New Refinery in North Dakota? File Under: Why There's No Growth in the US -- A Decade To Get a Permit

Okay, maybe nine years. Whatever.

Link to Bismarck Tribune here. 

The Three Affiliated Tribes announced Wednesday that it has been given permit approval to take control of a piece of reservation land to build an oil refinery.

U.S. Secretary of the Interior Ken Salazar joined with tribal leaders at tribal headquarters to announce the permit approval, which brings a refinery one step closer to reality.

Nine years ago the tribe had requested that the Bureau of Indian Affairs, a part of the Department of the Interior, accept the acreage into a trust. The trust will allow the Interior department to own the land while allowing the tribe to control and manage it.

The tribe has wanted to use a 469-acre piece of land near Makoti to build the refinery and produce feed for the tribe’s buffalo herd. Plans call for the refinery to be built on a 190-acre portion of the land. The other land will be used for the buffalo.

The permitting process, which was nearly a decade in the making, opens the door for the construction of a new refinery in more than 30 years.

SecInterior Ken Salazar sounded jubilant in the news story; he should have been dismayed that it took nine years to get a permit.

Data points:

• MHA Nation Clean Fuels Refinery
• $400 million refinery
• capacity of 13,000 bbls/day
• Bakken oil --> diesel, gasoline, propane (I still don't see the "clean fuels" aspect of this, yet)
• refinery site: along US Highway 23, on the edge of the Fort Berthold Indian Reservation
• 800 to 1,000 jobs during construction phase
• about 140 permanent jobs
• nine years to get the permit

File Under: I Can't Make This Stuff Up

A little humor for the day:

US Rep. Henry A. Waxman (D-Calif.), the House Energy and Commerce Committee’s ranking minority member, has asked the US Federal Trade Commission to investigate a gasoline price surge in the Golden State.

“Over the past week, retail gasoline prices in California have soared by more than 50¢/gal to a record price of $4.67/gal,” Waxman said in an Oct. 9 letter FTC Chairman Jon Leibowitz.

“There has been no similar surge in gasoline prices nationwide.”

Waxman noted that the most common explanation is that a series of refinery accidents and temporary shutdowns have created a California supply crunch. US Energy Information Administration data show that West Coast gasoline inventories are “unusually low for this time of year—at the lower edge of the 5-year range,” he added.

And, of course, regular readers already know which video comes up next.
I'm Shocked, Shocked, Casablanca "Soared by 50 cents/gallon to a record $4.67/gallon" -- so, I guess, $4.17 isn't so bad?

Before the increase, a 20-gallon SUV fill up cost: $83.40. After the increase: $93.40. Ten bucks on a $90 purchase. Pales in comparison to what California taxes will be after the November election. 

Something tells me Mr Waxman is getting a lot of mail from his constituents.

I wonder who will pay for this "investigation"?

Twenty-eight (28) New Permits; KOG, BEXP With Two Huge Wells;

Click here: North Dakota sets new daily and new monthly record for oil production.

Other Energy Links

RBN Energy: process for laying new NGL pipeline systems

Bakken Operations

Active rigs: 187, down 2 from yesterday

Twenty-eight (28) new permits

• Operators: BEXP (10),  Denbury (5), Marathon (4), Samson Resources (3), Oasis (2), Whiting (2), XTO, Liberty Resources,
• Fields: Sanish (Mountrail), Ray (Williams), Murphy Creek (Dunn), Heart Butte (Dunn), Banks (McKenzie), Bailey (Dunn), Werner (Dunn), Glass Bluff (McKenzie), Cedar Coulee (Dunn), Ambrose (Divide), North Tobacco Garden (McKenzie), Bicentennial (Golden Valley)
• Comments: No new permits for Newfield or OXY USA

Producing wells now completed:

• 21308, 2,461, KOG, Koala 14-32-29-3H, middle Bakken, Poe, t9/12; cum 71K 11/12; 28 stages; 4 million lbs ceramic; see pad diagram below
• 22023, 3,079, BEXP, Bill 14-23 1H, Alexander, t8/12; cum 23K 8/12;

Two wells coming off the confidential list tomorrow:

• 21251, 465, Whiting, Cymbaluk 21-25TFH, Wildcat, about 2K per month; located in Park oil field, in southwest North Dakota; t4/12; cum 15K 8/12;
• 21569, 723, CLR, Mittlestadt 2-20H, Chimney Butte, t7/12; cum 33K 8/12;

From the well file, a schematic of the pad where oil from three KOG wells will be commingled. These pads have to be quite impressive:

701,134 BOPD; Represents Almost Four (4) Percent Increase

https://www.dmr.nd.gov/oilgas/mpr/2012_08.pdf

Aug numbers are out: 701,134 bbl s per day.

CarpeDiem.com does a better job than I describing the significance of all this.

August production: 21,735,166 bbls / 31 --> 701,134 bopd
July production: 20,963,713 bbls / 31 --> 676,249 bopd


701,134 - 676,249 = 24,885 bbls / 676,249 --> 3.68% increase

7,701 producing wells -- 91 bbls/day

What surprises me the most? From CarpeDiem.com: North Dakota produced 73% more oil than Alaska in August. That's pretty impressive.

Incredible Story Coming Out of California: Results Of The Year-Long Fracking Study Is Released

Updates

October 12, 2012: same story from Oil and Gas Journal. 

A study commissioned by Plains Exploration & Production Co. concluded hydraulic fracturing of two test wells at Inglewood oil field in Los Angeles County, Calif., indicated no detectable evidence that it might induce earthquakes or have negative consequences on groundwater quality, a consultant reported.

Carno Entrix of Los Angeles conducted the study, and the California Department of Conservation posted the study on its web site.

California is expected to release a draft of fracing rules soon. Don Drysdale, spokesman with the Department of Conservation, told OGJ that it will be “several weeks” before a draft is issued.

So, we await the "California" rules. Can hardly wait.

Original Post

As you read the story below, note that this story is coming out of California. The governor of New York needs to read this study. One can only imagine all the "politically-correct" talk that must have emanated from the study team prior to releasing their findings.

A huge thank you to a reader for alerting me to this story. I had not seen it yet, and I scan the LA Times several times during the day.

http://www.latimes.com/news/local/la-me-fracking-baldwin-hills-20121010,0,5707434.story

I generally don't "cut and paste" so much from a story, but this is a huge story, and if the story at the source is archived, I want to be able to see the story twenty years from now.

A long-awaited study released Wednesday says the controversial oil extraction method known as hydraulic fracturing, or fracking, would not harm the environment if used at the Inglewood Oil Field in the Baldwin Hills area.

The yearlong study included several issues raised by residents living around the field, such as the potential risks for groundwater contamination, air pollution and increased seismic activity. For months, water wells on the 1,200-acre field were monitored.

Data from ground and air monitors were collected and analyzed, but no effects were recorded before or after the technique was used, the study says.

"There were eight contributing studies addressing such things as vibrations at the surface, microseismic activity at depth, noise, ground movement measurements, subsidence, groundwater quality, methane in both soil and groundwater," said Dan Tormey, technical director and principal at Cardno Entrix, the environmental consulting firm that conducted the study.

"Each was a study that contributed to the [overall] hydraulic fracturing study." Plains Exploration and Production Co., the owner and operator of the oil field, paid for the review as part of a settlement agreement with Culver City and environmental and community groups.

The report was reviewed by two independent firms selected by the company and Los Angeles County. The 206-page study is the first of its kind in the state. It comes at a time when environmental and community groups are urging lawmakers to ban fracking, a technique that fractures rock formations to release trapped oil and natural gas. The process involves a high-pressure injection of water, sand and chemical additives into the drill site's wellbore.

