Consumers Losing Confidence in US Economy. Well, Duh -- Certainly Not a Bakken Story

Link here.

Consumer confidence fell to its lowest level since April 2009, when the economy was still in a recession. And there was no job growth in August.

But, not to worry. The president is ready to introduce proposal to raise $1.5 trillion in new taxes.  The actual proposal:

Drawing a bright line with congressional Republicans, President Barack Obama is proposing $1.5 trillion in new tax revenue as part of his long-term deficit reduction plan, according to senior administration officials.

The president on Monday will announce a proposal that includes the new taxes, nearly $250 billion in reductions in Medicare spending, $330 billion in cuts in other mandatory benefit programs, and savings of $1 trillion from the withdrawal of troops from Iraq and Afghanistan.

I was not aware that $1 trillion had already been earmarked for troops in Iraq and Afghanistan. This sounds like "I'm going to save $45,000 next year because I have decided not to buy a Chevy Volt."

Update on the Niobrara -- A Story Yet to Be Told

Link here (regional links break early and break often).

I have blogged before that one of the reasons the Bakken boom is a boom is because the oil industry had done much of the preliminary work since oil was first discovered in 1951. I won't go into all that now.

Here's the nut on the Niobrara, in Wyoming-Colorado:

The [Wyoming] state oil and gas commission has offered approximately 240 drilling permits in Laramie County since the beginning of 2010, but companies have only drilled about 25 to 27 wells.

“We’re really not seeing very many wells being drilled,” Doll said. “Laramie County is leading the pack here, but again, 25 wells do not make a boom.”

Twenty-five wells since 2010! "We" are drilling 167 wells/month in North Dakota.

North Dakota Hay Being Sold To Drought-Stricken Ranchers

Link here (regional links break early and break often).

Oil isn’t the only booming business in North Dakota - local farmers are selling their extra hay to farmers in southern states, Dave Schmidt, Belfield, said, and they can’t make enough of it.

“We have shipped out a hundred loads so far,” Schmidt said. “They don’t care if it is round bales or square bales. They want it.”
It has been a good year for cutting hay, giving farmers a surplus, Bobby Kubas, South Heart, said. He added people selling cattle is also a factor.

“People are putting up three times the amount of hay they need,” he said. “It’s just going to go to waste if we don’t move it.”

Kubas sold 1,500 bales through Habiger Hay Farms in Kinsley, Kan. Owner Scott Habiger works with several farmers in North Dakota, Montana, South Dakota, Nebraska and Wyoming.

Another incredible story out of North Dakota. We are very, very fortunate.

It's Official: Harvard Professor Declares It The Lost Decade

Update

"Lost Decade": the phrase is now mainstream. I started calling it the "lost decade" about two years ago.

And yet another writer talks about the "Lost Decade."

Original Post

I have a label/tag "Lost Decade" at the bottom of the blog, where the labels/tags are. I don't know when I first started referring to the past ten years as the "Lost Decade" but it was before I first tagged one of my posts back in January, 2011.

Be that as it may, it's interesting that there is yet another writer who refers to the last ten years as the "Lost Decade."

And the past 10 years? Shoes off in the airport. Bruising unemployment. Slipping from first to 12th in college graduation. Even classic loser decades, like the 1930s and 1970s, were more productive than the oughts.

Census figures released this week show that for the first time since the Great Depression median household income, adjusted for inflation, hasn’t risen at all in over a decade. More than 15 percent of Americans now live in poverty, and the income of the bottom 10th has fallen alarmingly. Even the suburban poverty rate is at its highest since the 1960s. The economist Lawrence Katz of Harvard University is now calling it the “Lost Decade.”

Beyond No Child Left Behind (now in the process of being dismantled), President George W. Bush did nothing on the fundamentals. No rebuilding the country, no tax reform (unless you include monster tax cuts), no entitlement reform (unless you include adding a new prescription-drug benefit without paying for it), no energy independence, no immigration reform, no long- term deficit reduction (to the contrary, moving the budget from surplus to deep deficits).

In short, nothing to show for his time in office beyond doing good work on AIDS internationally and the wholly defensive claim that we were not attacked a second time on his watch. Besides Apple products and social networking, what new and exciting developments did the decade give us?

