Wednesday, November 21, 2012

Another Nice Essay From Rigzone: Musings on North American Energy

Link here to Rigzone. com.

It really is amazing. I think most folks think of the Bakken, if they think about it at all, as just more of the same from the North Dakota oil patch. But it seems I find the Bakken mentioned every day in some article or another.

Here's another example: Rigzone's musings from the oil patch, today.

First, this item:
A key aspect of this glorious new world of abundant petroleum is the growth in natural gas production that has led to very low prices and boosted its use in generating electric power at the expense of coal. While natural gas has been cheaper than coal, the fact that gas creates about half the volume of carbon emissions than coal has spurred it use in power plants subject to increased environmental regulation. The natural gas industry is working feverishly to try to gain a greater foothold in the transportation fuels market with the hope that market will further boost natural gas demand thereby lifting prices. Increased gas demand is seen as the remedy for low natural gas prices. In the meantime, U.S. producers are continuing their shift in shale drilling from dry natural gas basins to those with higher liquids content and crude oil. An unfortunate side benefit of this drilling shift has been large volumes of associated natural gas being produced further adding to the abundance of gas and depressing any recovery in gas prices.
And then this:
There are a number of people suggesting the Keystone project will get a green light to move forward. They are assuming President Barack Obama will not support his environmental friends by stopping the importation of more "dirty" oil sands output. Supporters of Keystone have to assume this oil will be used by the Gulf Coast refineries, which means that heavy oil volumes currently imported from Venezuela and Mexico will be cut and replaced with Canadian bitumen. That assumption is due to TransCanada's plans to mix the bitumen with Bakken light crude produced in Montana and North Dakota. Without a change in the federal law restricting the export of U.S. oil production, by blending the two oils, Keystone's volumes cannot be exported. If the refineries utilizing Venezuelan and Mexican heavy oil don't want to change suppliers, then the existing Gulf Coast refining complex will have too much heavy oil to be processed. That means the refining industry will have to revamp facilities to use more heavy and less light oil.

Hess Christmas Gifts


For your spouse, a few shares in Hess might be another option.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this blog.

Update on Halcon Resources -- SeekingAlpha

Link here to
.... just after our October article, Halcon disclosed a large producing asset buy in the Williston Basin. Management added 81,000 net acres in Williams, Mountrail, McKenzie, and Dunn Counties, North Dakota for $1.45B. The company basically bought a swath of acreage across the heart of the play with several sweet spots included. Backing out the 10,500 BOEpd of current production at a conservative $80,000 per flowing BOE yields a modest adjusted acquisition price of $7,500 per net acre.
This is cheaper than operated peer Kodiak (currently valued at roughly $15,900 per production adjusted acre using 3Q volumes) and interesting since a chunk of the new acreage that will see HK rigs next year is in the FBIR where KOG points to much higher than Basin average EURs and where QEP recently paid roughly $21,000 per production adjusted acre.
Incredible article on Halcon. Go to the link for the entire story. 

Additional Oil Patch Activity in Belle Fourche, South Dakota

A reader has sent in links to several stories about all the Bakken-related activity that is going on in Belle Fourche, South Dakota. Those comments have been posted, but knowing some folks don't read comments, those links have been brought together here.

For newbies, Belle Fourche is in the northwest corner of South Dakota, located on US Highway 85. It has become a major way-station for trucks coming up from Texas on their way to the Bakken in North Dakota. In addition, Belle Fourche is strategically located near coal, oil, and natural gas fields in Montana, Wyoming, and Colorado. Because of its much larger size, one would think that Rapid City would be more interesting than Belle Fourche for oil-related activity, but when one looks at the map, it is obvious that Belle Fourche is located in a much more advantageous location.

In addition to this post, there have been several other posts regarding Belle Fourche.

Now, the information that a reader has sent me regarding Belle Fourche:

First: this is actually quite incredible, all the work ONEOK is providing. According to the writer, Oneok has brought in 200 workers to Belle Fourche for their 1,300-mile natural gas pipeline. These workers will probably be in the Belle Fourche area for quite some time because they will probably be working on the Bakken Express also.
Here are some pictures of Oneok's operation in Belle Fourche, SD. There are my next door neighbor now. :) 
Second, there is also an oil field fiberglass plant that is almost done going up in Belle Fourche (posted earlier):

Third, there is a $3 million travel center that is currently under construction in Belle on the intersection of US Highway 85 and State Highway 212. 

