Canada Shops Its Keystone XL Oil to China

Update

Canada's reasoned approach to this whole debacle (link here): 

"Put all our antagonisms behind us." Pragmatic, business-like approach

"U.S. demand is declining."  US influence is declining

"Asia's star is rising and it will dominate the 21st Century. We can guarantee national prosperity for a long time to come by supplying them with the energy that they need."  Screw the US

She said governments need to listen to environmental groups and First Nations, and not "shy away from criticism and disagreement." Alberta's premier said the environmental management systems developed in Canada, for intensive resource extraction like the oilsands, should be viewed as the world standard. "We should demand that our competitors are held to the same level of transparency and accountability."  Level playing field -- oilsands extraction ain't killing any whooping cranes or desert tortoises

Original Post

Link here.

This entire thing is incredibly stupid, the more one learns.

Mr. Harper, attending the Asian-Pacific Economic Cooperation summit in Honolulu on Sunday, repeated Canadian officials' disappointment at the decision, and he told reporters he remained optimistic the project "will eventually go ahead, because it makes eminent sense."

Canadian officials have said in the past that they would seek out other markets, particularly Asian ones, if the U.S. didn't approve the Keystone project. A separate line that would send crude westward to the Canadian Pacific coast, where it could be shipped to Asia by sea, is currently going through Canadian regulatory approval.

But Mr. Harper's language in Hawaii was particularly blunt.

"This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products," Mr. Harper told reporters in Honolulu, according to a transcript provided by his office. "And that will be an important priority of our government going forward." Mr. Harper said he made that point in a meeting the day before with Chinese president Hu Jintao.

The Keystone decision comes as the latest in a string of irritants that have sparked friction between the U.S. and Canada, its largest trading partner.

Earlier this year, the White House reintroduced controversial "Buy America" provisions in proposed job-creating legislation that potentially shuts out Canadian firms from participating in government-funded infrastructure projects. Canada fought for the better part of a year to get similar provisions removed from an earlier Washington stimulus plan.

The White House then signed into law a U.S.-Colombia free-trade pact. That pact, which Canada wasn't a party to, included an unusual surcharge in its fine print on U.S.-bound Canadian and Mexican travelers. The charge was designed to recoup revenue lost from the elimination of tariffs on Colombian goods, and it angered some Canadian politicians.

The comments at the link are as interesting as the story.

At least we know who to blame this time when price of gasoline goes up, as it will next summer.

A $7 billion, shovel-ready project that would have put thousands of Americans back to work.

I.N.C.R.E.D.I.B.L.E.

And all those railroad tankers carrying oil across the entire Nebraska state, day in and day out.

Beautiful Bakken Evening -- Metrics -- Idle Ramblings -- The Bakken, North Dakota, USA

For investors worried about the EPA putting a stop to the Bakken: this is not rocket science. Split your hydrocarbon energy investments into two piles: one pile is for the Bakken; the other pile is for Big Oil (XOM, COP, and CVX).  Adjust the relative size of the two piles based on your reading of the "tea leaves." If it appears the EPA is going to stop the Bakken in its tracks, move your chips in the Bakken pile to your chips in Big Oil's pile. Big Oil doesn't have much in the Bakken, and with the end of fracking in the states, the price of oil will spike, going to Big Oil's bottom line. Of course, stopping the Bakken in its tracks (i.e., killing the domestic onshore oil industry) will push the US into a recession, if not a depression, but that's another issue, and above my pay grade. See disclaimer at the right; this is not an investment site.

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

I just got back from a great walk in the Bakken. It was dusk when I started and pitch black by the time I returned. I walked along the Little Muddy, crossed 1804, and then crossed the railroad tracks to put me on the dike headed to the Missouri south of Williston. It was clear -- easy to see the evening star, Venus, on the way back home, no wind, no precipitation, and it must have been 50 degrees when I started out. A gorgeous evening. I noted a flare just west of the US Army Corps office along the dike -- memo to self, check out that well -- would it be 18311? That's the only one in the area; it has to be. Hard to believe it is still flaring; it was completed in December, 2009.

• 18311, 2,769, BEXP, Williston 25-36 1H, Catwalk, Bakken, cumulative 161,000 bbls; yup -- still producing 5,000 bbls/month and flaring all natural gas. Amazing. Two years of flaring. Price-wise, not worth capturing the natural gas, but it is interesting.

