Random Notes on Wind Energy Costs

It was my understanding a wind farm comes in at about $1 million to $1.5 million / megawatt.

The Bison Wind Energy Center, just completed, in North Dakota: $500 million / 160 megawatts = $3,000,000/megawatt (the way the story is written, there exists some doubt, in my mind, that the numbers are entirely complete, but be that as it may: $300,000/MW). Corrected: see the comment from the second reader below.  Huge thanks to an alert reader.  The project is for 160 megawatts; cost is projected at $500 million. Cost per MW: about $3 million.

Off-shore, wind is, they say, more expensive. How much more expensive?

Cape Wind, off Massachusetts: $2.6 billion / 454 MW = $6 million/MW.

The London Array, phase I: 2.2 billion euros/630 MW (1 euro = $1.30); therefore, $2.86 billion/630 MW = $4.5 million/MW 

So, this is is what we have:

• North Dakota: $3 million/MW.
• On-shore average, wiki: $1 million/MW
• Off-shore, London (England): $4.5 million/MW
• Off-shore, Massachusetts: $6 million/MW

Disclaimer: I often make simple arithmetic errors.  

Solar Farms

Examples for cost comparisons:

Announced June 3, 2013: Universal Bioenergy Inc. announced that its subsidiary, NDR Energy Group, has signed ... with JSG Solar Inc., to build a solar power farm in eastern North Carolina, USA. The estimated cost to build the facility is $167 million. The project is projected to generate an estimated $301 million in revenues over 25 years. 

The solar facility would be built on approximately 425 acres of land and generate 80-100MW (megawatts) of electricity for sale to electric public utilities in the North Carolina service area. The estimated annual electricity production is 143.9 million kilowatt hours (kWh). 

• one section of farmland; not dual-use
• $167 million/100 MW = $1.67 million/MW 
• $167 million / 25 years = $7 million/year
• at 5% borrowing rate, $8 million/year in the early years just for interest payments
• $300 - $170 = $130 million over 25 years = $5 million in revenue/year
• reminder: profits = revenue - costs (simplified)

Kinder Morgan Cancels Plans For $2 Billion Freedom Pipeline, Permian To California

WSJ's take on this story.

Rigzone is reporting:

Kinder Morgan Energy Partners LP said Friday it has cancelled plans for the $2 billion Freedom pipeline, a conduit that would have brought a direct stream of West Texas crude to refiners on the U.S. West Coast.

The cancellation underscores the growing difficulty pipeline companies are having in selling new large-scale projects as oil producers and refiners increasingly rely on railroads to ship crude around. Once seen as temporary necessities to deliver oil from emerging oil-producing regions in Alberta, Texas and North Dakota, railcars have become a permanent fixture of the North American energy landscape because they allow refiners more diversity of supply.

This trend means that pipeline giants like Kinder Morgan will have to focus on smaller pipeline projects and branch out into other transportation segments.

I remember a couple years back, someone sending me a comment telling me that CBR was a temporary phenomenon. See also the WSJ story, May 24, 2013.

Kinder Morgan Energy Partners first pitched the 277,000 barrel-a-day pipeline in April, hoping to woo West Coast refiners dependent on more expensive oil shipped in from Russia, Ecuador and about a dozen other countries. Refiners in the fuel-hungry California market are eager to buy the same cheaper domestic crude that is already benefiting their competitors in the Midwest and Gulf Coast.

But Valero Energy Corp., Tesoro Corp. and others operating on the West Coast turned Kinder Morgan's proposal down, saying railcars gave them more flexibility. Bringing west Texas crude oil via Freedom and its $5-a-barrel tariff would not be much cheaper than shipping crude oil via rail from the Bakken oil field in North Dakota but would tie refiners down to long-term pipeline contracts.

I personally think it's a hoot -- CBR -- day in, day out, trains rolling down the track, burning fossil fuel and spewing CO2. Flexible, scalable, and manpower intensive. All those SUV's at RRX's, idling, waiting for the 110-car unit trains to pass. What's not to love.

And this is the irony: it's not even the activist environmentalists pushing their agenda any more; it's the big bad oil companies that have decided that "the track is back." 

For investors: check out Genesse & Wyoming. Another great opportunity. It's p/e is only 43.

Disclaimer: this is not an investment site. Do not make any decisions based on anything you read here or think you read here.  

Something tells me Jim Croce is smiling:

Railroad Son, Jim Croce
In his dreams, riding the rails to California; looks like it's no longer a dream. "The track is back." The song kinda reminds me of that other singer...John Denver.

Take Me Home, John Denver

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

To The Granddaughters

John Denver's "Take Me Home" used to bring tears. There are many, many songs I associate with one of the most remarkable summers of my life, and "Country Roads, Take Me Home" was one of the best.

Texas Is #1 In Production; But North Dakota Is #1 In Year-Over-Year Percentage Increase

Carpe Diem is reporting:

1. Two states – North Dakota and New Mexico – established new all-time monthly oil production levels in March, with annual increases of 35.7% and 23.5% respectively.

