however, believe that repealing the incentive would directly impact production and Montana’s economy.

“Exploration in the Bakken is occurring only because of the tax holiday,” said John Alke, opposing the bill on behalf of Fidelity Exploration and Production Company. Alke explained that wells across the border will produce three to four times the volume of those in Montana. “If you eliminate the tax holiday you will not affect the tax burden, but determine where companies will drill for oil.”

Testifying against the bill was Dave Galt for the Montana Petroleum Association who presented information showing a decline in recent production. Montana’s rig count is down to 12, representing a 31.6% drop since last year. Meanwhile, North Dakota’s rig count is more than 175 as of this week.

Also opposing SB 295 was the Montana Contractors Association, Northern Montana Oil & Gas Association, Montana Taxpayers Association, Montana Association of Oil, Gas & Coal Counties, the Montana Chamber of Commerce, and several oil and gas employers.

“Tax breaks exist to create jobs,” explained Nancy Schlepp of the Montana Taxpayers Association. Oil and gas projects have created nearly 30,000 jobs statewide, from Sidney to Kalispell, from oilfield employment, to construction, to retail and hospitality.

“These companies are generating a lot of tax dollars in a log of other ways,” said Webb Brown, President of the Montana Chamber of Commerce. Oil and gas companies paid more than 200 million last year in taxes to fund government programs and local schools, while property taxes paid by the Billings refineries represented one fourth of all property taxes paid in the city. Since 1999, when the production incentive was created, the state has collected over a billion dollars from oil and gas companies.

Bob Gilbert of the Montana Assoc. of Oil, Gas and Coal Counties presented impassioned testimony.  “Let us in Eastern Montana survive,” exclaimed Gilbert. “A skeptic would say this bill is designed to slow down or stop production of oil and gas in Montana; and I’m a skeptic.”

Retreived 3-5-2013. The Montana Petroleum Association, Inc.  A voluntary, non-profit trade association, serving a membership of oil and natural gas producers, gathering and pipeline companies, petroleum refiners, service providers and consultants.

Bob McTeer, Contributor
A former Dallas Fed president, I cover the economy.

The direct way fracking can reduce the budget is by stimulating economic activity and thus tax revenues. This is obvious.

This piece is about another, less obvious, less intuitive, indirect way fracking can reduce the budget deficit. It is based on the fact that the sum of the budget deficit, the capital inflow to finance the trade deficit, and the difference between domestic saving and domestic investment equals zero. If you expand or shrink any of these three imbalances, it puts pressure on the others to expand or shrink to maintain the net zero balance.

As fracking expands domestic oil and gas production, it likely will reduce U.S. demand for energy imports and shrink our trade deficit. This reduces the net capital inflow required to finance the trade deficit. The reduced capital inflow will tend to reduce the gaps between domestic investment and saving and government expenditures and tax revenue—the deficit in question.

Let me back up and elaborate. Income minus consumption gives us saving, by definition. Income minus consumption also gives us investment, since investment represents output not consumed. Therefore, taking consumption out of the equation, total saving must equal total investment.

National saving is composed of personal saving, business saving, and government saving, i.e. an excess of tax revenue over expenditures. Personal saving, as we know, is low but positive these days. Business saving is moderately positive. However, net negative government saving (the budget deficit) overwhelms the others and make total national saving negative. Since we invest more than we save domestically, the saving deficit must be made up by importing foreign saving in the form of the capital inflow that finances the trade deficit. (See the postscript for a further explanation of this.

Therefore, I repeat, these three variables—the investment saving imbalance, the government spending-taxing imbalance and the inverse of the export-import imbalance are linked together (they total zero) and are mutually determined. Other things equal, the reduction in the trade deficit due to fracking will reduce imported capital and put pressure on investment relative to saving and government spending relative to taxing. At least some of the correction is likely to lead to a smaller budget deficit.

Got it?

P.S. In a closed economy with no government, income will adjust to make saving and investment equal in equilibrium. Introducing, government spending and taxing, the two injections into the income stream (other than consumption) will be investment and government spending while the two leakages will be saving and taxing. Therefore, the sum of the injections will equal the sum of the leakages in equilibrium, although there is no requirement for a separate balance of taxing and spending and saving and investment. Introducing foreign trade, exports become a third injection while imports become a third leakage. In equilibrium, investment plus government spending plus exports will equal saving plus taxes plus imports. In our recent past, the excess of government spending over taxes requires a net capital inflow (to finance the excess of imports over exports) to finance the excess of domestic investment over saving. If fracking reduces the excess of imports over exports the other two imbalances must adjust, thus putting downward pressure on the budget deficit.