Please go to the linked story to get the rest of the details.

Now, we await the comments from those suggesting the study was flawed. And, oh, by the way, who is Cardno Entrix?  Who funds them? Who is on the Board of Directors? What experience do they have in fracking? Did they study enough wells? Did they hold any meetings in Las Vegas? Was Al Gore invited to present opposing data? Did they consider the life-time carbon footprint from planning to production to shipment to consumer use of fossil fuel facilitated by fracking? Did they consider the impact on endangered species in downtown Los Angeles?

Seriously, it should be noted the number of studies done and the number of wells tested in this California study, compared to the two wells, and then one well, tested by the EPA in Wyoming (see "shenanigans in Wyoming").

Reality Sets In? Never Mind

I can't remember if I posted an earlier story about Iraq's ambitious goals to significantly increase oil production. I took the article at face value, didn't question it, but certainly looked askance.

Now today, there is a report that Iraq has said, "never mind."

Iraq officially stepped back on Wednesday from its ambitious plans to more than triple its oil production by 2017, but it remains more optimistic than the world's leading global energy monitor about how fast and how high it can boost output. Baghdad's latest targets show that Iraq, which is now pumping some 3.4 million barrels a day, is eager to be a major player on the world energy map despite decades of wars and sanctions. It recently nudged out Iran as OPEC's second-largest producer, and further production gains would solidify its place behind the bloc's top producer, Saudi Arabia. 

Iraq did not provide any reasons for stepping back. But others did provide some reasons:

The IEA said Iraq needed to sort out internal issues in order for its predictions to come true. Among the most troublesome is the lack of oil-related infrastructure like pipeline networks, storages and export terminals. Another is the dispute between Iraq's central government and the self-ruled northern Kurdish region over rights to develop natural resources.

The IEA report also noted that boosting Iraq's oil production is crucial for international markets, as Iraq is expected to account for nearly half of the expected growth in global oil output in the current decade. A more pessimistic IEA forecast in the same report sees Iraqi oil output rising to just 4 million barrels a day in 2020 and to 5.3 million barrels in 2035. In its high case, IEA says that oil production could reach 9.2 million barrels in 2020.

The most troublesome issue: "Among the most troublesome is the lack of oil-related infrastructure like pipeline networks, storages and export terminals." That's what the IEA said. One has to ask "why." With all that oil, all that money, why is the lack of infrastructure an issue?

This story further serves to emphasize the challenges Bakken operators have faced and met head-on. I keep thinking of the huge investment in rail / crude-by-rail in just the past eighteen months in western North Dakota, and how that has significantly altered oil shipment patterns in the US.

Never Mind, Gilda Radner

Economical? The Jury Is Still Out

A question posed elsewhere gives me an opportunity to just toss something out which I've filed under: the jury is still out.

Periodically I see comments made by folks about non-economical wells in the Bakken without any substantiating data.

One observation: I see very, very few abandoned, shut-in, or plugged Bakken wells that have been drilled since 2006. I understand that it is time-consuming and an added expense to plug a well, and with manpower at a premium, it's probably even a bigger deal. Folks have suggested that is the reason we do not see more abandoned holes.

EXCEPT FOR ONE THING: as long as a well is producing, it holds the lease by production.

But, with pad drilling, things are different. Once a well is hooked up to a pipeline, operating expenses for a producing well are very, very low. In the old days, it would be hard to justify putting a pipeline into a remote well that was not producing much oil; but the trucking costs would have been a challenge. With pad drilling, if subsequent wells are better (which they most likely will be -- for a number of reasons), the operator might as well leave the original "pilot" well alone, even if production is small. A pipeline will be brought to the multi-well pad and the marginally-producing well will simply be hooked into that well. In addition, assuming the price of oil increases over time, that marginally-producing well may actually look better over time. 