2. Texas crude oil output in March – at 2.369 million barrels per day – was the highest in slightly more than 27 years, going back to February 1986, and increased by more than 30.5% over last March.  As I reported yesterday, the Lone Star State produced one-third of all US crude oil output in March, the highest share ever.

3. Oil production during the month of March in Oklahoma was the highest in more than 20 years, and oil output in Wyoming was the highest in almost 13 years.

4. For the country, the US produced more crude oil in March than in any month since October 1992, more than 20 years ago.

Sequentially, month-over-month, it will get increasingly difficult to set new records, but year-over-year records should continue to be broken for another year or so.

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

A Note To The Granddaughters

The house is very, very quiet. Everybody went to the movies to celebrate the older granddaughter's birthday. Her birthday is later this summer but she won't be around then, moving to a new city. So, she gets her sleepover tonight and her younger sister, whose birthday is also later this summer, gets her sleepover next week.

Meanwhile, I'm sitting outside in the backyard, typing on the laptop (the keyboard lights up), under a cloudless night sky. I'm looking for the evening star but may not see it due to light pollution. A bit warm still but absolutely no bugs (no mosquitoes, in other words) which really, really surprises me. No sports on television as far as I know. Even The Oil Drum is very, very quiet. Contributors there suggest that it's time to move on from the subject of "peak oil."

I've told this story before. While going to graduate school in southern California back in the early 70's I experienced the oil embargo. I started riding the bus but my roommate never stopped driving his car. The embargo ended and sometime between then and now, I realized that there would never be a "true" shortage of energy in my lifetime. Any shortage will be artificial and man-made.  It was a huge revelation.

Right now it certainly appears we could have a have a relative glut of oil/gasoline over the new few years. Supply is getting ahead of demand, and demand won't start being a problem until the Chinese move to a new demand level.

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

I saw Jerry Jeff some years ago in the oldest dance hall still in existence in Texas. In college, I always thought the Nitty Gritty Dirt Band was the originator of this song. Wrong. 

This is another song that begs the question: do men/women write these songs, or are some songs delivered by angels?

Mr Bojangles, Jerry Jeff Walker

North Dakota Recognized For Permanent Economic Growth: The Silver Shovel Award

Updates

January 10, 2015: North Dakota did not make the cut for the Silver Shovel Award in 2014.

June 11, 2013: the same story, but at MSN Money.

June 7, 2013: North Dakota GDP growth tops in US; exceeds GDP growth of China.

June 6, 2013: North Dakota's economy -- #1 in US -- third consecutive year

Original Post

I posted this link/story earlier today, but for reasons that will become obvious later, I am posting it again, and expanding upon it.

First, the link/story in The Dickinson Press:

For the first time ever, North Dakota is being recognized by Area Development Magazine for its permanent economic growth.

Released Wednesday, North Dakota was one of 15 states to be honored with the Silver Shovel Award given by the site selection and facility planning quarterly. Four other states — Texas, Georgia, Alabama and Kansas — received Golden Shovel awards for being the top in their population category.

Each state had to pick 10 projects that represented permanent economic growth for the state, Editor Geraldine Gambale said from her Long Island, N.Y., office.

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

I wasn't able to find the list of ten projects that North Dakota submitted, but here is my list, hoping that readers will let me know of major projects I missed. I'm not sure how to manage the oil-related projects; I will sort that out as we go along.

ONEOK: Bakken Natural Gas Liquids Pipeline and Stateline I and II and Garden Creek I, II and III natural gas processing plants

The Minn-Dak beet processing plant in Wahpeton

The Ultra Green Packaging factory in Devils Lake

Expansion of BNSF facilities in Minot; marketing headquarters in Bismarck

North Dakota State Bank: unique in the US

Port of North Dakota

#1 producer of several agricultural products; among top 5 for several other products

United Pulse Trading expansion in Minot

WAWS bringing potable water to numerous western communities

Proposed fertilizer plants in Jamestown ($1.2 billion); Grand Forks ($1.5 billion)

Two dozen crude-by-rail terminals established in less than five years

Numerous major pipeline projects: oil and natural gas

Bobcat expansion/re-emergence in Bismarck

North Dakota ranks third in percent of electricity production from wind energy (Iowa #1, South Dakota #2)

North Dakota ranks #1 in barley production, key to beer production (this alone should qualify us for the Golden Shovel award next year)

UND's Department of Aviation: largest collegiate training fleet

Great Plains Synfuels Plant uses thirteen percent of North Dakota’s yearly coal production to produce synthetic natural gas. This is the only commercial-scale coal gasification plant in the U.S., producing 54 billion cubic feet per year, most of which is piped to eastern states

Construction has begun on first new refinery in the United States since 1976 in the Dickinson area; two more planned

It's Raining In The Bismarck Area And Setting Records; Flooding Is Predicted

The Bismarck Tribune is reporting:

Bismarck continued to add to its record rainfall total for May as rain persisted Friday. As of 5 p.m. Thursday, Bismarck recorded 7.24 inches of rain for the month of May, eclipsing the record of 7.04 inches set in 1927. Bismarck received measurable rain May 16-21, none May 22, 23, 24 or 28 and measurable rain the rest of the month.

