(HELENA)—Attorney General Tim Fox announced today that Montana has joined nine other western states protesting the sequestration of state funds under the Mineral Leasing Act (MLA).  In a bi-partisan letter to President Barack Obama, U.S. Department of the Interior Secretary Sally Jewell, U.S. Department of Agriculture Secretary Tom Vilsack, and Office of Management and Budget Director Sylvia Mathews Burwell, members of the Conference of Western Attorneys General strongly objected to the loss of revenue, which is statutorily guaranteed to the states.

The Interior Department’s Office of Natural Resources Revenue notified states in March that it would withhold payments from March through July, and possibly August and September, saying the move was required by the 5.1% across-the-board sequestration cuts.  More than half of the  states receive mineral royalties, with western states relying heavily on this revenue because of the disproportionate amount of federal land with valuable minerals located in western states.

The MLA entitles states to 48% of all revenue collected by the federal government for mineral activity on federal lands within state boundaries.  Montana stands to lose nearly $2.4 million in revenue per year based on FY 2012 figures.  “The federal government can’t simply seize Montana’s money to cover its budget shortfalls and out-of-control spending,” said Attorney General Fox.  “Washington needs to balance the federal budget by cutting spending, not by taking money from the states that produce our mineral wealth and without regard for the principles of federalism.”

One-quarter of the sequestered funds were to be paid to the counties in which they were raised; three-quarters of the revenue would go to the State’s general fund.  “Counties typically rely on MLA-generated dollars to help meet their infrastructure needs,” said Harold Blattie, Executive Director of the Montana Association of Counties.  “The funds being sequestered represent over $600,000 that counties use to fund essential services like roads, bridges, building improvements, equipment and vehicles.  This is money Montana counties can ill-afford to lose.”

The ten Attorneys General point out that MLA payments are not subject to sequester for a number of reasons:  First, while mineral royalty payments make a stop in the federal treasury before being returned to the states, that does not convert the royalties into federal money or give the federal government any discretion to decide whether or how much money to return to the states under the MLA.

Second, because the only payments going to the states under the MLA come directly from mineral development in those states, it is an entirely self-sustaining revenue source.  Thus, it is not possible that such payments could be subject to sequestration.

Finally, if payments under the MLA can be deemed an appropriation or expenditure, the Attorneys General argue that the Office of Management and Budget should exempt them from sequestration like many other programs important to economic recovery.

Read the letter here: https://doj.mt.gov/2013/08/montana-protests-federal-withholding-of-mineral-leasing-act-revenue/

Steven Unterseher of Smiley’s Energy Service in Fairview, Montana reported the eastbound Amtrak Empire Builder #8 train hit a bulldozer in Trenton, North Dakota around 7:15 PM MDT on July 29, 2013. The operator of the bulldozer was life lifted from the scene to the Mercy Medical Center in Williston, ND hospital where he passed away from his injuries.

Stranded Amtrak Empire Builder #8 after hitting bulldozer near Trenton, ND

The accident was caused by the construction company not providing a flagger with the Amtrak train was coming around a corner and the engineer not seeing the bulldozer on the track ahead of him. Road 1804 is under construction and parallels the tracks between Trenton and Highway 58. First report is no one on the train was hurt but passengers were not allowed to disembark to get rides with waiting friends. Amtrak is waiting for another diesel engine to arrive and take over for the damaged one.

A hole in the front of the engine from the train was observed along with severe damage to the bulldozer sitting on the track.

Scene after the train accident in Trenton, ND

The Amtrak Empire Builder #8 disruption happened between Wolf Point and Williston near Trenton, North Dakota at 7 PM MDT. A paramedic in western North Dakota said, “The [lead] engine is smashed and the front is off the tracks with the second engine leaking a lot of diesel fuel. The Empire Builder #8 east bound started moving again after relief engines arrived at 2:25 AM MDT, and took the #8 Amtrak train to Trenton using NS 8043, NS 8021, AMTK 21, and AMTK 91 for power.

Dick Reed and his wife, who live in McMinnville, Oregon, are on the train while Amtraking to Little Rock via Chicago. Dick Reed said that it was pretty hot in the coach because of the lack of HEP* but after the night air started cooling off outside the crew opened doors to try to get a little air circulation to the passengers.

Another picture of the Amtrak versus Bulldozer accident. The damaged bulldozer is to the right of the tree.

*Head End Power is a system of electrical power distribution on a passenger train in which a power source in a central location on the train (usually a locomotive or a generator car) generates all the electricity for “hotel” power (non-traction, or non-motive power uses) needed by the train. Virtually all modern passenger trains have their electrical needs met in this fashion. The acronym HEP is its common usage.

This article and pictures can be re-published with attribution to the author: Bob van der Valk – Managing Editor – Bakken Oil Business Journal. Pictures were taken by Steven Unterseher of Fairview, Montana

By: Bob van der Valk
July 30, 2013 6 AM MDT
editor@bakkenoilbiz.com

North Dakota Director’s Cut Newsletter –Bakken Oil Business Journal Report

Photo by Rio Good

North Dakota’s total crude production in May rose to 810,129 barrels per day (bp/d), surpassing the 800,000-bp/d mark for the first time, according to the North Dakota Industrial Commission Lynn Helms’ Director’s Cut Newsletter of July 15, 2013.