I spooked a flock of Canadian geese that had bedded down for the night. You could tell by their honking they enjoy the flaring also; they know they are home.  One can still end up in the wilds of North Dakota within minutes of walking despite all the oil activity.

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

There have been quite a few articles written and a lot of chatter about the population of Minot and Williston going forward. It dawned on me that tracking the population is probably not the best metric to track. Would one rather have a city of 100,000 with 20 percent unemployment or 10,000 with full employment?  Would one rather live in a city where the average automobile was the equivalent of a Ford Focus or any mid-size sedan, not to pick on Ford, or the equivalent of a Ford F350 pickup? It will be interesting to track the population, partly because it's so easy, but I think a better metric might be dollars in building permits per capita or sales revenue per capita. Saying Williams County has sales receipts that nearly match those of Cass County grossly underestimates the true significance of those numbers.  The population of Williams County: 22,000; the population of Cass County: 150,000.

A Dead Cow -- EOG To Drill In Argentina -- Not The Bakken

From Mike Filloon:

In the first two parts of this series we covered Kodiak's  upside given the new record Whiting well in its Tarpon Prospect. This is obviously bullish for Whiting, along with Newfield and other players in the area. EOG Resources stated it had a very large resource find in the Bakken that has an estimated thickness of 900 feet.

Don noted that from the EOG transcript, EOG was referring to Texas, from the transcript:

Mark G. Papa

Yes, Let me have Bill Thomas address the thoughts on the Vaca Muerta.

William R. Thomas

Yes, Ray, we've got a well planned in the first part of next year. And the section we're targeting there, we've got data that shows that it's relatively thick, about 900 feet thick, and it's got about 150 million barrels per section of oil in place. So it's certainly a world-class potential rock. And we're planning a horizontal well, and we will be conducting microseismic on it to monitor the frac and do all the science work to fully evaluate how the well fracs. And certainly, we'll follow up that and see how the well produces. So our expectations are really high for it, but we'll just have to see how it goes when we get the well completed.

If the middle Bakken is 900 feet thick anywhere in the Williston Basin, that will be a story! At least we think EOG was referring to Texas: "Vaca Muerta" is Spanish for dead cow.

See first comment below: this is in Argentina. 

Houston-based EOG Resources  plans to begin drilling at the Vaca Muerta shale reservoir in Argentina's Neuquén basin next year, CEO Mark Papa revealed.

"We will drill our first two wells in 2012. Our target is the Vaca Muerta shale, which we believe will be oil productive," Papa said during the company's 2Q11 results webcast.

EOG has taken a position of 100,000 net acres (40,468ha) in the area after forming a business relationship with Argentina's largest oil company YPF.

The Steven Chu Effect, the Bakken, Joan Baez, Idle Ramblings --

Spot price of oil March 3 - 11, 2011:

West Texas Intermediate

94.91

97.51

97.19

99.70

99.70

99.70

100.7

I pulled that data because I wanted to go back and look at the "Steven Chu Effect."

Back in late February and early March, 2011, there was a lot of anxiety about the price of oil spiking to $100/bbl due to events in Libya, if I remember correctly. That was about the time the decision was made to tap the strategic petroleum reserve, which, of course, made no sense to me -- storage tanks at Cushing were as full as ever.

Now, we have melted up near $100 again ($99.22 on Friday, November 11, 2011) and there's very little media commentary. Interesting. And we're not even going into the summer driving season.

At that time I wrote (at the linked site):

Ideological policies (no drilling in Alaska, no drilling in the Gulf, delay drilling on shore, frustrate use of fossils through EPA regulations) have long term effects. It takes years to get drilling back on track.

We can now add one more thing to that ever-increasing list of decisions based on ideology: "no" on the Keystone XL.

I would revise that earlier paragraph to read:

Ideological policies (no drilling in Alaska, no drilling in the Gulf, delay drilling on shore, frustrate the use of fossil energy through EPA regulations, killing the Keystone XL, threatening to regulate fracture stimulation) have long term effects. It can take years to bring major energy projects on line and in a crisis, we don't have years to wait. 

And that's why oil will spike again if there's another perceived crisis in oil supply.  The Steven Chu effect: Plan A is to replace hydrocarbon energy with wind and solar energy. There is no Plan B.

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

I would normally place this on one of my other sites, but it's nice (for me)  to listen to this while reading Bakken-related stories and comments.