For Bismarck, five of the top 17 years for rainfall have come since the year 2000. The ninth wettest year in terms of rain came in 2011 — 23.22 inches. The 10th wettest was in 2010 with 23.18 inches. The 11th wettest was 2009 with 23.12 inches. The 12th wettest was in 2000 with 23 inches. The 17th wettest year was in 2001 with 21.34 inches of rain.

Imagine What Statoil Could Do If The CEO Had A Sense Of Urgency

When the following was reported in Petroleum News it generated a lot of discussion and concern:

Statoil’s business model, according to Bull, is to take a longer-term view of onshore production, an approach he describes as somewhat anathema in the onshore world.

“We’re long-term investors, so we don’t shy away from 10 to 20-year horizons and even more. And we’re used to this with the offshore world. As you know, finding oil and gas in the offshore world takes at least 10 years to actually start getting the production going, and then you expect another 20, 30 maybe 40 years of production after that.

So we think in terms of decades in our investment horizon.”

That was back on April 14, 2013.

Let's look at the last two daily activity reports regarding Statoil.

Thursday, yesterday:

• 21875, 2,047, Statoil, Bratcher 10-3 2H, Ragged Butte, t3/13; cum 5K 3/13;
• 21876, 3,153, Statoil, Lonnie 15-22 1H, Ragged Butte, t4/13; cum --
• 22511, 928, Statoil, Bratcher 10-3 3TFH, Ragged Butte, t3/13; cum 3K 3/13;
• 22807, 3,793, Statoil, Richard 8-5 2H, Banks ,t4/13; cum --
• 22872, 3,091, Statoil, Pyramid 15-22 4H, Todd, t3/13; cum 12K 3/13;
• 22873, 2,835, Statoil, Pyramid 15-22 3H, Todd, t3/13; cum 9K 3/13;
• 22874, 1,884, Statoil, Pyramid 15-22 2TFH, Todd, t3/13; cum 3K 3/13;
• 22875, 2,341, Statoil, Pyramid 15-22 1H, Todd, t3/13; cum 600 3/13;
• 22941, 2,581, Statoil, West Bank 26-23 1H, t3/13; cum --
• 22942, 2,274, Statoil, Sullivan WMA 35-2 1H, t4/13; cum --

Friday, today:

• 22900, 3,660, Statoil, Topaz 20-17 3H, Banks, 4/13; cum --
• 22901, 3,225, Statoil, Samson 29-32 3H, Banks, t4/13; cum --
• 23740, 2,311, Statoil, Jerome Anderson 15-10 6H, Alger, t4/13; cum --
• 21815, 4,680, Statoil, Richard 8-5 1H, Banks, t4/13; cum --
• 22322, 4,630, Statoil, Cheryl 17-20 2TFH, Banks, t4/13; cum --
• 22644, 1,168, Statoil, Jerome Anderson 15-10 2TFH, Alger, t4/13; cum --

Imagine what Statoil could do if they had a sense of urgency. As my daughter would text, LOL.

By the way, how do these IPs stack up with the record IPs in the Bakken? FAQ #9:

Again, the initial production of any well, self-reported by the producer, is becoming less meaningful over time. Having said that, it looks like the record IP for a Bakken well is now 5,200, a Newfield well (July, 2011): 

• 18691, 5,200, NFX, Wisness Federal 152-96-4-2H, Westberg, Bakken.

Two earlier wells: a Whiting well which had an IP of 4,761 boepd: file #17612, 4,761 boepd IP, Whiting, Maki 11-27H, Mountrail County, Sanish field.  This is still current as of February 20, 2010. Since then, BEXP claims to have set a record with the Sorenson 29-32 1-H, #18654, with a 24-hour flowback of 5,133 bopd. However, the NDIC reported an IP of 2,944. BEXP also reported the Jack Cvancara 19-18 #1H in the Ross project area with a 24-hour flowback of 5,035.

 (Note: mixing "boe" and "bbls of oil" also confounds the issue, of course.)

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

For more on the Pyramid wells, click here. 
For more on the Cheryl and Richard wells, click here.

Seven (7) New Permits -- The Williston Basin, North Dakota, USA; Fifteen (15) Producing Wells Completed -- Statoil Has Some Huge Wells

Active rigs: 187 (steady, trending up)

Seven (7) new permits --

• Operators: Oasis (4), XTO (2), Petro-Hunt
• Fields: Killdeer (Dunn), North Tioga (Burke), Enget Lake (Mountrail)
• Comments: Rare to see a well in Enget Lake (northwest Mountrail County, west/abuts Cottonwood; immediately south of Powers Lake)

There were no wells coming off the confidential list today.