May crude output was 2% higher than April 2013 and 26.7% above the corresponding month in 2012. The Bakken crude output makes up more than 90% of North Dakota’s total oil production.

The higher May output was boosted by a higher number of oil wells in production with the number of producing wells in May rising to 1,333 from 1,309.  North Dakota is the second largest oil producing state in the US with Texas at #1 and Alaska in third place..

Following is the complete North Dakota NDIC Director’s Cut Newsletter:

North Dakota’s total crude production in May rose to 810,129 barrels per day (bp/d), surpassing the 800,000 bp/d mark for the first time, according to the North Dakota Industrial Commission Lynn Helms’ Director’s Cut Newsletter of July 15, 2013.

May crude output was 2% higher than April 2013 and 26.7% above the corresponding month in 2012. The Bakken crude output makes up more than 90% of North Dakota’s total oil production.

The higher May output was boosted by a higher number of oil wells in production with the number of producing wells in May rising to 1,333 from 1,309.

7/15/2013 North Dakota Director’s Cut – by Lynn Helms, NDIC Department of Mineral Resources

Apr Oil 23,815,546 barrels = 793,852 barrels/day

May Oil 25,114,011 barrels = 810,129 barrels/day (preliminary)(NEW all-time high)

Apr Gas 25,835,802 MCF = 861,193 MCF/day

May Gas 27,899,280 MCF = 899,977 MCF/day (preliminary)(NEW all-time high)

Apr Producing Wells = 8,772

May Producing Wells = 8,915 (preliminary)(NEW all-time high

Apr Permitting: 202 drilling and 0 seismic

May Permitting: 211 drilling and 0 seismic

Jun Permitting: 165 drilling and 0 seismic (all time high was 370 in Oct 2012)

Apr Sweet Crude Price = $87.85/barrel

May Sweet Crude Price = $87.94/barrel

Jun Sweet Crude Price = $85.79/barrel

Today Sweet Crude Price = $97.00/barrel (all-time high was $136.29 July 3, 2008

Apr rig count 186

May rig count 187

Jun rig count 187

Today’s rig count is 186 (all-time high was 218 on May 29, 2012)

Comments:

The drilling rig count rose by only one from April to May, but the number of well completions rose by 10 to 143. That number of completions is above the threshold needed to maintain production so oil production rate rose, up 2.1% from April. However, the drilling rigs continue to outpace completion crews. The average number of days to drill a well from spud to total depth is at just under 22, but the average number of days from total depth to initial production has increased to 92. Load restrictions have remained in place longer than ever before because May 2013 was the wettest on record. Uncertainty surrounding federal policies on taxation and hydraulic fracturing regulation continue to make investors nervous. Pressure on the federal budget has led to a budget proposal that eliminates deductions for intangible drilling costs and the depletion allowance.

More than 95% of drilling still targets the Bakken and Three Forks formations.

We estimate that at the end of May there were about 500 wells waiting on completion services, an increase of 10.

Crude oil take away capacity continues to be adequate as long as rail deliveries to the coasts keep growing.

Rig count in the Williston basin is stable. Utilization rate for rigs capable of +20,000 feet is about 90%, and for shallow well rigs (drill to 7,000 feet or less) utilization remains about 60%.

Drilling permit activity was down sharply in May. There is a sufficient permit inventory to accommodate multi-well pads, the inability to construct locations during load restrictions, and the time required to deal with federal hydraulic fracturing rules if required.

The number of rigs actively drilling on federal surface in the Dakota Prairie Grasslands is down one to 2.

The number of rigs drilling on the Fort Berthold Reservation is down 4 to 21 with 6 on fee lands and 15 on trust lands.

There are now 935 active wells (96 on trust lands & 839 on fee lands)

Producing 155,332 barrels of oil per day (5,387 from trust lands & 148,594 from fee lands)

177 wells are waiting on completion

272 approved drilling permits (252 on trust lands & 20 on fee lands)

2,434 additional potential future wells (2,182 on trust lands & 252 on fee lands)

Seismic activity is steady with 4 surveys active/recording, 1 remediating, 1 suspended, and 6 permitted. There are now 4 buried arrays in North Dakota for monitoring and optimizing hydraulic fracturing.

North Dakota leasing activity is very slow, consisting mostly of renewals and top leases in the Bakken – Three Forks area.

US natural gas storage is now 0.8% below the five-year average indicating the price has bottomed, but low prices are still expected for the foreseeable future. Natural gas production increased 4.5% versus the 2.1% increase in oil production. This is consistent with the Bentek study that shows gas oil ratios increasing as wells age. North Dakota shallow gas exploration is not economic at near term gas prices.

Natural gas delivered to Northern Border at Watford City is down $0.31 to $3.20/MCF. This results in a current oil to gas price ratio of 30 to 1, but the high liquids content makes gathering and processing of Bakken gas economic. Additions to gathering and processing capacity are catching up, but the percentage of gas flared remained at 29%. The historical high was 36% in September 2011.

By:  Bob van der Valk

Traffic on the interstate highways and rails has become part of the way modern way of life.  Rail tanker car traffic hauling crude oil increased in multiples over the last five years and will continue to do so every year until more infrastructure is build to handle all of this new found oil.   Additional crude oil production in the Williston basin, within the Bakken Shale Formation is going at full speed on our way toward make our country energy secure.