Diamonds and Rust, Joan Baez

Listening to these words, brought a chill up my spine:

I'l be damned: here comes your ghost again.
But that's not unusual;
It's just that the moon is full
And you happened to call.

And here I sit
And on the telephone,
Hearing a voice I'd known
A couple of light years ago,
Heading straight for a fall.

As I remember, your eyes
Were bluer than robins' eggs.
My poetry was lousy, you said.
Where're you callin' from?
A booth in the midwest.

Ten years ago I brought you some cuff links.
You brought me something.
We both know what memories can bring:
They bring diamonds and rust.

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

That sent chills up my spine. The background to the lyrics is very well known; the only private line, if there is one, is the one that comes early: "it's just that the moon is full, and you happened to call." Wow.

I am sure poetry and music this good is still being written and sung somewhere but I haven't run across it lately. At least not consistently.

The other night I watched much, but not all, of the Country Music Awards. I must have missed the good part. I did not recognize (m)any of the nominees, and certainly did not enjoy the music. It was hard for me to call much of it country. Time is passing me by.  And that's why I'm glad I have the Bakken. It brings me back to reality.

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

The first time ever I mentioned the "Steven Chu effect" was in October, 2010:

West Texas Intermediate

76.87

76.87

76.87

76.76

78.11

78.52

76.97

Yup. Ideology has its consequences.

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

An acoustic cover:


Diamonds and Rust, Judas Priest

For Investors Only -- Energy Companies

2) Paid subscription required at the linked site, but "initial" data free and might be of interest to investors looking for energy companies paying dividends >3% apr.

2) Santa Claus rally?

4) No brainer

2 + 2 = 4

This is not an investment site; see disclaimer at the right.

Oil Extraction Tax Memorandum for North Dakota; Tax Updates; North Dakota Oil And Gas Tax Miscellaneous

Oil Extraction Tax -- Background Memorandum -- Prepared by the North Dakota Legislative Council staff for the Taxation Committee, August 2011. This memorandum does not address the Oil Production Tax.

Data points take from that document

Refer to original document if questions or possible typographical errors in transcribing and for more complete information

1980

• State-approved initiated measure No. 6: established an oil extraction tax as a companion to the oil and gas gross production tax that existed since 1953; the oil extraction tax rate was established at 6.5 percent of the gross value of oil at the well and has remained at that rate, except for full or partial exemptions
• The initial tax extraction tax law provided exemptions for oil exempt from gross production taxes, up to 100 bopd owned by a royalty owner, and oil from a stripper well, defined as 10 bbl or less per day

1987

• Stripper wells re-addressed: 10 bpd for wells at 6,00 feet or less; 15 bpd for wells 6,000 to 10,000 feet, and 20 bpd for wells >10,000 feet deep
• For wells drilled and completed after April 27, 1987, and for qualifying secondary or tertiary recovery projects, the rate of tax was reduced from 6.5 percent to 4 percent of gross value at the well
• In addition to that reduction, production from new wells completed after April 27, 1987, was given a full extraction tax exemption for the first 15 months of production
• A trigger provision was included so that the rate would return to 6.5 percent if the average price of oil between June 1 and October 31 of any year is $33 per barrel or more
• The royalty owner exemption was eliminated

1989

• An exemption was created for production during the first 12 months after a well has been worked over; certain costs thresholds were mandated; applied only to wells producing no more than 50 bbls of oil before beginning the project (50 bbls over what time span? day, month, year? probably day)

1991

• trigger mechanism adjusted for any period of five consecutive months, rather than the June to October time frame; $33 oil still the threshold
• 5-year exemption for oil produced from a secondary recovery project
• 10-year exemption for oil produced from a tertiary recovery project
• EOR exemption applied only to the delta

 1993

• Exemption for the first 12 months of production after workover was amended, based on cost and production numbers
• Reduced the tax rate from 6.5 percent to 4 percent for production from a workover well after the 12-month exemption period

1995

• A 24-month oil extraction exemption for production from a horizontal well
• A 10-year exemption for production of oil from a well that has been inactive for two years; subject to trigger mechanism
• A nine-month exemption for production from a horizontal reentry well; subject to trigger mechanism
• Stripper well classification revised: 30 bopd for wells deeper than 10,000 feet