Fifteen (15) producing wells completed:

• 22900, 3,660, Statoil, Topaz 20-17 3H, Banks, 4/13; cum --
• 22901, 3,225, Statoil, Samson 29-32 3H, Banks, t4/13; cum --
• 23740, 2,311, Statoil, Jerome Anderson 15-10 6H, Alger, t4/13; cum --
• 21815, 4,680, Statoil, Richard 8-5 1H, Banks, t4/13; cum --
• 21418, 584, CLR, Larson 3-21H, Sauk, t4/13; cum 17K 4/13;
• 23130, 976, Hess, SC-Norman 154-98-3130H-4, Truax, t5/13; cum 10K 4/13;
• 23572, 934, Hess, AN-Bohmbach 153-94-2734H-4, Antelope, t5/13; cum 6K 4/13;
• 24556, A, Whiting, Lacey 21-1TFH, no other data; flowing, no pump;
• 24828, 1,341, Whiting, Hansen 13-20TFX, Sanish, t4/13; cum --
• 24555, 1,993, Whiting, Lacey 21-1H, Sanish, t4/13; cum --
• 24961, 1,726, Whiting, Meiers 44-18H, Sanish, t5/13; cum --
• 22322, 4,630, Statoil, Cheryl 17-20 2TFH, Banks, t4/13; cum --
• 22644, 1,168, Statoil, Jerome Anderson 15-10 2TFH, Alger, t4/13; cum --
• 24075, 1,371, MRO,  Hansen Ranch 34-10TFH, Bailey, t4/13; cum 2K cum --
• 24829, 678, Whiting, Hansen 14-20TFX, Sanish, t4/13; cum --

The "Real Reason" Why Millennials Don't Buy Cars And Homes: They're Broke; Remember -- This Is The Worse Economic Recovery In US History; Unemployed Rate High; Underemployed Rate At Record Levels; Record Number on Disability; Record Number Using Food Stamps; And It Isn't Getting Better For Urban Youth (Think Detroit)

Updates

Later, 3:36 pm: Above, I noted it "wasn't getting any better," but I honestly did not think it would get worse so soon after the original post.

Just after posting the note below, broadcast media said Tesla was raising the price-point for its most affordable car. I can't make this stuff up.

Here's the story. PlugInCars is reporting: 

The long-term vision of Tesla Motors has always been to enter the mainstream auto market with high-volume electric cars. Its niche expensive models—the Roadster and Model S—were positioned as luxury stepping-stones, to build experience and brand awareness as it moves down market to affordability.

Tesla CEO Elon Musk told Bloomberg last week that his company expects in three to four years to offer a car to compete against the Nissan LEAF—claiming that Tesla’s future affordable mass-market car will cost “below $40,000.”

Wait a second.

I thought the bogey was $30,000. At least, that’s what Musk told Newsweek’s Fareed Zakaria in July 2008. “We think we could either directly or in partnership with a major auto company actually get to a car that is under $30,000 in four years,” he said. If taken at face value, that would mean a $30,000 car by, well, this year. (I realize that Musk said this prior to the financial crisis.) 

Wow, it's been that long? 2008 plus four years = 2013?

For the millennials, I guess.

And now the "inexpensive" model is $10,000 more expensive. [BOE: 10/30 = 33% increase in price and no sign of the car.]

Original Post

Don sent me a link to this story: Yahoo!Finance is telling us the "real reason" millennials don’t buy cars and homes. I saw the story earlier and had not planned to post/comment on it, but I gave it a fair amount of thought. Then when Don sent me another article with the same theme, I thought it worthwhile to note my thoughts for my granddaughters some years from now.

My minimally edited reply:

I saw this story (different paper, different writer) but same theme.

My first thought: urban-centric; east-coast-centric writer.

1. Midwest: folks need a car

2. California: folks need a car

3. NYC, Boston, DC: huge population centers; relatively robust public transportation system; skews the data.

4. The story kind of reminds me of Aesop's fable: the wolf that couldn't reach the grapes (too high) and walked away, rationalizing they would be sour grapes any way.  There seems to be a stable of writers who write from a different planet. But go to any airport news stand, and look at all the magazines where cars are featured.

5. To me, this is a just a story to help make those who can't afford a car to feel better about their lot in life, that they are not alone. But, I bet any 18-y/o in NYC, DC, or Boston, who was offered a free Ford Mustang or a free F-150 would jump for it.

6. I don't often have a car, but that's not by choice. I love driving. The article, when I first saw it, was simply fluff -- suggesting the writer, as I noted above, was urban-centric, east-coast centric. But the muscle car is alive and well in California. And, if anything, the young Hispanics love muscle cars. I bet the same in Florida.

And guys don't get gals without cars:

Modesto, California, Car Show
There's a reason following the release of the movie "Cars" that, according to wiki, related merchandise, including scale models of several of the cars, broke records for retail sales of merchandise based on a Disney·Pixar film, with an estimated $5 billion in sales.

Modesto, California, Car Show
I don't think automobile manufacturers have anything to fear.

A Tipping Point For The Transformation Of North Dakota's Economy?

A recurring theme or conversation one hears in North Dakota has to do with economic development beyond agriculture and oil/gas. It seems folks are struggling to find some industry that would fit the state, but they keep coming up against dead ends.