Retrieved 3-4-2013. Forbes.

What Opportunity Looks Like: Big Mountain meets the Bakken

“The Bakken has definitely been a huge help and a huge source of revenue to us.”

For many Montanans the Bakken boom has provided a plethora of opportunities. For the Gearhart family of Whitefish, the growth in the oil patch has meant growth in their family-owned business, Big Mountain Glass (BMG).

The company, owned by Chris and Kathy Gearheart, has been in Montana for 41 years and has provided commercial glazing on projects such as the Metra in Billings, the new UM Native American Studies Center in Missoula, the Marcus Daly Memorial Hospital in Hamilton, and the Whitefish Emergency Service Center, to name a few. BMG has twelve full time employees, including son and MSU graduate Scott Gearhart. Scott’s the Commercial Project Manager for the company. Scott’s wife is a full time nurse, and works part time at Big Mountain Glass as well. They also have a seven year old daughter.

With a degree in Construction and Engineering Technology from Bozeman, Scott explained that working for the family business was always part of the plan, saying that it only took a few years of working outside of Montana to realize it was where he wanted to return to work and raise his family.

Before the downturn in the local economy, says Scott, Big Mountain had twenty one full time employees. With the recent resurgence of job opportunities in North Dakota and Eastern Montana, however, he said, “The Bakken has definitely been a huge help and a huge source of revenue to us.”

The first Bakken project for Big Mountain Glass started three years ago. The Gearharts’ business has done everything from small glass instillation projects for schools, strip malls, and NAPA stores in Watford City and around Williston, to a couple of large scale projects in Dickinson and Bismarck.

“We were actually sought out to bid the penitentiary expansion job in Bismarck,” said Scott. Big Mountain not only bid the job, they won it. “This is a major project of over a million dollars in glass,” said Scott. Some of the other large scale projects they’ve worked on include housing complexes for Halliburton. Big Mountain is also waiting to hear back on a medical clinic job they bid recently in Dickinson.

Scott explains that compared to Montana, there is such a shortage of contractors bidding jobs in North Dakota that there’s almost no competition. New contractors are moving into North Dakota with no subcontractor base. The growth is outpacing the workforce, creating job opportunities for contractors, truckers, builders, skilled laborers, small businesses, and many others far beyond North Dakota.

Estimating revenue from the Bakken alone, Scott says oil patch projects account for 15% of his family’s business. Luckily for Scott, he only has to leave the Flathead about once every four months to check on jobs in North Dakota to make sure things are running smoothly. For Scott’s younger brother Tyler, however, the story is quite different.

Tyler Gearhart, like his brother, graduated from MSU in Bozeman where he lives today. He received his degree in Marketing and Entrepreneurship and now works as a MWD Field Technician for The Directional Drilling Company. He was recommended for the position by his uncle, who Tyler says has worked in the oil fields for the better part of two decades. Tyler’s main responsibilities include assembling tools for down hole monitoring, setting up surface gear, and taking surveys. Like most true blue Montanans, the Gearhart brothers spend their free time outdoors fishing and skiing (pictured above).
“It was always a goal of mine to stay in Montana after college,” said Tyler, who describes the worse part of his job as the long periods away from home. He says the best thing about his job is the people.

“Don’t make assumptions about what goes on in the oilfields,” said Tyler, “Come out and experience things before you jump to conclusions.”

By CHIP BROWN Published: January 31, 2013

Long before the full frenzy of the boom, you could see its harbingers at the Mountrail County courthouse in Stanley, N.D. Geologists had pored over core samples and log signatures and had made their educated guesses, and now it was the hour of the “landmen,” the men and women whose job was to dig through courthouse books for the often-tangled history of mineral title and surface rights.