Hess Has A Nice Well; Wells Coming Off Confidential List Thanksgiving Eve; OXY USA Reporting Two New Wells; Hess With a Nice Well

Bakken Operations

Active Rigs: 183 (steady, up 2 from the recent low)

Twelve (12) new permits --
  • Operators: BEXP (5), BR (4), Murex (2), CLR
  • Fields: Elm Tree (McKenzie), Painted Woods (Williams), Corral Creek (Dunn), Baker (Williams)
  • Comments: Murex has a permit for a wildcat in Divide County;
Wells released from the confidential list:
  • 19604, PNC, WPX, Mandaree 24-13HD, Spotted Horn
  • 20390, 169, OXY USA, Bullinger Trust 1-18-19H-142-96, Manning, t5/12; cum 33K 9/12;
  • 21698, drl, XTO, Flatland 11X-2F, Sand Creek,
  • 22041, 1,084, Hess, SC-JW Hamilton-153-99-1314H-1,  Long Creek, t7/12; cum 45K 9/12;
  • 22262, 352, OXY USA, Little Butte 1-21-28H-16-90, Dimond, t5/12; cum 20K 9/12;
  • 22595, 580, Hess, GO-Darryl-158-98-0904H-1, Rainbow, t8/12; cum 25K 9/12;
Producing wells completed:
  • 20781, 1,019, ERF, Pine 148-94 12D-01-3H, McGregory Buttes, t10/12; cum --

ONEOK: Investor Day, September, 2012

From the transcript:
....  the prolific Bakken Shale in the Williston Basin. (The presentation is linked here.)

When our projects that we've announced in the Bakken are completed, we will have invested in our gathering and processing segment almost $1.5 billion to construct four new natural gas processing plants at a capacity of 100 million cubic feet per day each. They are in North Dakota, the Garden Creek number one and two plants [McKenzie County]. The Stateline's number one and two plants [are in the] Divide County gas gathering system. These projects together will increase our current processing capacity in the Bakken Shale to approximately 500 million cubic feet per day.

We are also investing in new well connect, system expansions and upgrades to our gathering and compression assets which are associated with these new plant to get supplies to those processing facilities and those investments are backed by percent or contracts with acreage dedications and a fee-based component.

Talking more about the Bakken Shale, we are making major NGL infrastructure investment in the Bakken as well, and those investments are backed primarily by the NGL production from our existing and new processing plants that I just talked about on the previous slide.

We have begun construction on a 500-mile Bakken NGL pipeline that's going to be in service during the first half of 2013, which will transport unfractionated or raw NGLs to the Conway and Mont Belvieu market hubs. It will utilize a pipeline. We already own a 50% ownership in, which is our Overland Pass pipeline, and the NGLs will be fractionated at our Williston fractionator, which is also in a process of being expanded.
One of the key points I would like to make about the Bakken NGL pipeline is that it will for the first time allow processing plant in the Bakken or in the Williston Basin to recover and transport ethane which currently is not possible.
In the Bakken, and we have to talk about the crude oil, it is a prolific crude oil play with projection expected to increased well over 1 million barrels per day within the next five years, because of that growth crude oil takeaway capacity in general is absolutely required for this area. In order to connect this additional supply to the marketplace that's being developed, we've announced plans to build the crude oil pipeline to bring light sweet oil --  and when I say sweet: low to no hydrogen sulfide crude oil -- from the Bakken Shale to the crude oil hub in Cushing, Oklahoma. The 1,300 mile Bakken crude oil express pipeline will parallel more than 80% of current and planned NGL pipelines and it is expected to be in service by early 2015. 
Later this month, we expect to hold an open season as we continue to negotiate with anchor shippers on the project. For producers this new pipeline provides a reliable mode of transportation at a lower cost versus other alternatives. It allows them to increase their netbacks and receive the benefits of their high quality crude oil, so that's the unique thing about this particular pipeline is that it will focus on light-sweet crude, which too many of those producers is an advantage. That way they can ensure when their barrels get to Cushing, they have that same light-sweet barrel, which is very important to them.
Not entirely unique. It is my understanding that Enbridge also limits light, sweet Bakken oil in their Bakken pipelines, and, of course, that's true also of oil shipped by rail.

Of The Top Five Gadgets Youngsters Want For Christmas, Four Of Them Are Apple Products

Link here to

Unfortunately, the sixth on the list was "computer," not separated by Mac vs PC.

Let's see what CNBC has to say: it's all about Apple. Everything else is a "compelling product." Or "credible" as in the Nook. And "then you have Google and Microsoft." The "apps that matter." Barnes and Noble, again, "compelling." Pretty lukewarm for everything other than Apple. Buying a $199 tablet as a second device for his children (the first device, of course, being the iPad).  Concluding statement: "at least MSFT has a product on the market now." Wow, that's a strong endorsement.