Until now.

The invisible hand of free market capitalism seems to be providing an answer that folks have been struggling to find.

I'm thinking of the fertilizer plants going up on the east side of the state, Jamestown ($1.2 billion) and Grand Forks ($1.5 billion).

Yesterday, MDU/MBI announces a $700 million-pipeline project to take natural gas from western North Dakota (the Bakken) to western Minnesota, but readers quickly noted that this same pipeline could carry feedstock to these fertilizer plants.

Now, Don, notes this story in The Bismarck Tribune:

BNSF Railway is opening an economic development office in downtown Bismarck, Gov. Jack Dalrymple said Thursday.

Dalrymple said the new BNSF office, in the Wells Fargo Building at 400 E. Broadway Ave., will house economic development, sales and marketing staff to enhance the railway company’s customer services.

BNSF Railway employs more than 1,500 people in North Dakota and has hired more than 400 employees within the last two years, the governor’s statement said.

It will only be a matter of time before we start reading stories about BNSF shipping North Dakota fertilizer nationwide. 

Note: the economic development center is not in the middle of the Bakken; it is not even in Minot where so much of its activity is located in North Dakota. It is not even in Minnesota. Which brings me to the next story from The Dickinson Press:

With some of the state’s most prominent political leaders looking on and close to 200 people packing the New Salem City Auditorium, top executives from Minnesota Power/ALLETE touted their $500 million baby — a 50,000-acre network of over 100 wind turbines in Oliver and Morton counties.

“We’ve been here and we intend to stay here for the long haul,” said ALLETE CEO Al Hodnik. “North Dakota is both energy rich, but, most importantly, policy-friendly. I can’t say that about Minnesota, the state I grew up in, but North Dakota is good for business and good for our company.”

I have not got one good word to say about wind energy. Wind turbines have NO redeeming feature in my mind. Activist environmentalists know the devastating effect they will have on migratory birds and if they can live with that, it's beyond me to say anything else. It shows their true colors. Activist environmentalists are not interested in the environment; they are interested in anarchy.

Having said that, yes, the rapidity with which Bismarck makes decisions (or refrains from putting up more obstacles) is incredible.

And, as I've said before, it gives the governor a seat at the table when the feds and the states meet to discuss energy.

Now, back to the original point: this trifecta is not trivial -- two billion-dollar fertilizer plants outside the oil patch; a three-quarter-billion-dollar pipeline to move feedstock to these plants; and, millions of dollars in railroad upgrades to move the fertilizer.

I've maintained for quite some time, developers are concentrating too hard on figuring out how to capitalize on opportunities inside the oil patch, but they are hog-tied by another trifecta: lack of workers; lack of infrastructure (particularly transportation); and very high-priced land in the oil patch. Eastern North  Dakota, by comparison, offers a better opportunity.

I wonder if the fertilizer plants represent a tipping point in the transformation of North Dakota's economy? Fertilizer is not often thought of as related to the oil patch, and even without the Bakken, there will be sources of natural gas from Montana and Canada. It looks like the fertilizer plants may even push BNSF to a new level in North Dakota.

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

Related: The Dickinson Press is reporting:
For the first time ever, North Dakota is being recognized by Area Development Magazine for its permanent economic growth.

Released Wednesday, North Dakota was one of 15 states to be honored with the Silver Shovel Award given by the site selection and facility planning quarterly. Four other states — Texas, Georgia, Alabama and Kansas — received Golden Shovel awards for being the top in their population category.

Each state had to pick 10 projects that represented permanent economic growth for the state, Editor Geraldine Gambale said from her Long Island, N.Y., office.

“We don’t include retail, commercial or construction type jobs — things of that nature that would be temporary,” Gambale said. “It’s based on high valuated jobs.”

The ONEOK pipeline project in McKenzie County was one of the 10 projects the North Dakota Department of Commerce submitted.

Friday Morning News And Links

Active rigs: 186 (steady)

RBN Energy: TransCanada's Mainline conversion to oil, part I.

The proposal involves converting approximately 1865 miles of TransCanada’s existing Canadian Mainline to crude oil service and constructing up to 870 miles of new pipeline. If approved by Canadian regulators, the Energy East pipeline will have the capacity to transport between 500,000 bopd and 850,000 bopd. The Open Season closes on June 17, 2013 and if there is sufficient shipper interest, TransCanada will proceed with applications for regulatory approval. If those approvals are granted then the project is expected to be in-service to Montréal and Québec City in 2017 and to St John in 2018.

WSJ Links

Section M (Mansion): seldom read

Section D (Arena):

• The completely awesome San Antonio spurs.

Section C (Money & Investing):

• Buffett's safe bet on Vegas.

Section B (Marketplace):

• America is running out of Subarus.

Section A:

• Driver's-license dilemma: more states are giving them to illegal immigrants but some say fraud is an issue. Well, duh.

• Op-ed: a double-trouble scandal for Obama -- the Justice Dept scandal has outraged two of the president's reliable allies: the press and liberal activists.