The US and Canada rail systems are currently being over utilized with the lack of infrastructure reaching the point of having major accidents.  The one in Lac-Mégantic near Quebec on Saturday, July 6th killed up to 53 people along with destroying most the small village.  Railroad tracks laid over 100 years ago are still being used today but with higher and heavier traffic than for which they were originally designed.

The 70 thousand barrels of Bakken sweet light crude oil was being shipped via rail from Trenton, North Dakota to Saint John, New Brunswick with eventual delivery destination of the Irving Oil refinery.  World Fuel Services had title to the crude oil and 50 thousand barrels were lost in the derailment caused by human error.   The MM&A engineer had stopped the 102 chain of rail cars without setting the brake.  While he walked to town to get some rest the train rolled backwards eventually derailing and exploding into a fireball killing people and destroying most of the town.

You may not like pipelines or fossil fuels but the most efficient and safest way to move the highly volatile sweet Bakken Oil crude oil is by pipeline. Increased hauling of crude oil with our overused and in some cases antiquated rail system may well turn out to be “Hell on Wheels”.

The town of Lac-Mégantic near Quebec Canada was named for the lake near which it is located and was named by the Amerindian Abernaki tribe.  It means “Place Where the Fish Are Held” and Lac is the French word for Lake. The small village is about 20 miles north of the Maine border
As environmental disasters go, the explosion Saturday, July 6, 2013 of a runaway crude oil tanker train is a major catastrophe. One thousand people were forced to evacuate the immediate area. Quebec’s environment minister reported 26,000 gallons of crude oil spilled into the Chaudière River and could possibly reach Quebec and the St. Lawrence River before too long.

The derailed 72-car train belonged to MM &A, which is a subsidiary of Illinois-based multinational Rail World, and was carrying North Dakota shale oil extracted by hydraulic fracturing to the massive Irving Oil refinery in the port city of Saint John in New Brunswick, Canada.   They refine the crude oil into gasoline and diesel.  Irving then uses pipelines to ship their finished products to the Northeast US as well as supply Canadian petroleum distributors.

The Wall Street Journal reported in their March 2013 article,  the US rail system moved 9,500 carloads of crude oil in 2008 and surged to 233,811 carloads in 2012. During the same period, the total number of spills and accident increased exponentially. A derailed train accident spilled 714 barrels of crude oil in western Minnesota in March 2013 on frozen land.  But, this accident resulted in a quick and efficient clean up with the railroad skating by without doing much damage to the environment.

Application for the Keystone XL pipeline permit was first filed with the US State Department in late 2008. Since then, the amount of oil being shipped on rails has risen 24-fold mostly shipped mostly on the Burlington, Northern, and Santa Fe (BNSF) railroad owned by Berkshire Hathaway.  Warren Buffett, the Oracle of Omaha and main stockholder of Berkshire Hathaway, has been am ardent supporter of BOLD Nebraska, which is blocking the Keystone XL from being recommended through Nebraska.  The second application is waiting for recommendation by the US State Department for an eventual final up or down decision from President Obama.

Earlier this year Jane Kleeb, the Director of Bold Nebraska, stated the Keystone XL pipeline would be build over her “dead body”.  The problem there is a possibility resulting in more dead bodies, hopefully not hers, if the Keystone XL pipeline does not receive its approval to build the necessary northern leg from Alberta, Canada to Steele, Nebraska.

Baker, Montana will be the location for an on-ramp into the Keystone XL pipeline to be utilized to ship a minimum of 100 thousand barrels per day of Bakken crude oil to the Gulf Coast of the US.  The total capacity of the pipeline is 830 thousand barrels with most of the oil in the pipeline coming from Alberta, Canada in the form of oil sands crude oil also called bitumen.  It is heavier than light sweet crude oil and is the type of heavy sour crude oil used in most US oil refineries to crack into gasoline and diesel fuel as well as other products.

The southern leg has already started construction from Steele, Nebraska to Cushing, Oklahoma with President Obama taking credit for accelerating the approval process for this section.   It was a great photo opportunity for President Obama during the last Presidential election.  Only one problem the southern leg did not need his approval.  Only pipelines between countries have to go through the process of being reviewed and recommended for approval to the President.

The disaster at Lac-Mégantic should be a wake up call for this Administration to do the right thing and approve the permit for construction and operation for the full length of the Keystone XL pipeline to be approved without delay.

Video by Lac-Mégantic resident Adrien Aubert, who filmed the blast on July 6, 2013.

Opinion Article

“Phelim We Hardly Knew Ye”

By: Bob van der Valk
Dateline: Terry, Montana
June 27, 2013

This opinion article deals with FrackNation as a pro-hydraulic fracturing for oil & gas documentary. Comments, other than my own, were made by individual landowners in the Pennsylvania area where the controversy about hydraulic fracturing had its inception.

Bob van der Valk

FrackNation’s Phelim McAleer has been able to hit Josh Fox’s Gasland and Gasland Part II movies with his best shot making his points about hydraulic fracturing not being the cause for underground water contamination.   Neither is the methane produced by the drilling process resulted in any of the health problems purportedly suffered by land owners where the drilling has been done.

For the last two years Phelim McAleer has made it his life’s calling chasing Josh Fox around the country peppering him with embarrassing questions about ridiculous charges being made in the original Gasland movie.  Gasland was nominated for an Oscar as the Best Documentary of 2010.  Most, if not all, of the charges made by emotionally and financially driven opponents to hydraulic fracturing drilling for natural gas have been debunked by Federal and State agencies, which became involved by reacting to the public attention Gasland initially received.