If Obama loses the next election, he won’t be associated with a decade (like George H.W. Bush). If he wins, and serves until 2017, the next 10 years will probably be seen as the Obama decade. Only then will we know if history will view him as something more than the first black U.S. president.

Yup, it's official. If a Harvard professor is calling this the "Lost Decade," then it's the "Lost Decade." And I've been referring to it as such for at least the past two years.

Sorel Winter Boots -- Bakken, North Dakota, USA

This is a must link for men in the Bakken looking for a little something for their significant other for Christmas.

It's a dynamic link; if you have a slow connection, give the site a chance. Even with a fast connection, give the site a chance to change; I believe it will go into a nice video, also.

My hunch is that by the end of the week, this will be my most visited post. If not, I am underestimating my audience.

Home of Economy vs Wal-Mart -- Williston, North Dakota, USA

Someone sent in a comment about Home of Economy in Williston. Knowing that folks might miss comments, here is what I said:

The Williston Home of Economy is a full-size store. It seemed to "stagnate" before the boom, competing with Economart near the high school, and Wal-Mart north of Williston.

But, without question, the only place to shop in Williston for oil field work, farming, and for fishing and hunting, is the Home of Economy. It used to have the best selection of cowboy boots but I forget how extensive the selection is now. However, I was impressed with the selection of winter boots made in Canada by Sorel. The boots are like I remember. I bought my first (and only pair) about 20 years ago for $60, and I think they were selling for about $100 now at the Home of Economy. The boots may not have changed a whole lot, but the marketing has. I think I need to do a stand-alone post on Sorel boots. Smile.

Home of Economy is NOT a mess, as has been suggested of Wal-Mart by others. Home of Economy seems to keep work boots and clothing in stock. They have a poor selection of western dress shirts but I doubt most of the folks who shop there are looking for clothes for church or fancy dining out.

Contrary to what others have said, I have found no problems with stock at Wal-Mart. Yes, there are often stacks of unopened merchandise waiting to be stocked on shelves, and they do run out of things (like iPads) but that's true everywhere, where US industry has learned to "ship just in time." JIT was probably introduced about 20 years ago and accounts for much of the shortage of merchandise in some areas of the country.

But the individual who said that Williston Wal-Mart looked like it had just gone through a natural disaster suggests that that individual had never been in a natural disaster. Smile.

The problems with Wal-Mart: a) long walk across the parking lot; b) long walk around the store to find everything; and, c) the long checkout lines.

Home of Economy: one can park practically at the front door; the checkout lines are short; the checkout clerks talk to you about your work and your "time-off" plans; and the prices are fair.

So, yes, I love Home of Economy.

Peak Oil -- Carpe Diem -- Bakken, North Dakota, USA

Link here.

Hubbert's peak is still not in sight. Amen.

US Oil Imports Lowest as a Percentage Since 1996 -- Carpe Diem -- Bakken, North Dakota, USA

Link here with a great graph (and generally these links do not break).

"In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such "tight" oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago.

Overall U.S. oil production has increased more than 10% since 2008. Net oil imports reached a high point of 60% in 2005, but today, thanks to increased production and greater energy efficiency (plus the use of ethanol), imports are down to 47%."

This, despite all the bashing of Big Oil and the federal government doing everything possible to destroy the domestic oil industry.

Explanation for Why Wells At the End of the Confidential Period Can Report "No Production Data Available" -- Bakken, North Dakota, USA

Elsewhere, this question: what does it mean that a well coming off the confidential list reports "no production data available"?

In the current boom this is what it means: the well has not been completed, which, in general, means the well has not been fracked.

At the end of the six-month confidential period, the well comes off the confidential list. If it has not been completed/fracked, the company can request that the well be placed on DRL status awaiting completion. While on DRL status, the company does not have to file production reports.

I just checked several wells on DRL status: none of them showed production data. It seems I have recalled some wells on DRL status that reported production data but I can't remember for sure. Until I'm corrected, or I can find an example, the bottom line is that a well on DRL status is most likely producing oil, but because it is not completed/fracked it does not have to report production. I have noticed that wells on DRL status that have sold oil, do report that data to the NDIC. (Wells will produce oil even if they have not been fracked.)