• Op-ed: don't blame Ireland for America's tax blunders.

• Teen-agers don't know how to mail a letter. I can't make this stuff up. And neither can Brian S. Hall. 

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

A Note To The Granddaughters

While attending her high school graduation, our niece recommended a book her dad had given her: The Age of Entanglement: When Quantum Physics Was Reborn.

This is a very challenging book to read. The author revisits the history of the development of the theory of quantum mechanics through transcribed interviews of the key players as the theory is being developed. Of course, the conversations are imagined, but based on notes, letters, and interviews and copiously sourced with end notes.

It is extremely "wordy" with an incredible amount of unnecessary, or so it would seem, descriptions of the settings and tangential conversation. It is difficult to stay focused in many cases.

It is best to simply press on, not get bogged down while reading. Of course, the subject matter contributes to the difficulty in reading the book.

It is the author's first book. She was 25 years old when the book was published; it seems I read somewhere she spent eight to nine years working on the book. That means she might have been as young as 16 years of age when she was inspired by a high school teacher to really try to understand quantum mechanics.

Two takeaways from the book. First, one learns that unlike some theories or scientific discoveries, quantum mechanics was the product of dozens of mathematicians and physicists. The process was messy and the results messier. More than 80 years after much of the original work was done, the theory seems as difficult as ever.

The second takeaway was the answer to my question: when was quantum mechanics "discovered." Unlike calculus which we can narrow down to a specific year and mathematician (or two), or the structure of two-stranded DNA which we can narrow down to an exact month, if not day, and specific "scientists," that is not true for quantum mechanics. The tipping point was the Solvay conference in 1927, which is considered one of the most famous conferences ever. Over the next five years, the theory was "developed" by multiple individuals.

And I forget who first used the phrase, quantum mechanics. It will be a hard book to outline for my literature blog.

This book should not be read unless one has a good background in the pop literature of quantum mechanics.

Tax Loophole

Reuters is reporting:

The story of the "check the box" loophole, which allows U.S. companies to choose for themselves how to classify their subsidiaries for tax purposes, and a companion policy known as the "look-through" rule, shows how Washington bureaucrats, lobbyists and politicians have worked together — sometimes wittingly - to save money for American corporations and deprive the federal government of billions in tax revenue each year.
What began in 1996 as an effort by the Treasury Department to simplify the U.S. tax code mistakenly ended up as a massive tax loophole for corporate America, which seized upon it and has never let go.

Besides fueling an explosion in earnings that U.S. companies keep abroad - now more than $1.8 trillion, the Commerce Department estimates, double the amount from less than a decade ago - the loophole has become a symbol of how difficult it can be to repeal a tax benefit once it becomes entrenched.

But that's not the reason I posted this story.

It has to do with ObamaCare.

This bill is 2,700 pages long, too long for the Supreme Court justices to read, but you can bet corporations and unions are reading every page looking for loopholes, and they will find them. 

It's happened before:

The section of the Internal Revenue Code that made 401(k) plans possible was enacted into law in 1978. It was intended to allow taxpayers a break on taxes on deferred income. In 1980, a benefits consultant named Ted Benna took note of the previously obscure provision and figured out that it could be used to create a simple, tax-advantaged way to save for retirement. The client he was working for at the time chose not to create a 401(k) plan.

It's my understanding that some employers have already found a loophole in ObamaCare that is extremely good news for employers; very bad news for employees.  Except they will be able to keep their jobs.

With regard to the original story linked:

Two of Apple's most aggressive questioners, Democratic Senator Carl Levin of Michigan and Republican Senator John McCain of Arizona, have called for closing the "check the box" loophole. But even they have voted to keep it alive several times in recent years when it has been inserted into other legislation.

Levin's office did not respond to requests for a comment. McCain declined to comment for this story.

I guess they voted for it, before they voted against it.

By the way, President Obama's economic adviser, GE/CEO loves the loophole, at least according to the linked story. I can't make this stuff up.

Permit Numbers Cancelled By Surge; It's Not About The Nail -- The Video -- For Guys Everywhere

The other day it was mentioned that Surge was canceling a number of permits. These are the permit numbers and the names of the wells. These are all in Bottineau County and would have been Spearfish wells, I believe:

• 24893, Haram 00 NWSE 31, 31-164-77
• 23899, Scandia 2S NWNW 35 02 SWNE 34H, 35-164-78
• 23898, Scandia 1S NWNW 35 00 SWNE 34H, 35-164-78
• 23897, Scandia 1N NWNW 35 02 NWNE 34H, 35-164-78
• 23896, Scandia 2N NWNW 35 00 NWNE 34H, 35-164-78
• 24876, Haram 00 NWSE 20, 20-163-77
• 24875, Scandia 00 SESE 11, 11-163-78
• 24950, Haram 00 SENE 23, 23-163-77

Some, if not all, are located in/near the Souris oil field, along the Canadian border in Bottineau County.