Recently Phelim McAleer has been showing his FrackNation up against Gasland Part II.  This is leading up to the HBO-TV premiere of Gasland Part II on July 9, 2013. FrackNation will be shown again on AXS-TV July 10, 2013 both of them will get high viewer ship for both cable channels.

What has been lost in this conversation about hydraulic fracturing is the US becoming energy secure once again of having to import crude oil from countries with governments hostile to our way of life. Neither Josh Fox nor Phelim McAleer one have oil industry experience and are continuing this unnecessary raucous to promote themselves.

Sherry Hart

After the Binghamton, New York, February 10, 2013 showing of FrackNation a question was asked by Craig Stephens addressing Phelim McAleer, the producer of FrackNation, about the December 15, 2010 “Dimock Consent Order and Settlement Agreement” (COSA): http://files.dep.state.pa.us/OilGas/OilGasLandingPageFiles/FinalCO&A121510.pdf

Similar to what has happened since the beginning of the Dimock saga, the actual contents and findings of the COSA frequently get overlooked while pro-drillers and drilling opponents continue to banter with each other about the water being poisoned, no it wasn’t, etc.   Phelim’s brief answer to Cabot’s move to settle was that it was a case of corporate business as usual and happens all the time.  Partly true, but anyone who has been following the Carter Road allegations and its resulting mounds of paperwork and legal filings for the last couple of years are familiar with a few things above and beyond his answer:

The PA DEP claimed identification of the migrating gas as being from Cabot’s wells primarily using “presumptive guilt”, based only on proximity to the well, and explains their findings in a the original COSA dated November 4,2009 (http://www.marcellus-shale.us/pdf/Cabot_Consent-Order_11-4-09.pdf) which states starting in January 2009 PA DEP collected samples from water wells providing water to 13 homes which showed elevated levels of dissolved methane as well as identified combustible gas in the headspaces of seven of those water wells.

After the COSA was established, Cabot hired an independent consultant to perform a separate investigation.  According to a review of data on the same exact wells determined to be problematic by PA DEP, Robert W. Watson, Ph.D./P.E. and Associate Professor Emeritus of Petroleum and Natural Gas Engineering and Environmental Systems Engineering, etc. concluded that Cabot was using procedures for drilling, casing and cementing wells even at that time which met or exceeded the requirements of the Pennsylvania Oil & Gas Act, were adequate to protect the drinking water, and which did not cause or allow methane migration into the drinking water. (http://www.cabotog.com/pdfs/Dr_Bob_Watson_WhitePaper_101010.pdf – page 2 and again in the Conclusion on page.

Based upon those findings, and mostly those findings alone, because all of the water supplies were within 1,300 or less feet of a Cabot well and because those wells were drilled within the preceding six months, PA regulations deem a determination of guilt can be made.  (page 3-4, articles J-K): The Pennsylvania Oil & Gas Act: A Summary of Statutory Provisions dated March 2009, Section 208: Protection of Water Supplies (58 P.S. § 601.208) (page 4) states, in part, “There is a refutable presumption that a polluted water supply located within 1,000 feet of a well is caused by the well.” http://law.psu.edu/_file/aglaw/SummaryOfPennsylvaniaOilAndGasAct.pdf  This Summary was written prior to pre-drill tests becoming mandatory, which if anything could well be the most important lesson learned in Dimock.

Other information that could be pertinent is in the legal filings of the lawsuit itself:

1) The Dimock litigants fired their original lawyer when another better known litigation firm offered to take them on as clients.  They walked out leaving $650,294.18 in legal fees unpaid. 2) When the revised COSA was finalized, settlement amounts of the plaintiffs totaled $2,234,160. (2011-11-30 2010 COSA Settlement amounts.jpg).  Amounts of the settlement varied depending on individual property appraisals.  These funds were put into an escrow account to be claimed by December of last year.  There were no restrictions put on this money; it was free for them to collect and they could still continue with their lawsuit and water deliveries would continue.  (2011-12-16 DEP and Cabot Rev Consent Order and Settlement Agreement.PDF)
3) Their original lawyer caught wind of this settlement and put a lien on the escrow account for the outstanding fees the litigants had not paid. (2011-01-12 Motion to demand fired attorneys fee.pdf)
4)  All those persons within the determined effected area and not involved in the lawsuit, claimed their money.  None of the litigants did because doing so would mean paying their first lawyer.  This got muddled in their lies of how Cabot was forcing them to sign non-disclosure agreements and quit the lawsuit… all of which is written into the contract that the money is theirs – no restrictions on it.
5) In August, most of the litigants settled, but do have to abide by a gag order regarding the settlement amounts or findings.  Also, the money contained in the escrow account set up per the COSA goes back to Cabot.  Thus Dan Dinges statement, “The aggregate value of the settlements are not a material item with respect to Cabot’s financial statements,” (statement found in the Philly.com article referenced below.)   I believe there is currently only one remaining holdout, Ray Kemble, who spoke to the Philadelphia Inquirer soon after the settlement offers were made and accepted by the majority of the litigants.  He mentions what his settlement offer was and it appears it was pretty close to the same amount originally offered him in the COSA. (Per Philly.com: http://articles.philly.com/2012-08-27/news/33403570_1_susquehanna-county-town-cabot-oil-baby-drill) “Kemble is angry at just about everybody – Cabot, regulators, his own lawyers, and his ex-wife, who accepted the settlement, thereby reducing the amount offered to him. He said he would only see $79,000 from the deal, after legal fees.”  His ex-wife was entitled to half the amount offered, thus twice the amount Kemble states he was offered is $158,000.  Originally the COSA provided for a settlement offer of $185,712.00.
6) Thus, it appears the litigants were offered just slightly less the amount originally offered without having to access the funds that had liens on them, probably due to lawyer’s cuts, etc.  Settlement discussions began soon after the third set of water test results were released showing, once again, the water tested within acceptable drinking water standards.