Science Writer: Who Is Doing The Math? And Buried In The Headline: Nearly 2 Parts Per Million -- You Have Got To Be Kidding


November 22, 2012: Irrefutable facts that global warming advocates never address:
  • "man-made" CO2 represents but 3% of all greenhouse gases, not including water vapor. Water vapor is the number #1 "greenhouse gas" by a huge margin; again, CO2 represents but 3% of all greenhouse gases; eliminate all CO2 and one still has 97% of the other gases to deal with, including water vapor
  • the increase in atmospheric CO2, from 2010 to 2011, is measured at "nearly two parts per million"; the annual variability of atmospheric CO2 is 3 - 9 parts per million
  • Canada, one of the first signatories of the Kyoto Protocol, has pulled out of the protocol (2011)
  • Germany has switched to coal (from nuclear energy) to provide the bulk of its electricity; of all forms of energy, coal is considered one of the worse for CO2 generation
  • most EU countries, in 2011 - 2012, due to financial constraints, have pulled back on renewable energy, if not completely banning new renewable initiatives [note: I have posted this several times; this was posted November 21, 2012; a new link at Bloomberg validating this fact was published November 22, 2012]
  • even ardent global warmers agree that global warming ended 16 years ago, as noted by the British Met Office; these ardent global warmers agree, but argue that a 16-year plateau is too short a period from which to draw conclusions; this plateau occurred during a period of heavy industrialization, especially in China, and when overall CO2 concentration was 140% of that in the pre-industrial age
  • Antarctic ice is growing in volume
  • CO2 emissions of the United States is currently at a 20-year low 
  • despite rising sea levels, 657 new islands were discovered through satellite imagine, announced in 2011 -- this is the weakest of the arguments because it is possible most of these islands were simply "overlooked/missed" in earlier surveys
  • the "intelligent designer" has not revealed the "correct" setting of the earth's thermostat
Those are irrefutable facts. 

Later, 9:56 pm: in the post below and the linked article, CO2 levels are stated to be in the range of 400 parts per million. Exactly what is "400 ppm"? To put this in perspective:
Submarine crew are reported to be the major source of CO2 on board submarines (Crawl 2003). Data collected on nine nuclear-powered ballistic missile submarines indicate an average CO2 concentration of 3,500 ppm with a range of 0-10,600 ppm, and data collected on 10 nuclear-powered attack submarines indicate an average CO2 concentration of 4,100 ppm with a range of 300-11,300 ppm. Source: National Academies Press.
Later, 9:54 pm: what percent of atmospheric greenhouse gases comes from man-made CO2? 3%. Three percent. The major atmospheric greenhouse gas? Water vapor. Source: Global Warming/GeoCraft. In other words, if we eliminated ALL CO2 from the atmosphere, 97% of all greenhouses gases would remain.
Original Post 

Here is the verbatim cut-and-paste paragraph from
Chief among these heat-trapping gases is carbon dioxide (CO2), the biggest culprit behind global warming. Carbon dioxide levels reached about 390.9 parts per million last year, which is 140 percent of the pre-industrial level of 280 parts per million and nearly 2 parts per million higher than the 2010 carbon dioxide level, according to the WMO report.
Generally speaking, when something increases by a hundred percent, it is said to have doubled. So, if the pre-industrial level was 280 and it increased by 100%, it should be 560 parts per million. And then another 40% of 280, about 110, added to the 560 would yield 670 parts per million.

In fact, 40% of 280 --> 110, which added to 280, gives the current number of 390. It increased by 40% assuming the numbers are to be trusted in the first place.

[Update: the linked story is accurate as written; see first comment.]

Oh, I almost missed this. How fast is CO2 rising ... according to the article? It rose "NEARLY 2 PARTS PER MILLION" between 2010 and 2011. Nearly two parts per million. You have got to be kidding. Reproducible? Hardly. Significant. Not. [Update, from wiki: There is an annual fluctuation of about 3–9 ppmv which roughly follows the Northern Hemisphere's growing season.]

Two parts / million increase: from 389 to 391 or thereabouts.  391 - 389 --> 2. Then 2/389 --> 0.5% increase in one year. Zero-point-five percent. Reproducible? Hardly. Statistically significant. Not. And even if this is absolutely accurate, a half-percent increase, would that mean anything with regard to global warming or Hurricane Sandy. Obviously not. And with the huge population increase in the past year, a rise of less than half-a-percent is pretty remarkable. Not only is earth's population growing, but per capita, energy use is going up. 