On May 9, 2013, Surge announced it was selling its non-core assets in North Dakota:

The company is pleased to announce certain senior management changes, effective immediately, a private placement of up to $2.5 million, and the sale of certain non-core, non-operated assets for proceeds of approximately US$42.75 million.

From the press release:

Surge has executed a formal purchase and sale agreement with a Canadian oil and gas producer to sell its non-core, primarily non-operated assets in North Dakota for a purchase price of approximately US$42.75 million.  Closing of this transaction is anticipated to occur on or around May 31, 2013.  The non-core assets being sold comprise production of approximately 650 barrels of oil per day, with independently engineered P+P reserves of 2.2 million boe, and a net present value of $36.8 million (discounted at ten percent before tax as of December 31, 2012).  The Company expects a reduction in its borrowing base of $13 million as a result of the sale, resulting in a bank line of $277 million.

The sale of Surge's assets in North Dakota is the first step in implementing changes in the Company's business plan to maximize shareholder value, strengthen the Company's financial flexibility and support a sustainable business model.

Back-of-the-envelope:

• 650 x $50/bbl x 365 days = $12 million/year
• at 5% interesting, $42 million costs about $2 million in interest

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

For  guys everywhere, it's not about the nail...


It's Not About the Nail from Jason Headley on Vimeo

BRK

I wasn't going to post this story: Berkshire buys NV Energy, but when BRK-B hit another 52-week high (one of several over the past few weeks), it was impossible to resist.

So, Motley Fool is reporting:

There's a lot that's not surprising about the acquisition. The size, if anything, is small. Buffett's been very vocal about his desire to make "elephant"-sized purchases. Nor is it surprising that the conglomerate is expanding its reach with a steady utility business. These types of businesses add stability to the insurance and consumer-goods-heavy Berkshire. And it shouldn't be all that surprising that the price for NV Energy doesn't look all that cheap. If the Heinz deal reminded us of anything, it's that Buffett is willing to shell out a "full" price for a good buy.

But what may surprise a lot of investors is that by all appearances, Buffett had very little to do with this multibillion-dollar acquisition. Greg Abel, the CEO of MidAmerican, appears to have been firmly in the driver's seat on this one. Sure, Buffett knows that Abel is tapping MidAmerican's cash resources for the billions to purchase of NV Energy -- he even chimed in on MidAmerican's press release that the company is "a great fit for Berkshire Hathaway." But this was very much the Greg Abel Show.

"The size, if anything, is small." $10 billion.

Baghdad Bob Re-Emerges

Updates

June 6, 2013:  Investors.com is reporting -- "Fracking: The Death Knell Of OPEC"

If there was any doubt the U.S. shale revolution is breaking the dominance of unsavory energy producers on global oil supplies, look no further than last week's OPEC meeting, where the alarm bells were going off.

At Friday's Organization of Petroleum Exporting Countries meeting in Vienna, the mask of non-chalance about America's new fracking energy boom came off.

After years of dismissing U.S. energy production as insignificant and expensive, OPEC suddenly said it would "study" the growth in hydraulic fracturing and horizontal drilling, a deceptively bland response to the biggest challenge the cartel has ever faced on its monopoly.

The statement concealed the anything-but-tranquil tone of the meeting, in which members were attacking each other and warning of a split.

Nigeria Oil Minister Diezani Alison-Madueke declared U.S. shale oil "a grave concern," according to a report in the Wall Street Journal.

And the linked article goes on from there.

Original Post

Iraq: shale will have little effect on oil demand from OPEC. Rigzone is reporting:

Rising U.S. shale oil production will have only minimal effect on demand for crude oil from the Organization of the Petroleum Exporting Countries, meaning most members of the group want to leave their output ceiling unchanged at 30 million barrels a day, said Iraqi Oil Minister Abdul Kareem Luaiby Thursday. 

Iraq will continue to increase its oil production to 3.525 million barrels a day by the end of this year, compared with 3.125 million barrels a day currently, Mr. Luaiby said.

And that is according to Abdul Kareem "Baghdad Bob" Luaiby.

An earlier post links a story suggesting Iraq is on track to double production by 2020 or 2025. I forget which; I think 2020.

Baghdad Bob needs to look at this graph. 

Re-Posting Due To Significance

The original story was posted earlier tonight, and then a story came out which made the post even more relevant. In case folks missed the earlier post and the update, here is the link. This is a big story.

MDU Subsidiary To Invest $700 Million In Natural Gas Pipeline

Updates

Later, 11:13 pm: see first comment. The pipeline will also supply natural gas to the fertilizer plant(s) going up in the eastern part of North Dakota. 

Original Post

Through a press release, MDU is reporting:

WBI Energy, Inc., the pipeline and energy services subsidiary of MDU Resources Group, Inc., announced plans today for a proposed natural gas pipeline stretching from far western North Dakota to western Minnesota where it would connect with Viking Gas Transmission Company’s pipeline system.

This project would increase pipeline takeaway capacity out of the Bakken to accommodate rapidly growing natural gas production in the region.