1997

• A five-year extract tax exemption for production from new wells within the boundaries of an Indian reservation on tribal trust lands or land owned by a tribe (think KOG, WMB)

2001

• Trigger provision for exemptions and rate reductions was amended to clarify when the trigger was to become effective; trigger price was defined as $35.50 per barrel, as indexed for inflation

2003

• A temporary exemption from gross production tax was provided for gas produced from shallow gas wells, with an expiration date of June 30, 2007
• The two-year inactive well exemption was amended to clarify the definition of a two-year inactive well and to provide an 18-month provision to qualify the well for an exemption to be consistent with other oil extraction tax exemptions

2005

• A sales and use tax exemption for carbon dioxide used for the enhanced recovery of oil or natural gas

2007

• An oil extraction tax reduction to 2 percent for the first 75,000 bbls of oil during the first 18 months after completion from a horizontal well drilled and completed in the Bakken formation from July 1, 2007, through June 30, 2008
• The gross production tax exemption for shallow gas was made permanent for the first 24 months of production
• Extensive language regarding wells in the reservation which I won't repeat here

2009

• A contingent rate reduction in the oil extraction which reduced the oil extraction rate for horizontal wells from 6.5 percent to 2 percent during the time the rate reduction is in efect
• Existing law provides a complete oil extraction tax exemption that triggers into effect if the price of oil for five consecutive months remains below the trigger price; because the exemptions did not trigger into effect, the rate reduction provided by the earlier bill remained in effect through October 2009
• The rate reduction can trigger into effect again if the average price for any month drops below $55
• The rate reduction applies to oil produced during the first 18 months after completion for a horizontal well and is limited to the first 75,000 bbls or the first $4.5 million of gross value at the well
• If the rate reduction is effective on th edate of completion of a well, the rate reduction applies to production from that well for up to 18 months after completion, even if the price of oil rises to more thn $70
• If the rate reduction is ineffective on the date of completion of a well, the rate reduction does not apply to production from that well at any time
• The triggered rate reduction was scheduled to expire June 30, 2012, but the expiration date was extended to June 30, 2013, by 2011 House Bill No. 1467

Proposed amendments to 2011 Engrossed House Bill No 1467

• Provide for immediate elimination of most existing extraction tax exemptions and a substantial change to the stripper well exemption
• Reduce the 6.5 percent oil tax extraction tax rate by one-half percentage point when statewide daily production reaches 425,000 bopd; 650,000 bopd; and 700,000 bopd.
• At statewide daily production of 700,000 bopd, the extraction tax rate would be 4 percent and would remain at that rate
• At the 425,000 bopd, the stripper well exemption would not apply to new wells drills on a Bakken pool stripper well property until production from that well declines to a level that meets the statutory requirements for an individual stripper well

July 1, 2013

• Natural gas tax break: tax incentives for capturing and using the byproduct of the state's booming crude production. The Bismarck Tribune has a short note on the law.

Obama: America's Been A Little Bit Lazy For the Past Two Decades

Link here.


The President supports "Occupy Wall Street"

I can't make this stuff up.

One Hundred Percent Tease -- The Bakken, North Dakota, USA

Tomorrow, I hope to post a photo I thought I would not see in Williston for the foreseeable future.

I would post it today but I don't have the camera cable nor a fast enough wi-fi connection to download it.

It is not worth waiting for -- but it will be quite a surprise when you see it. It was to me -- a surprise. But a very welcome surprise.

Bull's Eye in The Bakken -- Watford City to Alexander to Williston -- The Bakken, North Dakota, USA

Link here to the Minot Daily News:

Although Alexander's traffic is often bumper-to-bumper, the number of semis on the road remains on the increase throughout western North Dakota. A count of on-coming semis conducted one morning last week was 138 from N.D. Highway 83 to New Town, 161 from New Town to Watford City and 97 from Watford City to Alexander, a distance of 20 miles. The number of rigs on the road increases substantially late in the day every day. Add in all the support trucks, pick-ups, school buses and regular traffic and the roadways are jammed dangerously full.

Raymond Nadolny, Williston State College president, said Williston will soon outgrow West Fargo and become the state's fifth-largest city. He said he wouldn't be surprised if Williston's population reaches 60,000 in five years. The city, located about 20 miles north of Alexander, ranked ninth in the state with fewer than 15,000 residents in 2010.