I am on the "edge of the envelope" with my understanding of this, so I expect some folks will tweak my understanding but in general, the above is true for all intents and purposes.

Bottom line answer to the question: the well was not yet completed/fracked at the time it came off the confidential list. Everything else is trivial.

WTI vs Brent Spread

I accidentally deleted a comment asking for an explanation for the WTI vs Brent spread in price.

I've blogged about that on several occasions. I do have a tag ("WTI-Brent-Spread") in the labels/tags section at the bottom of the blog, but I have not updated the tags (which I still need to do).

To find commentaries on the "WTI-Brent-Spread," type in "Brent" in the search frame at the upper left of this blog and it will take you to previous posts. I have checked those posts; unfortunately many of the original links are broken (which I warn folks about). My posts are all there, and my links are all there, but links to other media, newspapers, etc., are often broken, or require a paid subscription.

However, having said all that: the WTI-Brent spread is due to the fact that the storage tanks at Cushing, Oklahoma, are full. A couple years ago it was even worse for Bakken oil because there was limited takeaway capacity coming out of North Dakota, and the pipeline companies were charging what the market could bear to ship oil out of the Bakken. I remember folks telling me they were losing $10 to $20/bbl paying for pipeline space. And at that time, the price of oil was well below $90. 

North Dakota Not Only "One" With Lack of Faith of US Economy -- Bank Deposits Soar Nationwide -- Earning Little to No Interest

Link here.

Consumers worried about the economy are pumping cash into checking, savings, and money market accounts. But the banks don't need their money and have slashed interest rates to discourage customers. 

Americans are pumping money into bank accounts at a blistering pace this year, sending deposits to record levels near $10 trillion on escalating fears that the U.S. economy is on the verge of another implosion.

There's no sign that the flood into checking, savings and money market accounts is slowing down. In the last three months, accounts at U.S. commercial banks have increased $429 billion, or 10%, almost double the increase for all of last year.

There's one big problem: Banks don't want your money.

My hunch: folks hate earning all that money on Wall Street, only to have it taxed. Might as well put it in the bank, earn little to no interest, and not worry about taxes.

This is why banks don't want your deposits: it costs them money to "store" your money, even if it's all electronic. Banks need to insure their deposits with the FDIC:

The large amount of cash only adds to expenses such as paying for deposit insurance premiums. With lending standards tight as a drum after the financial fiasco, and demand for loans growing only slightly, banks have been doing everything they can to demonstrate how little they need new cash.

In the most obvious sign, they have slashed interest payments to discourage customers. Wells Fargo & Co., which has the most branches in California, halved its payments on one-year certificates of deposits to 0.1%; Citigroup, which paid 2% in 2009, dropped its payment to a paltry 0.3%.

And in a possible glimpse into the future, one New York banking giant is even charging big customers for the right to park money there. The Bank of New York Mellon is forcing institutional clients to pay fees if they deposit more than $50 million into an account.

And Frank-Dodd won't let the banks loan money if it distorts their portfolio. Frank-Dodd regulates a bank's portfolio mix. Which is no different than parents who give their children an allowance and then tell their children how they can or cannot spend it.

500-Bed Man Camp in Watford City Nearing Completion -- Bakken, North Dakota, USA

This is the kind of story that is easy for one to skip over, but my hunch is that it might eventually be picked up by a national print media, such as Forbes. (Regional links break early and break often.)

The story is a great human-interest story but is also filled with a few interesting data points about the strength of the Bakken.

First Millennium Construction and Millenium Lodging is based out of Baton Rouge, Louisiana, and caters to the energy industry, but predominantly along the Gulf, and is owned by Nathian Hossley.

It sounds like Hossley was doing well in the south and didn't have much interest in taking operations to the Bakken. It turned out that one of his former Louisiana neighbors, Jarvis Green, an ex-NFL football player with two Super Bowl rings, now living in Denver, Colorado, kept hearing about the Bakken and wanted to get involved in some manner.

Interestingly, Green had majored in engineering at LSU.

Green finally convinced Hossley to let him join the company with an eye toward opportunities in the Bakken.

The company is now taking advantage of one opportunity.

First Millenium is building a 500-person man camp on County Road 35 (14th Street NW), Watford City. It should be completed by November (2011). County Road 35 is exactly one mile to the west of the turn of highway 85 in south Watford City.

