"Oh, by the way .... "

This is just idle chatter, but something that I can't get out of my mind. When that happens, what works best for me is to post it and then move on.

Was it last Tuesday (January 4, 2011) when Mr Bernanke was testifying before Congress (regular bimonthly hearing)? Someone asked him whether it was the Fed's policies that was resulting in price of oil trending toward $100.

Besides alerting me to the observation that Washington was getting phone calls, e-mail and letters from their constituents concerned about rising price of oil, it alerted me to reflect on Mr Bernanke's answer.

He said the rising price of oil was not due to the Fed's policies but rather due to emerging markets. Wow, I wasn't the only one who caught that. Talking heads on CNBC immediately opined that Mr Bernanke was being disingenuous. In fact, they said, the rising price of all commodities, including gold and oil was directly related to the Fed's policies.

But let's assume Mr Bernanke was truthful ... just not offering the whole truth. If so, then the rising price of oil is due to two reasons (one from Mr Bernanke, and one from CNBC  talking heads):  a) emerging markets; and, b) the Fed's policies that have weakened the dollar.

But there's a third reason, and I think it's even bigger than "emerging markets." I think it's the global recovery. Japan recently reported record amounts of imported oil. Japan's oil imports rose 11 percent in November. And Japan ain't an emerging market. 

And, of course, the administration's policies of slow-rolling leases on-shore and off-shore in the US, and now the shutdown of the Alaskan pipeline .... well ... the price oil is rising due to "emerging markets," according to Mr Bernanke, but he could have read off a laundry list of reasons.

Update on KOG Update -- Bakken, North Dakota, USA

Because I was traveling when the most recent KOG update was released, I was not able to post everything I wanted to post.

Folks invested in KOG will have already seen it and looked at it closely but newbies should take another look at it, and pay attention to some key phrases:

• KOG will add a third rig this quarter (1Q11)
• KOG is partnering with XOM on some wells (read "deep pockets" for XOM)
• December weather will impact production targets (buying opportunity when earnings reported)

• KOG mentions that production from a four-well pad will be connected to a recently completed pipeline system. That system was not named, but I'm thinking Arrow Pipeline
• KOG believes that their recent drilling results suggest the Bakken and Three Forks are not communicating with each other in KOG's core operating area in Dunn County
• KOG believes that recent drilling results lend support to "drilling at least four Bakken wells within a drilling unit." That's a verbatim quote. Note some key words: "at least four"  .... "at least" ... "Bakken wells" ....  they did not say Bakken and Three Forks wells. 

In addition to these four-wells pads, KOG is also drilling two-well pads.

Inflation Watch -- Not a Bakken Story

Just a reminder.

For those interested in a true picture of inflation, unbiased, non-political, and simply based on prices of billions of products, this is a nice site to review periodically.

The first thing I do when I get to the site is un-check the boxes of all the countries except the US to get a clearer picture of the true inflation rate of the US.

Note the steep incline (almost straight up) between September, 2009 (-2.5%) , and January, 2010 (2.25%). Since then it has been relatively flat.

I have the site bookmarked at the top of my sidebar on the right but am planning on moving it.

Nice Discussion of Three Wells Over Time -- Bakken, North Dakota, USA

For newbies, this is a nice discussion about three wells in one 1280-acre spacing unit drilled over the past three years, and the effect fracking has on results.

• 15787, no IP reported, Angela Kaye 2-11H, Murex, West Bank, Bakken, no test date; first production September, 2005; cum 217K 10/12; 
• 18551, 1,250, Murex, Kristi Leigh 11-2H, West Bank, Bakken, t5/10; cum 192K 10/12
• 19196, 2,395, Murex, Ventura 11-2H, West Bank, Bakken, t11/10; cum 133K 10/12;

All three wells were horizontals in sections 2-11, T156N-R96W.

The wells are about 2.5 miles southwest of Tioga (Iroquois for "Peaceful Valley"), in the Beaver Lodge oil field, literally where the oil industry got its start in North Dakota.

The spark that ignited North Dakota's oil boom of 1951 was discovery of oil by Hess Petroleum Corporation on the Clarence Iverson farm, 8 miles south of Tioga.

Photos of the Clarence Iverson #1 well.

• Perhaps one of the most famous oil photographs ever taken; taken by Bill Shemorry.
• Another Bill Shemorry photograph of the well; from an airplane.
• Crowd scene at the Clarence Iverson #1 well. 

Location of the Clarence Iverson #1 well: just east of Country Road 21 about eight miles south of Tioga in the SW4 SW4 section 6, T155N-R95W. "X Marks the Spot." [These links are broken; I will try to find them later.]

• 25, Lease Name: Clarence Iverson, #1; Beaver Lodge-Devonian Unit G-307, t4/4/51 (Silurian); t12/17/51 (Madison); 9/27/59 (Devonian); all PNA now; the Devonian last produced in 1977; and was still producing over 1,000 bbls/month, better than some Bakken wells after two years of production; 

Note: for record keeping. The first well drilled in the West Bank oil field was the Stacy-Lynne.
15683, 436, Murex, Stacey-Lynne 1-12H; West Bank, Bakken, t3/05; cum 322K 8/13;

Alaskan Pipeline Shut Down: Leak Discovered

Link here.