This is why Phelim’s response fell far short and was merely the tip of the proverbial iceberg.

Robin Fehrenbach Scala 

Are you hearing that Phelim is actually on the other side?  Or is it a setup so both can profit from the argument and their respective films?  Having met and argued with Josh Fox even before his film came out, I know he is a liar and expect no truth to ever come from his mouth.

It was later that I was contacted by Magdalena Segieda, who is the Director and Producer of FrackNation, in an effort to find people in my area who were drilled and would talk on camera for the film. I met her first and we made some initial contacts, then Phelim and the film crew came out and spent a whole day in my house getting possible scenes with me and Sherry Hart talking about our issues and showing us working the boards and contacting landowners and politicians. (Of all those hours we appear for exactly 2 seconds maybe, which we were happy about).

HBO is trying to justify their financial backing of Gasland and Part II (and Fox in general) so it seems like a good time to spread information, which could be used against Phelim or make him seem like he is just as bad as Fox.

 I also provided money to be executive producer and was involved from before the film was a film. There IS one way to prove who is right, and that is to follow the money. If HBO is really paying for ANYTHING they could prove it. But they won’t.  I trust HBO less than a guy sitting on a street corner with a hat waiting for spare change. Ask them to prove it. They can’t.

By the way, HBO DOES NOT put up those posters.  Phelim does and has since the beginning. It started from his first argument with Josh, where he asked if Josh knew about methane being in the water since the dawn of time, and Josh said, “It is not relevant”

Game On!

Now Phelim makes sure that if Gasland Part II is being shown, FrackNation is also being shown in the same town, biting at the bit for the debate with Josh, but there’s no point holding his breath!

At least HBO did not pay for FrackNation or any part of it or any advertising for it. They DID pay for Gasland and Part II and are now sucking eggs over it.

I never read the account about the arrest of the Julia Mineeva, the former Russian TV anchor, at the premiere of Gasland Part II or if her arrest for trespassing was a set up.  I do know that Josh Fox set up his own arrest (complete with his cameras rolling) at a committee hearing in the House of Representatives so he could use it in Gasland Part II.

The only reason I feel I can stand up for Phelim (though I could be wrong…it is always possible to be wrong) is due to his behavior on all other occasions where I have been with him or them, watching how they react.

See, I am the type who would make the movie and then go broke because I did not attempt to make money for travel and distribution. The movie would then be a waste of time and investor money.

I would hope that Phelim is making SOME kind of money so he does not go broke (as I would, which is stupid) trying to get the word out.

If anyone is being a money hog and pretending to actually care, it is Josh Fox, who will admit it to anyone everywhere except when asked during a screening.

Being a landowner in PA and NY, I felt like I hit the lottery when Phelim and company contacted me to help make the movie. I had no way to educate the public on my own and attempts to find a spokesperson died after speaking to an agent for an hour while finding out what it would cost to get the person I wanted.

Bob van der Valk

FrackNation exposed Josh Fox for the publicity seeker he is. The oil industry needs to have a serious discussion about the urban lies being spread by the likes of Josh Fox. Phelim did a good job on FrackNation and accomplished just that. He is a journalist and should have stuck to bringing out the true facts about hydraulic fracturing.  But we need an independent journalist to tell the true story on how to go about making the US energy secure. The next frontier will be in California with the Monterey Shale Formation coming into play. Their potential reserves of oil & gas is 3 times bigger than Marcellus, Eagle Ford & the Bakken combined.

Robin Fehrenbach Scala

You just explained your position so it makes total sense to me. Phelim has become the story.

Thanks for continuing our conversation until I could “get it”.

Bob van der Valk

God bless the USA!

This editorial was written with the assistance and input of:

• James Asbury – Mansfield, Pennsylvania
• Robin Fehrenbach Scala – Factoryville, Pennsylvania
• Sherry Hart – Tunkhannock, Pennsylvania

Disclosure: Bob van der Valk, Robin Fehrenback Scala and Sherry Hart donated funds to the Kickstarter program and are credited as Executive Producers of FrackNation.

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Montana vs. North Dakota, 2012

Number of drilling rigs
Montana: 10
North Dakota: 183
Producing wells
Montana: 4,712
North Dakota: 7,997
Average barrels per day
Montana: 72,600
North Dakota: 768,977
Barrels of oil yearly
Montana: 26.5 million
North Dakota: 242.5 million

Oil production increased 9.5 percent in Montana in 2012, the first time the state’s seen an increase since 2006, with oil activity drove up the state’s payroll by more than $300 million in the the past year.

In 2012, 26.5 million barrels of oil were produced in Big Sky County, compared to 24.2 million in 2011, said Tom Richmond, administrator of the Montana Board of Oil and Gas.