Note: the exact number is not provided: simply a "nearly 2 parts per million."  As my daughter would text, LOL.

But assuming the numbers are correct, the blame must rest with China and Europe, certainly not the US. The US has far exceeded its responsibility, compared to the rest of the world, in reducing CO2 emissions. The New York Times, the most trusted mainstream medium on global warming reported, just a few months ago, that US CO2 emissions were at a 20-year low.

And that fits with recent new stories: Canada has withdrawn from the Kyoto protocol in the past year; EU is switching to coal in lieu of natural gas; and, China is building an average of one coal-powered utility plant every day. Even the CIA is closing its "global warming office." (Which I assume was a spa, to begin with.)

As noted above, CO2 emissions are associated with global warming. No one has been able to provide the answer to the question: who determines the earth's thermostat setting?


From that last link, speaking of the thermostat:
..... we are talking about 0.6 degrees Celsius over 100 years -- neither statistically significant nor reproducible. Again...0.6 degrees Celsius over 100 years; if science were only so precise ... again, 0.6 degrees... are you kidding?
There is also some question whether CO2 accumulation is the main culprit in climate change: it is hard to reconcile that earthly CO2 concentrations have increased by 40% over the past year, and global warming actually ended 16 years ago according to the British weather office

Belle Fourche, SD: Another Plastics Pipeline Company Breaks Ground

Link here to Black Hills Fox:
A Texas-based pipeline manufacturer is expanding its operations by constructing a new plant in Belle Fourche. Pipeline Plastics says the new plant will create about 20 to 40 new jobs in the area.
Tuesday (November 20, 2012) the Belle Fourche community welcomed a new company into town, Pipeline Plastics.  The company is expanding its operations and they held a ground breaking ceremony Tuesday morning.
Search the MDW site for Belle Fourche -- it's getting to be quite a story. 

Breitbart Has It Right

Unions to shut down LAX if at all possible today, the busiest travel day of the year. Led by the president's favorite union: SEIU.  Slowdown to last "all" day, 11: 00 a.m. to 4:00 p.m.

But Americans are content/satisfied. They re-elected the president by a landslide. And I'm not in LAX today. Enjoying Starbucks coffee in a Boston suburb, waiting to see the grandchildren when they get out of school early today.

Along with the rest of Americans who are content/satisfied, so am I. As long as I'm not flying.

And the LAX slowdown? This, too, shall pass.

Jobless Claims: The Less-Volatile Four-Week Moving Average Approaching the Magic Number

Link here to Bloomberg.

Remember, the magic number is 400,000. 

This story is particularly interesting for two reasons: a) the four-week moving average has reached 400,000 for all practical purposes, especially if the numbers are revised upward next week, as expect; and, b) blame for the worsening numbers were placed on everything and everyone except on George Bush.

Here is what the jobless claims are blamed on this week:
  • Sandy
  • global economic slowdown
  • fiscal cliff
Quote of the day: Sandy is a “temporary setback for the job market,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly forecast the figure. Beyond the storm, “the job market is still very weak and it’s going to remain that way until we get some fiscal clarity.”

Let's parse that a bit: "temporary" -- every week there is a "temporary" reason for the setback. See data points going back to January 21, 2011, almost two years ago. And then this: "The job market is still very weak...." Well, duh. "And it's going to remain that way until we get some fiscal clarity."  Oh, why do I even bother? Smile.  

The four-week average, a less volatile measure than the weekly figures, rose to 396,250 from 386,750.

Is it just me or has anyone else noticed that every week there is some unexpected event that causes the first-time jobless claims to jump? It's an interesting phenomenon.

Permitting Activity in Montana: Targeting the Bakken

Link here to Fairfield Sun Times.
  • Sheridan County: 2
  • Roosevelt County: 3
  • Richland County: 5
All horizontals targeting the Bakken. 

Well, That Didn't Last Long --- Twinkies Mediation -- Less Than A Day


November 22, 2012: will liquidate.  At $35,000/year, some employees said they would rather relax at home and collect unemployment benefits; not sure if they are still eligible for health care insurance provided by the company; ObamaCare coming

Original Post

After the bankruptcy judge said the unions and the company had not tried hard enough, the company agreed to mediation, but said, with the company losing $1 million/day, the mediation would not last longer than 24 hours.

And it didn't

The same bankruptcy judge presided over mediation efforts.

It would have been fun to be a fly on the wall.
Judge: "So, where do we stand?"