Apart from a few fanatics who sometimes turned up at midnight, the landmen would begin arriving at the courthouse around 6 a.m. In the dead of winter, it would still be dark and often 20 or 30 below zero, and because the courthouse didn’t open until 7:30, the landmen would leave their briefcases outside the entrance, on the steps, in the order they arrived. And then they would go back to their cars and trucks to wait with the engines running, their faces wreathed in coffee steam. Sometimes there were more than 20 briefcases filed on the courthouse steps. The former landman who told me this — Brent Brannan, now director of the North Dakota Oil and Gas Research Program — said he sometimes thought he could see the whole boom in that one image, briefcases waiting for the day to start, and it killed him a little that he never took a picture.

For many years North Dakota has been a frontier — not the classic 19th-century kind based on American avarice and the lure of opportunity in unsettled lands, but the kind that comes afterward, when a place has been stripped bare or just forgotten because it was a hard garden that no one wanted too much to begin with, and now it has reverted to the wilderness that widens around dying towns. In a way, of course, this kind of frontier is as much a state of mind as an actual place, a melancholy mood you can’t shake as you drive all day in a raw spring rain with nothing but fence posts and featureless cattle range for company thinking, Is this all there is? until finally you get out at some windswept intersection and gratefully fall on the fellowship of a dog-faced bar with a jukebox of songs about people on their way to somewhere else.

All of which may explain the shock of coming around a bend and suddenly finding a derrick illuminated at night, or a gas flare framed by stars, or dozens of neatly ranked trailers in a “man camp,” or a vast yard of drill pipe, or a herd of water trucks, or tracts of almost-finished single-family homes with Tyvek paper flapping in the wind of what just yesterday was a wheat field. North Dakota has had oil booms before but never one so big, never one that rivaled the land rush precipitated more than a century ago by the transcontinental railroads, never one that so radically changed the subtext of the Dakota frontier from the Bitter Past That Was to the Better Future That May Yet Be.

It’s hard to think of what oil hasn’t done to life in the small communities of western North Dakota, good and bad. It has minted millionaires, paid off mortgages, created businesses; it has raised rents, stressed roads, vexed planners and overwhelmed schools; it has polluted streams, spoiled fields and boosted crime. It has confounded kids running lemonade stands: 50 cents a cup but your customer has only hundreds in his payday wallet. Oil has financed multimillion-dollar recreation centers and new hospital wings. It has fitted highways with passing lanes and rumble strips. It has forced McDonald’s to offer bonuses and brought job seekers from all over the country — truck drivers, frack hands, pipe fitters, teachers, manicurists, strippers. It has ginned up an unreleased reality show called “Boomtown Girls,” which follows the lives of “five bold and brave sisters” in the formerly drowsy farm center of Williston, N.D. Williston, whose population has tripled in the past 10 years, lies in the middle of the 150,000-square-mile Williston Basin, a depression in the crust of the earth that geologists now believe contains one of the largest oil fields in the world.

In the fall of 2011 in Crosby, N.D., Continental Resources, the oil company with the most acreage leased in the basin, erected a self-congratulatory granite monument celebrating its work in the so-called Bakken Formation, the Williston Basin rocks that, as Continental put it, ushered in “a new era in the American oil industry.” The number of rigs drilling new wells in North Dakota’s part of the basin reached a record 218 last May. It has now leveled off at around 200, as thousands of wells have been completed under deadline pressure to secure expiring mineral leases. Many thousands more will be spudded in the next two years as the boom moves from discovery to production and crews drill “infill” wells, complete pipelines, fortify roads, enlarge refineries and build natural-gas pumping stations and oil-loading train yards.

North Dakota’s last oil boom, 30 years ago, collapsed so quickly when prices crashed that workers in the small city of Dickinson left the coffee in their cups when they quit their trailers. Apostles of “Bakken gold” insist that what’s different this time is that this time is different, the history of frontier avarice notwithstanding. This is the boom that is going to change everything without the remorse and misgivings that have marked the aftermath of so many past orgies of resource extraction. This is the boom that won’t leave the land trashed, won’t destroy communities, won’t afflict the state with the so-called Dutch Disease in which natural-resource development and the sugar rush of fast cash paradoxically make other parts of the economy less competitive and more difficult to sustain. This is the boom being managed by local people certain they know how to look after their interests and safeguard the land they live on. This is the Big One that North Dakota has been waiting for for more than a century. [… read more.]

Retrieved: 7 February 2013. The NY Times. Original Story here: http://www.nytimes.com/2013/02/03/magazine/north-dakota-went-boom.html?_r=1&