Accounting for the increase were new wells in eastern Roosevelt County and successful “infill” wells drilled in the existing Elm Coulee field near Sidney in Richland County, Richmond said. Elm Coulee is the area where the original successful horizontal wells were drilled in the Bakken formation.

“Production in Roosevelt County is what’s adding a nice increment,” Richmond said.

Sidney Mayor Bret Smelser said the first well drilled in the Bakken in Montana in 2000 was in the Elm Coulee field with 400 wells eventually drilled in western Richland County before moving to North Dakota. Operators there were the first to tap the Bakken formation with what Smelser calls a one-stage, or a “hail Mary” frack, in which hydraulic fracturing was used on the entire length of the lateral section of the well. The first lateral drilled was 400 yards. Today laterals can be up to two miles.

Hydraulic fracturing is method whereby high volumes of water and sand and a chemical mix is pumped into the wells to break up rock and release oil.

Now operators are returning to Elm Coulee to drill new wells and using better technology to do multi-staged “fracks” in the lateral sections, he said.

When a single frack is used, the mix goes to only the weakest rock, Richmond said. In staged fracks, shorter sections of the lateral line are targeted one at a time.

“It is a more efficient way to contact a reservoir with your frack fluid, and it’s a little more controlled,” Richmond said.

Today, Elm Coulee has 840 horizontal wells and 230 vertical wells are producing in the county.

“There’s millionaires out this way,” said Smelser one day earlier this month as he drove through Elm Coulee outside of Sidney, where pump jacks could be seen in every direction.

The city of Sidney even has a piece of the action, owning the mineral rights under city parkland abutting one well that’s recently been drilled near town. If it flows, it’s expected to produce roughly 200 barrels a day, which will generate about $16,000 for the city annually, Smelser said.

Production in Roosevelt, Richland and Fallon counties still accounts for the bulk of oil production in the state, Richmond said.

There were 4,712 producing wells in 2012, up from 4,520 in 2011.

Currently, the state has 10 drill rigs working on the ground. That isn’t particularly high, Richmond said, but good wells are being drilled.

Oil production peaked in the state at about 34 million barrels a year in 2006, Richmond said.

While oil activity is robust in eastern Montana, it’s not an oil “boom” akin to what’s occurring in North Dakota, said Patrick Barkey, director of the University of Montana’s Bureau of Business and Economic Research.

On average, Montana produced 72,600 barrels a day in 2012 compared to 768,977 in North Dakota.

Montana production is now leveling off but that indicates that new wells are coming on line to replace declining wells, Barkey said.

Oil activity continues to drive up wages in all sectors and the footprint extends beyond the oil field, creating a tremendous amount of service work in communities such as Billings and Glendive, ranging from legal to survey to repair and maintenance, Barkey said.

“What’s really putting the zip into the economy clearly is oil and gas particularly oil and it’s on both sides of the border,” Barkey said.

In the past year, payroll in Montana increased by $300 million, more than Wyoming, South Dakota and even Colorado. The primary engine for that growth was oil activity, Barkey said.

Five smaller eastern Montana counties bordering North Dakota outpaced most of the rest of the state in wage growth including larger counties such as Yellowstone, Gallatin, Missoula and Cascade, according to the University of Montana’s Bureau of Business and Economic Research.

Roosevelt County, for instance, saw a payroll increase of 6.7 percent in the past year, and Richland County, 9.4 percent. Cascade County’s total payroll declined by 0.9 percent in the past year.

The oil field work also has driven up wages in other sectors, Barkey said.

In Richland County, inflation-corrected wages per worker in all fields increased from $28,400 in 2002 to $44,330 in 2011. Salaries of food service workers in Richland County jumped from $8,900 in 2002, which was 75 percent of the state average, to $13,200 in 2011, which is just more than 100 percent of the state average.

Wage growth is even more amazing in North Dakota, where the state’s payroll increased by $2 billion in the last year.

“It’s becoming pretty clear to me that this Bakken oil development, we’re not likely to see another event like this in our lifetime,” Barkey says.

In April, the U.S. Geological Survey released a report updating a previous assessment of the Bakken Formation and providing the first governmental assessment of the Three Forks Formation.

The estimate in the newly released report doubled the estimated resource from a 2008 USGS assessment. The new report maintained the estimate of 3.65 billion barrels of recoverable oil and added an addition 3.73 barrels of recoverable oil from the underlying Three Forks Formation. The Bakken Formation includes western North Dakota and eastern Montana.

Of the total estimate of 7.3 billion barrels, 5.7 billion barrels are believed to be in North Dakota and 1.6 in Montana.

“That says from a resource point of view, production and for that matter drilling could go on for quite a while if the economics support it,” Barkey said.

This is “The End” for any hope of gasoline prices on the West Coast, specifically Southern California, before Memorial Day.  Today’s AAA Fuel Gauge for Los Angeles-Long Beach showed the average gasoline price already over $4 per gallon. The two major oil company refinery upsets in Southern California this afternoon will result in spike for gasoline prices starting on Monday with retail pump prices expected to hit $4.25 per gallon. The remainder of the West Coast including the Bay Area and the Pacific Northwest gasoline prices will follow suit.

The CononoPhillips 76 refinery in Wilmington reported flaring this afternoon.  Then the kicker came in the form  of the ExxonMobiil refinery suffering a “power bump” putting their Fluid Catalytic Cracker (FCC) unit out of business.