Within the Bakken, there are several areas of increased concentration:

• New Town, Parshall: Parshall and Sanish oil fields
• Tioga, Stanley: oil and natural gas hubs; Hess regional headquarters
• Epping, Wheelock: new major truck stop; truck reliever route; some huge wells
• Williston: major industrial park for the entire Bakken
• Trenton-Dore-Fairview: new diesel refinery; oil-loading facilities
• Alexander, Watford City: the bull's eye of the Bakken; where peak activity will be in 2012
• Belfield: yet to experience full impact
• Dickinson: hard to say exactly how much impact
• Minot: could become center of activity for Spearfish formation

Perhaps I'm just too close to Alexander, but everything suggests Alexander is going to be most impacted this next summer. There is no bypass around the town; there is a single thoroughfare through the town -- that road, US Highway 2 connects the industrial parks west Williston with Watford City.

Update on Fly Ash And Why North Dakota Doesn't Use Fly Ash From South Dakota -- The Bakken, North Dakota, USA

Link here to the Bismarck Tribune:

Burning lignite in power plants creates a fly ash residue that - turns out - is perfect and relatively cheap for solidifying drilling waste buried in pits next to oil wells.

Sales of fly ash are turning into a decent source of revenue for power plants out in Coal Country. Not only do power producers not have to pay to dispose of the ash - oil companies pay good money to take it off their hands, mix it into drill cuttings and bury it for them.

Data points:

• Bought for $100 per ton and resold for $250 per ton, bagged, shipped, and delivered.
• South Dakota fly ash not used because it is slightly radioactive.

Update on Hospitals in the Oil Patch -- The Bakken, North Dakota, USA

Link here to the Dickinson Press.

WILLISTON — Mercy Medical Center is dealing with a baby boom and a sharp increase in medical emergencies and clinic visits resulting from the area’s oil boom.

The medical center at the hub of the thriving Bakken Formation has $25 million in expansion projects in the pipeline as it scrambles to handle the spike in demand for health services.

“We just were not equipped for the influx of young people and families,” said Matt Grimshaw, chief executive of Mercy Medical Center.

Data points:

• Three years ago, the hospital downsized to a 25-bed critical access facility based on predictions of a dwindling and aging population.
• Williston’s population now is estimated at 23,000; 4,716 census count in 2010. 
• Williston could peak at 40,000 in six to seven years
• Williston hospital looking to oil industry for assistance
• Minot’s population, 40,888 according to the 2010 census, now is estimated to exceed 50,000
• Minot's population could double to 100,000 in the next five to ten years
• Trinity Health is the second-largest hospital system in North Dakota after Sanford Health
• Trinity Health added 80 doctors and mid-level practitioners in the last two years and is trying to hire more than 60 nurses 

It appears the new ambulatory care center at Williston is pretty much structurally complete to allow full work during the winter.

Two photos of the ambulatory care center, November 13, 2011:

This is a view looking south from the new ambulatory care center. Note the Oasis rig in the far background, and the line of trucks on the bypass.

Meanwhile, this is a new 3-story clinic going up across the bypass from Mercy Hospital (this is not part of the Mercy Hospital complex):

New Poll and Results of Previous Poll -- MillionDollarWayBlogspot

Previous poll:

• 60% prefer no advertising on this blog
• 20% prefer to see advertising on this blog
• 20% have no opinion with regard to advertising at this site

A new poll has been posted on the sidebar at the right. It was announced earlier this week that Ms Obama will be the Grand Marshall, along with VP Joe Biden, at NASCAR's final race of the season, in which the 2011 NASCAR champion will be determined. I believe that race is a week from today.

I don't want to influence the voting, but I don't know Ms Obama's connection to NASCAR. Mr Biden was a used car salesman before going into politics.

Update on Truck Reliever Route Around Williston -- The Bakken, North Dakota, USA

It appears a temporary truck reliever route may be a reality by next summer, with a permanent truck route at least partially completed as early as 2013, according to the  November 13, 2011, edition of the Williston Herald.

A presentation on the proposal and a Q&A period to follow will be open to the public at the Williston Community Library, 6 - 8 p.m. tomorrow evening (Monday, November 14, 2011).

Roads that will be improved, include:

• Williams County Road 4, including portions between 52nd Street NW, 53rd Street NW, and 142.5 Avenue Northwest
• Williams County Road 6
• Williams County Road 7
• 143rd Avenue Northwest
• 56th Street Northwest