Sunday, May 13, 2012

The Great California Exodus -- Absolutely Nothing About the Bakken

North Dakota to Texas Renaissance Zone

I don't know whether it would be better to call this a "zone" or a "corridor." Or perhaps "the energy backbone of the nation." For now, I've settled on "zone."


May 15, 2012: Kansas participating in the energy renaissance

Later, 3:45 p.m.: The reader added another link; see comment noting that when California's population grew by 10 million, the number of tax filers increased by 150,000 

Original Post

I posted a stand-alone story on the huge California deficit/budget crisis earlier this weekend.

A reader sent me a link to a great WSJ article that was published back in April. Generally I would just link that article to the original post (which I did) and leave it at that.

But it is such an incredibly good article, I will post the link here, encouraging others to read it. (There's an added benefit: at the top of the page at the link, there's a story on Jamie Dimon at JP Morgan. With the recent news about JPM it's interesting to see what was written about JPB a month ago.)

Back to the linked article.

Almost every paragraph of that article could be highlighted, so I will have to pick and choose a few choice paragraphs.

"I've known Jerry for 35 years, and he's smart, but he just can't seem to be a paradigm breaker. And of course, it's because he really believes in this green stuff." [Repeat: "he really believes in this green stuff."]

In the governor's dreams, green jobs will replace all of the "tangible jobs" that the state's losing in agriculture, manufacturing, warehousing and construction. But "green energy doesn't create enough energy!" Mr. Kotkin exclaims. "And it drives up the price of energy, which then drives out other things." Notwithstanding all of the subsidies the state lavishes on renewables, green jobs only make up about 2% of California's private-sector work force—no more than they do in Texas.

Of course, there are plenty of jobs to be had in energy, just not the type the new California regime wants. An estimated 25 billion barrels of oil are sitting untapped in the vast Monterey and Bakersfield shale deposits. "You see the great tragedy of California is that we have all this oil and gas, we won't use it," Mr. Kotkin says. "We have the richest farm land in the world, and we're trying to strangle it." He's referring to how water restrictions aimed at protecting the delta smelt fish are endangering Central Valley farmers. 
According to the Tax Foundation, California has the 48th-worst business tax climate. Its income tax is steeply progressive. Millionaires pay a top rate of 10.3%, the third-highest in the country. But middle-class workers—those who earn more than $48,000—pay a top rate of 9.3%, which is higher than what millionaires pay in 47 states. [My wife keeps asking me why we don't move to California; need I say more?] [Note: income tax, property tax, and possibly the highest state sales tax in the country.]

And Democrats want to raise taxes even more. Mind you, the November ballot initiative that Mr. Brown is spearheading would primarily hit those whom Democrats call "millionaires" (i.e., people who make more than $250,000 a year). Some Republicans have warned that it will cause a millionaire march out of the state, but Mr. Kotkin says that "people who are at the very high end of the food chain, they're still going to be in Napa. They're still going to be in Silicon Valley. They're still going to be in West L.A."
On a percentage basis, the number of rich folks in Napa, Silicon Valley, and West LA, are an inconsequential minority in the big scheme of things. My hunch is there are fewer rich folks in NSVWLA than there are illegal immigrants in California.

By the way, the A-list actors in West LA no doubt claim another state as their legal residence; they have multiple houses (homes?), and it's not easy calculating number of days someone "lives" in a given state for residency purposes.

Third, and music to my ears:
Mr. Kotkin lists four "growth corridors": the Gulf Coast, the Great Plains, the Intermountain West, and the Southeast. All of these regions have lower costs of living, lower taxes, relatively relaxed regulatory environments, and critical natural resources such as oil and natural gas.

Take Salt Lake City. "Almost all of the major tech companies have moved stuff to Salt Lake City." That includes Twitter, Adobe, eBay and Oracle. [I did not know that. I'm sure naysayers will tell me they knew that, and it's no big deal.]
Music to my ears? I now refer to the Great Plains as the "North Dakota to Texas Renaissance Zone."

900 vs 300

Three data points below the breaks:


1. 2008: The State of North Dakota estimated in 2008 that the Bakken Formation contains 149.2 billion barrels of oil in-place (OOIP) within the borders of North Dakota. (Don't you just love that "point.two"? It makes the number look much more believable than if it were 150 billion bbls, but I digress.) [Update: that link is broken, but it helps me date this presentation. This NDIC presentation must have been in 2008 because slide 30 shows 149.2 billion bbls of oil OOIP in the middle Bakken. I don't want to lose presentation, so I have archived it.]


2. I vaguely recall that early on in the Bakken boom "they" said one could expect about 3 - 4 percent recovery of OOIP.  Four percent of 150 billion --> 6 billion.  In fact, from various conference calls, it appears "they" are recovering eight percent (eight percent of 150 billion --> 12 billion). Harold Hamm has said for quite some time that 24 billion is likely to be recovered. Eight percent of "what" --> 24 billion?  300 billion. So, I've always thought Bakken OOIP was around 300 billion barrels.