Company: "We're losing $1 million/day on payroll for employees who are on strike."

Union: "I don't think the company is trying hard enough."

Judge: "Break for lunch? The 'court' will reconvene at 2:00 p.m."


Judge: "So, where do we stand?"

Company: "We're still losing $1 million/day on payroll for employees who are on strike."

Union: "I don't think the company is trying hard enough."

Judge: "It appears mediation efforts have failed. Any last words?"

Company: "No."

Union: "No."
The company will now ask (again) to liquidate. Plenty of buyers out there. Will take about a year to close down / sell operations, some say. 

Reader Provides Background on the Decker Coal Mine Story; Comments on BSNF and the Bakken

Late last night I received the following as a comment in response to the Decker coal mine story. It is a great comment, providing a lot of background, including a tie-in with the Bakken. Because some folks may not read comments I have re-posted the comment here.
A significant portion of the coal produced at the Decker mine has historically gone by train to the Midwest Energy Resources Company (MERC) site in Superior, WI, unloaded there, and then placed onto vessels for ultimate delivery to coal plants located along the Great Lakes. The amount of coal being brought in to Superior has really declined the last couple years, not necessarily because of actions in the US (though there's no denying the future of coal in the US does not look bright), but because of what's happened in Canada.
Coal has essentially been abandoned as an energy source in Canada in general, and the province of Ontario in particular. Several large coal-fired power plants in Ontario that were receiving regular shipments of coal out of Superior have shifted to natural gas or renewables, causing MERC to lose a big chunk of business.
To combat this loss, as well as losses that loom due to United States policy, MERC has been pushing to establish export deals, especially with European markets. There's been some success to date, with a deal to send coal out of Superior to the Netherlands and Spain, but so far not enough is being exported to make up for the business that has been lost. The ramifications are being felt all along the railroad tracks and, now, all the way to the mine in southeast Montana. The Duluth News-Tribune has covered this with some articles over the past year, but the links to those have long died. Still, I'm sure you could find some more information by running adequate terms through Google.

By the way, there's something Bakken-related I can work into this comment. Because of the decrease in demand for coal at places like the port in Superior and elsewhere in the Midwest and along the East Coast, BNSF recently announced that some trains that normally would have passed through Minot and Williston on their way between Chicago and the Pacific Northwest will be shifted to BNSF's historically coal-laden corridor that runs southwest from Chicago and passes through Iowa, Nebraska, and northern Wyoming. The main reasons cited were in order to make room for more oil trains set to come out of the Bakken region, as well as the railroad's continuing difficulty to attract crews to eastern Montana and North Dakota, which I think most honest observers would attribute at least partially to union regulations (I can explain that in greater detail, if desired).

FWIW, Trains Magazine was the one to report on the traffic shifts and a link to what was said is at ( It's behind a paywall, though, but what I typed was the crux of the article.
With regard to the issue of BNSF having trouble attracting crews to eastern Montana and North Dakota, yes, my hunch is that readers would be interested. Certainly I am.

Thank you for taking the time to provide the background to a very complex story.


A Note for the Granddaughters

On a completely different note: during the early 70's, specifically the 1973 oil embargo, I honestly thought "we" might run out of gasoline and/or energy in general. I was quite concerned. I was going to school in Los Angeles at the time. I started taking the bus: that tells you how concerned I was, using the LA bus system. My roommate was never worried; he continued to drive to school every day. I did not ride with him; I truly thought "it" was all over -- our economy. Talk about naive.

One of the "nice" things to have come out of the domestic coal story is the realization that "we" will "never" run out of fuel. That coal we are not using will be around for centuries.

Not only will coal be around for centuries, it will provide a ceiling in the price Americans pay for energy: if other energy gets too expensive, we will return to coal.  I feel very, very badly for all the laid-off coal workers who may not find new work that pays as well, but the current situation tells me that the US energy future looks very, very good.

Wednesday Morning LInks -- Not Much On The Bakken -- Stories In General

RBN Energy: natural gas wellhead freeze-offs

I did not read this article, scanned it. The subject is too depressing for me to read: funding rules test schools.  This story takes up the entire Page 3 of the A section of today's WSJ (except for a gutter ad): we've talked about the significance of Page 3 before.  The by-line is Karnes City, Texas, just south of San Antonio, Eagle Ford, Texas, but I did see North Dakota and Montana mentioned. The article -- or, rather the issue -- is depressing because it is a man-made problem that should be solved.

ObamaCare: states get a say in health law. Again, I did not read the article, scanned it. For archival purposes only.