Because of it the ExxonMobill was flaring Friday afternoon at its 149,000 b/d refinery in Torrance, Calif., with the shut down of  their FCC unit, which had been kept running while other units in the refinery were going through a planned turnaround.  Now all of the units at this refinery are down.

The FCC is out of service and the refinery is flaring,

The refinery issued an unplanned flaring notification to the South Coast Air Quality Management this afternoon citing a breakdown. The flaring event began at 2 p.m. PDT and is expected to end before midnight.

ExxonMobil began a large-scale, multi-week turnaround May 3 on Torrance’s lone crude unit, an alkylation unit, a delayed coker unit, a sulfur recovery unit and a hydrotreater.

“Although we anticipate impact to production, ExxonMobil expects to be able to meet its contractual commitments,” a company spokesperson previously said about the planned maintenance.

The fluid catalytic cracker was not involved in the turnaround and had been operating via gasoil feed stored in railcars before a power glitch affected the unit.

Late Friday afternoon David Dumais, deputy fire chief of Torrance Fire Department, confirmed the following by phone.

* Upset occurred during maintenance turnaround,
* Refinery started turnaround this month on units including crude unit, alkylation unit, coker, hydrogen plant on May 2, 2013.

Any or all of the above article can be re-published with proper attribution to the author and the Bakkken Oil Business Journal.

Feel free to contact me for updated information.

Bob van der Valk  |  Managing Editor, Bakken Oil Business Journal
Terry, Montana  |  (406) 853-4251  |  editor@bakkenoilbiz.com

Article by: Bob van der Valk

There is no such thing in the petroleum business as perfect timing but in this case the Keystone XL pipeline project may just be the ticket to put North America over the threshold of becoming energy secure from Middle East countries from which we have been importing crude oils for over 40 years. The Organization of the Petroleum Exporting Countries (OPEC) is a cartel given a free hand to rule over the oil dependent economies of Western Countries like the US by dictating our fuel prices for over 40 years.

With excuses to “The Association” for using a parody of their song to make my point:

And then along comes Keystone
And does she want to give me kicks , and be my steady stream
And give me pick of memories
Or maybe rather gather tales of all the fails and tribulations
No one ever sees

Tanker rail cars filled with crude oils are already heading south from Saskatchewan, Canada and Trenton, North Dakota. The bitumen oil sands and Bakken crude oils could be more easily transported and economically by the use of a pipeline. It’s been a long four years with many fails and tribulations along the way to obtain the necessary permit to construct and operate just the animal known as the Keystone XL pipeline.

After completion it will be able to carry 830,000 barrels of crude oil to Cushing, Oklahoma on its way by use of the southern leg already under construction going to the Gulf Coast refineries. An on-ramp called The Bakken MarketLink will intersect with the Keystone XL pipeline in Baker, Montana, providing much needed relief for export of oil being produced from the Bakken formation. Much of this oil is currently exported with a discount to producers due to the lack of infrastructure necessary to move their product. Additionally, the pipeline will provide the safest method of transport, where currently much of the oil is being transported by tanker or railcar.

Much of the workforce necessary to build the new pipeline will be housed in a proposed workforce camp adjacent to the City of Baker. The camp will be built when the Presidential Permit (necessary to cross the Canadian border) has been approved. In preparation for the camp, the City of Baker has been working with Keystone to assure the necessary water and wastewater infrastructure is in place. Current electrical work being performed in Baker, Montana is for a wastewater lift station. Any improvements that are needed for the camp once it is constructed will be ultimately reimbursed by Keystone to the City.

Ongoing electrical infrastructure work at the proposed Baker, Montana workforce camp site.

Senator Alan Simpson gave the keynote address on February 20, 2013 at the Western Petroleum Marketers Association Convention and Trade show in Las Vegas. The former Senator from Wyoming recently became better known for the Bowles – Simpson Plan to reduce to national debt.

In response to my question about the future of the Keystone XL pipeline, he revealed Richard Trumka, the current President of the AFL-CIO, would come out in favor of President Obama granting the permit for construction and operation of the Keystone XL pipeline about a month from then.

Senator Alan Simpson took time to pose with me before giving the keynote address

Right on schedule on March 21, 2013 Joe Canason, a reporter for Real Clear Politics web site, interviewed Trumka. He told him that he doesn’t oppose the Keystone XL crude oil pipeline, current bête noire of the environmental movement. Although the AFL-CIO hasn’t directly backed Keystone, it has endorsed “pipelines in general,” said Trumka, who argues that the pipeline will have “a smaller carbon footprint” than other methods of transporting those petroleum products.
The nation would be better served, he says, by reducing “seeps and leaks” from existing oil facilities, “which represent a bigger hazard to the environment.” Would that create jobs? Trumka responded: “Far more than the pipeline itself — about 125,000 jobs a year. But it would also be a win-win. The environmentalists agree with us on that, we should clean up the leaks and the seeps.”
Read more at: http://www.realclearpolitics.com/articles/2013/03/21/the_newsmaker_memo_an_interview_with_afl-cio_president_richard_trumka_117562.html#ixzz2SL7CzAjJ

From 2005 to 2012, East Coast refinery runs of imported crude decreased 735,000 barrels per day (bbl/d) or 46 percent. (Editor’s note: There are 42 gallons in one barrel of crude oil.) That decrease was almost matched by a 685,000 bbl/d decrease in overall East Coast crude runs. Recently, the large price differentials between land-locked crude oils with growing production, such as the Bakken, and global sea-borne crude oils linked to the price of the Intercontinental Exchange of London Brent crude oil benchmark price, have encouraged refiners to bring more domestically produced crude into the region via rail. In 2012, 92 percent of crude oil run in East Coast refineries was imported, down from 99 percent in 2005.