3. From an earlier post this year (February 23, 2012:
From wiki:
A research paper by USGS geochemist Leigh Price in 1999 estimated the total amount of oil contained in the Bakken shale ranged from 271 billion to 503 billion barrels, with a mean of 413 billion barrels  -- original oil in place (OOIP).  (200,000 square miles) 
With the deeper benches in the Three Forks formation, CLR says there could be 900 billion barrels of OOIP in the Bakken Pool.

Simply incredible.

Also from wiki:
Ghawar is an oil field located in Al-Ahsa Governorate, Saudi Arabia. Measuring 280 by 30 km (170 by 19 mi), it is by far the largest conventional oil field in the world. When appraised in the 1970s, the field was assessed to have 170 billion barrels of original oil in place (OOIP). (3,230 square miles)

So, those are the data points. A lot of folks have said Leigh Price's estimate of 270 to 500 billion bbls of original oil in place in the North Dakota Bakken was on the high side.

Harold Hamm consistently opines that he thinks there is 24 billion bbls of recoverable oil from the Bakken. Eight percent recovery is certainly on the high side but there is more and more evidence that we are seeing at least eight percent recovery by the better Bakken drillers. Again 8% of what = 24? 300 billion barrels.

So: 300 billion bbls OOIP seems to be "the number."

But note: CLR above suggested that with the deeper benches of Three Forks, the OOIP might be as much as 900 billion barrels of oil (or three times as much as 300 billion barrels).

A article today reminds us that CLR thinks the new number is 900 billion bbls. That was in the 4Q11 conference call.

So, is CLR putting its money where its mouth is? From the linked article:
When asked about where they will spend their $550 million CapEx increase, Hume responded "it's all entirely going to the Bakken." (They produce in the Niobrara/DJ Basin, the Anadarko Woodford and the Bakken.) He added, "we're obviously participating in all the acreage sales in our key plays, mainly the Bakken. Right now, we're very concentrated, very focused on consolidating acreage in the Bakken."

Update on Housing in Billings, Montana -- The Bakken, North Dakota, USA

Link here.
Thousands of workers chasing quick riches by flooding into the Bakken oil field have helped jump-start home sales in Billings.

And the wave is starting to make Billings houses harder to find — and more expensive.

Well-site geologist Joe Hallgren works under contract for SM Energy of Billings. He and his family live in Williston, N.D., the oil boom’s epicenter. But, they’re building a house in Billings and when it’s finished in July they’ll move here and Hallgren will commute to the oil patch.

“I’ve seen a few boom-bust cycles. This one is crazy,” he said. “We got to the point where, for our family, Billings is just going to be better for us.”

Canada: Enough is Enough! Good For Them. They've "Manned Up"

Canada is calling the EU on carbon emissions. Remember, Canada was the first signatory of the Kyoto Protocol to say "this protocol is crazy."

And, to further signify Canada has had enough of faux-environmentalists, the government will limit/restrict the number of folks who can testify/speak at the Enbridge hearing on the Northern Gateway Pipeline proposal.

At least one North American country has manned up.

Officials Expect 4,000 To Attend Oil Expo in Bismarck

Link here.  May 22 - 24, 2012.

I don't know if 4,000 is a big number or not for an "expo" in North Dakota, but considering we are five years into the North Dakota Bakken boom, and we can still get a turnout of 4,000 for an oil expo seems to be significant.

Another Shovel-Ready Job Delayed by the Obama Administration

Continuing to slow-roll the oil industry.

Another year to get federal permits for the reservation. Incredible.
A bypass project that’s intended to relieve heavy oil truck traffic through New Town has been delayed while federal permits are sought.

Construction on the first section of a bypass was slated to being this year, but will be delayed for another year because the project has yet to get the required federal environmental clearance.
The same federal permitting process will delay work on main street. The article says 11,000 vehicles (mostly trucks, I assume) go through this town (New Town) daily.
Officials say about 11,000 vehicles daily travel through New Town.
I have no idea if this has anything to do with the president's new title

Housing Stories From Williston -- Heart of The Bakken, North Dakota, USA

When this story is put on the internet, I will link it. Maybe it's already there, and I missed it.

For now, this front page story in weekend edition of the Williston Herald: housing summit to be held in Williston to discuss building 5,000 more homes in Williston over the new two years.

In addition to that read on.

From the Minot Daily News, 1,344 more homes and 157-room hotel, new retail north of Williston. This is so big, the governor himself will be there:
Ground will be broken Tuesday for a 100-acre development for retail, housing and a hotel in Williston.

The developer, North by Northwest Development LLC, will unveil the future home of the site at Chandler Field, on the frontage of the main arterial of U.S. Highways 2 and 85.

The site has been approved for 223,400 square feet of retail, 1,344 multifamily units and a 157-room hotel.
Then this, from a reader, sent in as a comment, and more to follow, I'm sure:
There is also a development by Braxton that will be developing the acreage between the Fairground Road and 42nd street. That was supposed to be a 600 unit mix with club house. They are the same developers the built the Microtel and Hampton Suite hotels.  
And, of course, "old news" (about three days old):
Ground was broken Thursday for Sand Creek Town Center, also on the west side of Williston.
Sand Creek will include a 14-screen movie theater and Menards. Other businesses are expected to be added to the facility.