But I would think if a particular well was uneconomical, operators wouldn't be quick to drill another well in that location, unless they felt they could do better.  The MRO Vorwerk well recently drilled seems to be a so-so well. It was stimulated with 2.4 million lbs in 30 stages, not an inexpensive proposition.

• 21286, 246, MRO, Vorwerk USA 14-34H, t1/12; cum 17K 8/12; 30 stages, 2.4 million lbs

And now I see MRO has a permit for another well just 50 feet south of that well:

• 24078, loc, MRO, Vorwerk USA 24-34H, 

The well file suggests multiple formations with an oil show. The well file also suggests this should have been a better well based on background gas units and the height of the flare.

The monthly production for the first Vorwerk well above suggests more work (possibly) to be done. These are not impressive early month production numbers for a Bakken well, but as noted above, the jury is still out. Lots of rambling to suggest this: I'm not sure what the definition of a "non-economical Bakken" well is.

Monthly Production Data

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2012	7	785	920	202	414	0	378
BAKKEN	7-2012	15	1263	1331	392	691	0	609
BAKKEN	6-2012	10	1535	1410	574	771	0	732
BAKKEN	5-2012	14	2293	2442	1117	402	0	328
BAKKEN	4-2012	26	2747	2870	1476	1473	0	1325
BAKKEN	3-2012	29	3936	4091	3368	2012	0	1869
BAKKEN	2-2012	26	3655	3502	3912	3155	0	3008
BAKKEN	1-2012	9	1088	593	80	1157	0	1103

Having said all that, one company in the Bakken I am not able to sort out: Baytex. This is not an atypical well for Baytex, though some recent Baytex wells have improved significantly:

• 20587, 97, Baytex, Colby 23-14-160-99H-1PB, long lateral; Three Forks well, Burg oil field, t8/11; cum 27K 8/12; 20 stages; 1.93 million lbs;

Baytex is one of the more active drillers in the Bakken. It is interesting to compare cumulatives of Baytex wells with those of other active Bakken drillers.

NOG Up On Rumors -- Wall Street Cheat Sheet

Shares of Northern Oil & Gas [were] up modestly on Monday due to takeover rumors that abound. The firm has strong financial prospects plus a recent management shakeup, but shares have traded at a notable discount to peers since the shorts attacked it in 2011. However, certain analysts believe that a sale could be the ultimate goal.

Also, at the same link, it was noted that TEPCO had to raise household power rates  -- the article was about importing less expensive shale gas, but the bigger question was neither raised nor answered: what was the reason for increased TEPCO costs in the first place?

A quick google search found this: from Tucson Citizen.com: http://tucsoncitizen.com/wryheat/2012/04/09/renewable-energy-mandates-raise-electricity-costs/

I can't make this stuff up. Note the date: April 9, 2012 -- just a few months ago; wow, the rate increase must have been significant.

The lede:

Currently, 29 states plus the District of Columbia and Puerto Rico have renewable energy mandates requiring that some electricity be produced by renewable energy sources such as solar or wind generation. California has the most stringent requirement of 33% renewable generation by 2020; Arizona has a requirement of 15% by 2025. These mandates are costing us money and more. A new study from the Manhattan Institute for Policy Research has been examining the consequences of these energy mandates, some excerpts: go to the link to see the excerpts. I don't want to re-print the obvious. 

But the article goes on:

In addition to the direct cost of electricity, the Manhattan Institute notes that the increasing subsidies to renewable energy ventures (some $14.6 billion in 2010) is essentially using our tax money to raise our electricity rates. Many of these projects also receive tax breaks from the states. These mandates also increase costs to businesses which means we ultimately pay more for consumer products. 

On another note, "Big Bird's" salary is not bird feed. The actor inside the "Big Bird" costume makes about $315,000/year. [It gets worse: That year (2009), Sesame Workshop president and CEO Gary Knell got $684,144 in reportable compensation from his job. The salary of the US president is fixed by law at $400,000, though the job does come with use of a house, Camp David, and Air Force One.]