The Trans Alaska Pipeline shut down on Saturday (January 8, 2011) after a leak was discovered at the intake pump station at Prudhoe Bay, constricting supply in one of the United States' key oil arteries. 

Some quick bullets:

• Operated by BP. (Yup, that's the same company that operated the well in the Gulf that blew in summer, 2010.)
• The pipeline accounts for 12 percent of US oil production.
• Ships 630,000 bbls/day.
• Unknown how long shutdown will last.
• Shipments from the terminus of the pipeline are unaffected; tankers are being loaded on schedule.
• No evidence the concrete encasement has been broached; if true, no environmental impact.

Comments:

• Price of oil will rise Monday, all things being equal.
• Direct economic impact will be minimal long term; back to normal within a month. (Didn't get reported on DrudgeReport and is not yet on Yahoo!Financial news page, January 9, 2011.)
• Indirect impact will be greater: anti-oil advocates will call for more regulation.
•  This can only be seen as more bad news for the oil industry.

[Update, January 19, 2011, Wednesday a.m.: apparently the start-up of the bypass came on line without incident and fanfare;  the target rate for today is 510,000 barrels a day. The pipeline carried 641,517 barrels a day in December. Alaska crude oil stockpiles were 583,943 barrels yesterday, after dropping as much as 83 percent after the disruption to 432,962 barrels on Jan. 15.]
[Update, January 17, 2011, Monday a.m.: supposedly the bypass has been completed; no announcement that oil has started flowing; oil dropped a bit in price but still over $91; markets closed today, Martin Luther King Day.]
[Update, January 16, 2011, Sunday a.m.: the pipeline was shut down just after midnight Saturday (that would be early morning Saturday, or early morning Sunday (unclear) -- to me, that would mean early morning Sunday)  for repairs. It is expected to remain closed for 36 hours. If so, we should see news reports on/about Tuesday, January 18, 2011, that oil is flowing once again.]
[Update, January 13, 2011: see update here.]
[Update, January 12, 2011: 400,000 bopd now coming through pipeline, but that is too little to keep the pipeline open; a very, very interesting story; I think this is a bigger story than media suggesting, and much of it due to moratorium on drilling in Alaska. No link. From CNBC. 
[Update, January 11, 2011: bypass pipeline underway. But could someone post the "real" percent of America's oil that comes through the pipeline. The first story (Sunday) said the pipeline represented 12 percent of America's production; yesterday they said 9 percent; today, the number is 15 percent. Those are not minor differences.]
[Update, January 10, 2011: pipeline shut for 3rd day; oil up 1 percent; why isn't the jump in oil price much bigger?]
[Update: 8:21 p.m. EST, Crude Soars on News of Pipeline Shutdown.]
[Update: Unrelated to spill. Price of oil could hit $110 within weeks according to OPEC official.]
[Update: Event considered "significant" by BP.]
[Update, 6:40 p.m. EST, Sunday night, January 9, 2011 -- Futures show oil up $1.32.]

Montana: Redistribution of Oil Proceeds Decimates Local School Districts

Sidney, Montana, is in Richland County, Montana. The Elm Coulee oil field is in Richland County, Montana.

Elm Coulee is where the current boom targeting the Bakken began (about 2000; moving to North Dakota about 2006).

Obviously Sidney benefits greatly from local oil revenue.

But, not unexpectedly, the governor feels that the money needs to be redistributed across the entire state.

If the governor’s proposal is approved, Sidney’s elementary district is projected to have approximately $79,000 in budgeted oil and gas funds. Under the current format, the district budgets $300,000 in oil and gas funds in the elementary budget.

I wonder if the money generated by the tourist industry in and around the state parks and around Glacier National Park is redistributed across the state? Just asking.

I assume it's just a matter of time before North Dakota considers the same.

Just What North Dakota Needs -- An Agency That Doesn't Do Anything

$600,000 for two employees?

This is what happens when the government has more money than it knows what to do with.

How about using the $600,000 for a one-time bonus to public school teachers? Or giving it back to the taxpayers?

Is the governor a conservative? Just asking.

EPA Takes On Montana

EPA to delay oil and gas permitting in Montana.

EPA seeks to take over permitting in Texas on same grounds.

The issues are slightly different in the two states, but similar in the big scheme of things: everywhere I look, the federal government is getting more and more into my personal life.

Royalty Payments to Severed Surface Owners -- North Dakota, USA

I've always felt severed surface owners should get an on-going payment for oil produced from a well on their land.

Whether or not eight percent is the right number can be worked out.


[Update: Since posting the above, I've been mulling it around in my little mind. That may have not been well thought out, on my part. Lots of issues to consider. For example, the surface owner who consciously decided to sell his/her mineral rights, now cashes in anyway if the bill is passed. He/she made money selling mineral rights; now gets royalties, anyway. It certainly makes it an easier decision in the future to sell mineral rights on "oil-poor acreage" if the bill passes. If the surface owner erred, he/she will get royalties anyway. On second thought, more work needs to go into this bill. This will be very interesting to follow.]

More discussion here by folks a lot smarter than I am on this issue. Thank goodness. 

Williston To See Things It Has Never Seen Before -- Bakken, North Dakota, USA

That's the opinion of one Willistonite following estimates that oil production in North Dakota could double, surpassing even Alaska.

Without a doubt, 2010 was a watershed year for the ND oil industry.