Opposite this trend, the Midwest has been importing significantly more crude oil from Canada since 2005. In 2012, runs of imported crude oil reached 1.7 million bbl/d, an increase of 205,000 bbl/d (14 percent). In 2005, almost 34 percent of imported crude oil run in the Midwest was shipped to the Midwest via another region, most commonly by pipeline from the Gulf Coast; however, by 2012, nearly all imported crude processed in the Midwest was imported directly from Canada. While total U.S. crude imports have been decreasing, imports from Canada have gone up 775,000 bbl/d since 2005. The United States imported 2.4 million bbl/d of Canadian crude oil in 2012, or about 28 percent of the total U.S. crude imports.

The AFL-CIO endorsement, for the Keystone XL pipeline permit to be recommended by the US State Department for final approval by President Obama, is a step in the right direction. Another little push and North America will be energy secure and stick our thumbs on our noses to those pesky OPEC members.

ABOUT THE AUTHOR – Bob van der Valk, petroleum industry analyst, is the managing editor and regular contributor of the Bakken Oil Business Journal. He works and lives in Terry, MT. He can be contacted at (406) 853-4251 or by email.

Photo by Renae Mitchell, Oil & Gas Industry Photographer

Nicknamed the Mile High City because of its elevation, Denver was established in 1858 just east of the Rocky Mountains as a mining town during the Pikes Peak Gold Rush. Originally known as Denver City, the city was named after Kansas Territorial Governor James W. Denver. At the time, the area was part of Kansas Territory. Later, Denver City’s name was shortened to Denver after it became the capit al of the Colorado territory, which was created in 1861. Completion of the Denver Pacific Railroad in 1870 that linked Denver to the transcontinental railroad enabled Denver to prosper as a supply and service hub.

ENERGY IMPACT

While gold mining brought the first settlers to Denver, companies that are part of the air transportation, telecommunications, aerospace, and manufacturing industries are also found in Denver today. A number of oil and gas companies are also present in Denver, including Halliburton, Noble Energy Inc., Anadarko Petroleum Corp., EnCana Corp., EOG Resources Inc., and GE Oil & Gas.

Innovation in multi-stage hydraulic fracturing and horizontal drilling technology has allowed the oil and gas industry to begin exploring Colorado’s unconventional resources. These resources include shale and tight sands within three basins. Of these plays, the Niobrara currently is the most active, according to a report by the Institute for 21^st Century Energy. Some analysts have estimated the Niobrara, which is mainly a liquids-rich play, to hold reserves of approximately 2 billion barrels of recoverable oil reserves, according to the Colorado Oil & Gas Association.

Unconventional oil and gas activity in Colorado created 77,600 jobs in the state in 2012, according to the second part of a report by the Institute for 21^st Century Energy into the impact of unconventional resources on the U.S. economy. The number of jobs in Colorado supported by shale activity will grow to 121,398 in 2020 and 175,363 in 2035. Unconventional oil and gas activity contributed value-added economic activity of more than $11 billion in Colorado last year; that contribution is estimated to grow to more than $26 billion by 2035.

The nine-county Metro Denver and northern Colorado region ranked fourth for fossil fuel energy employment and seventh among the nation’s 50 largest metros for clean technology development concentration in 2012, according to the Metro Denver Economic Development Corporation. The energy industry cluster employs more than 44,000 people in the area, and the state of Colorado ranked tenth in fossil fuel energy jobs. Energy research centers and universities such as the National Renewable Energy Laboratory and the Colorado School of Mines are also found in the Denver area.

The energy industry not only has impacted Denver’s economy in real life, but in prime time as well – the popular 1980s TV soap opera, “Dynasty” followed the lives of a wealthy oil family living in Denver.

CITY HIGHLIGHTS

Denver residents can enjoy an active lifestyle, thanks to the city’s proximity to the ski resorts and outdoor recreation opportunities in the Rocky Mountains, as well as the city’s golf courses, dog parks, swimming pools and tennis courts. Not surprisingly, Denver’s access to outdoor recreation opportunities means its residents are among the healthiest in the United States. In 2011, Forbes magazine ranked Denver fifth among America’s Top 20 Healthiest Cities. The city’s overall good weather, performing arts and cultural opportunities, panoramic view of the Rockies and excellent schools make Denver an ideal place to work.

Residents and visitors can glimpse the city’s past at historical sites such as the Molly Brown House – the home of the Unsinkable Molly Brown, an American socialite and philanthropist who survived the sinking of the Titanic – to Denver’s Four Mile Historic Park, which features the city’s oldest standing structure and exhibits of pioneer life in the West. Other landmarks and attractions include Colorado’s state capitol building, the U.S. Mint and Elitch Gardens, an amusement park located in downtown Denver. The city offers something for everyone, from art and science museums to performing arts and sporting events to its aquarium, zoo and botanical gardens.

Author: Karen Boman

Retrieved 8 May 2013. Rigzone.