For newbies, Watford City:

• is the gateway to the Teddy Roosevelt National Park, north unit,
• right in the center of the Bakken,
• about 50 miles southeast of Williston -- the heart of the Bakken, and
• home of one of the best steak houses in the country.

The man-camp, or lodge, dining facility will bring gumbo and crawfish to the north.

With regard to the cold weather in North Dakota, this is what I found most telling. From the article:

It can be tough to deal with for the first time but Green said he knows what to expect after years in Massachusetts and Denver.

"I've played in 20 degree below weather before," he said. "I played sleeveless. I've done that. I've practiced in that stuff. When I was in New England and it snowed and was below zero, we practiced outside."

Green said the first thing he plans to when winter hits is find a snowboard and head to the biggest hill he can find.

"I can't wait. I'm a snow guy," Green said.

Others with First Millenium won't be so welcoming when the snow comes. Green is looking forward to seeing their reaction.

"I laugh at all the other guys from Louisiana," he said. "I tell them they are going to have some [rough times]."

First Millenium plans to request a permit for a 1000-person lodge next spring (2012), a major truck stop, and more.

In the oil service industry in the Bakken, I would have to agree that truck stops and truck parking areas are needed most, following housing.

Right now, trucks are parked on every vacant lot, every side in the industrial zone, and to the best of my knowledge, there are no truck stops in the Bakken that can meet the demands of the boom. The first new truck stop to be built in the boom appears to be the one going up north of Williston, on a 720-acre parcel of land, right where the kick-off point for the new Williston truck reliever bypass will begin. Construction on that bypass will begin in 2013.

Anyway, I digress. Go to the Williston Herald link to read the full story. As noted above, my hunch is that the story will be picked up by someone in the national print media.

******************

A couple last thoughts:

A fair number of folks have written about their concerns regarding man-camps, but I think they are a superb answer to a difficult question. Developers are learning a lot about man-camps, and the lessons they learn will be useful for many things, including natural disasters. Just as Wal-Mart is able to get to a disaster area before FEMA with necessary supplies, man-camp developers may find another niche providing emergency housing for folks affected by natural disasters.

In the Bakken, these man-camps are temporary; they will eventually reach a peak, plateau and then decline. They help prevent over-building permanent housing units, a problem that has plagued cities in previous oil booms.

A second thought: I much appreciate the comment "anonymous" sent to me a long time regarding the "cold" in North Dakota. There's a whole nation north of us (called Canada) with worse winter conditions than North Dakota and that country is doing just fine. Interestingly enough, I have not yet met one Bakken truck driver or rough neck who is afraid of the cold, the snow, or the ice. They respect it but don't fear it. I run into many of them at Home of Economy (my favorite store at the moment) buying winter clothes, preparing for the winter. I think there's something about these guys that love the challenge.

Investors Only: Enbridge Energy Partners, Master Limited Partnerships

Someone asked about Enbridge "paying seven percent."

Enbridge (ENB) does not pay seven percent. Enbridge Energy Partners, LLC, (EEP) yields 7.5 percent. So be careful which one you are looking at.

A couple of recent links discuss EEP and other master limited partnerships:

• Top 10 dividend payers in the commodities sector, SeekingAlpha.com
• Enbridge and Kinder Morgan, Seeking Alpha. com

I don't follow Kinder Morgan very closely, although in the past I have posted about Kinder Morgan, and although I can't remember what I posted, I do remember telling myself that to diversity within the industry, I would split any investments in this area into EEP and KMP (again be careful to note exactly which entity you are considering when looking at these family of investments. It can get confusing.).

I have favored EEP only because I see Enbridge everywhere up here in the Bakken and have posted several photos on the blog. It's hard for me to believe that Enbridge won't continue to grow. There will be competition between rail and pipeline, but again, it's hard for me to believe that rail would overtake pipeline in preference. But they certainly are putting in lots of crude-by-rail oil loading facilities in the area.

I used to read articles about difficulty figuring taxes when it came to master limited partnerships, but it's been my experience that the industry has come a long way in simplifying things, but the tax consequences and calculations are much different than non-MLP equities. This is a recent link regarding taxes and the companies noted above.