“It’s exciting to think that the proposed pipeline could provide a new transportation route to bring Bakken-produced natural gas directly to industrial customers and commercial and residential utility customers in eastern North Dakota,” said David L. Goodin, president and CEO of MDU Resources.

“Through interconnecting pipelines, the proposed pipeline could also serve Minnesota, Wisconsin and Midwest U.S. markets.”

The pipeline has been initially designed to transport approximately 400 million cubic feet per day of natural gas and, depending on user commitments, could be expanded to more than 500 million cubic feet per day. The project investment is estimated to be between $650 million and $700 million. 

Several comments:

• when I first started the blog, I was not interested in natural gas in the Bakken; ONEOK changed everything
• the Bakken is considered an oil play; natural gas was originally thought to be about 3% of total economic value of the Bakken oil/gas prospect
• at $700 million for the project, MDU obviously feels the Bakken is going to be around for awhile

And a huge "thank you" to Don for alerting me to the press release. I had not yet seen it.

This is a PDF of the proposed route of this new natural gas pipeline (link broken -- first noted August 3, 2017).

No Wells Come Off The Confidential List Friday?

A Tale Of Two Countries

In Germany, despite a jump in May due partly to bad weather, unemployment is close to a reunification low.

In France, it stands at the worst level since records began in 1996, highlighting the growing divide between the eurozone's two major economies.

And Aljazeera is reporting.

Some years ago it was reported that slightly more than half of the entire French work force was employed by the government. I don't know if that is still accurate. If so, the record unemployment rate is even more startling. [Update: a reader clarified some of this for me: Over time the majority of French industry was owned/controlled by the French government from WWII through Mitterand. Over 60 - 70 percent of French manufacturing, mining, transportation, etc., was owned / controlled by the government. Only over the last ten years, or so, has the government been selling off major sectors. That explains where I "remember" the "more than half" figure -- that was some years ago.]

Two Quick Tweets -- And, A New Poll

Updates

Later, 10:54: just after posting the poll and the background for the poll earlier this evening, Rigzone posted an article on a US-Latin American trade agreement which will help natural gas export decisions later on down the road:

This meeting comes on the heels of Obama's administration recently appointing U.S. Energy Secretary Ernest Moniz, who was sworn in last week. He said he will put about 20 applications on hold to export liquefied natural gas until he reviews studies by the Energy Department and others on what impact the exports would have on domestic natural gas supplies and prices.

Caribbean countries are concerned about higher global oil prices impairing their economies and are looking for ways to promote alternative energy sources while better integrating their energy sectors.

Original Post

Platts: US crude inventories reach new record high -- but gasoline stocks have declined.

Platts: Obama's shout-out to US LNG exports:

Heartened by a brief mention of liquefied natural gas exports by President Barack Obama, the new head of the US trade group for shale gas producers said Thursday he thought Obama should hasten a permitting process that has issued only two permits thus far.

"The great news, here in America, is that by 2020 we'll be a net exporter of natural gas," Obama said Wednesday evening at a fundraising speech in Chicago. "We will over the next couple of decades have the capacity to be energy independent for the first time, incredible change."

"Obama's behind this," America's Natural Gas Alliance CEO Marty Durbin told roughly 100 lobbyists and trade industry representatives Thursday at the American Gas Association's monthly Natural Gas Roundtable in Washington.

I'm not going to hold my breath waiting for additional export licenses.

So, time for a new poll.

But first, results of the current poll, where we asked readers what they thought the future of the US Post Office was:

• grand reform guaranteeing solvency forever and ever: 6%
• status quo (Congress keeps writing blank checks): 81%
• reverts back to Cabinet-level department: 3%
• absorbed by another Cabinet-level department: 10%

Now, the new poll. The US has approved two LNG export licenses this year. Will we see any more licenses granted this year? Yes or no.

Seven (7) New Permits -- The Williston Basin, North Dakota, USA -- Statoil Roughnecks Should Be Celebrating This Weekend -- Pyramid Wells Northest Of Williston With Great IPs

Active rigs: 186 (steady, but trending back up)

Seven (7) new permits --

• Operators: Murex (4), Triangle (2), Whiting
• Fields: Rawson (McKenzie), Sanish (Mountrail)
• Comments: Murex has permits for four (4) wildcats up in Divide County; how interesting -- they will be in the area of the Alexandria and Sioux Trail oil fields noted yesterday; serendipitous.

Wells coming off the confidential list were posted earlier; see sidebar at the right.

Twleve (12) producing wells completed:

• 21875, 2,047, Statoil, Bratcher 10-3 2H, Ragged Butte, t3/13; cum 5K 3/13;
• 21876, 3,153, Statoil, Lonnie 15-22 1H, Ragged Butte, t4/13; cum --
• 22511, 928, Statoil, Bratcher 10-3 3TFH, Ragged Butte, t3/13; cum 3K 3/13;
• 22733, 200, CLR, Glasoe 5-19H, Dolphin, t4/13; cum 5K 4/13;
• 22807, 3,793, Statoil, Richard 8-5 2H, Banks ,t4/13; cum --
• 22872, 3,091, Statoil, Pyramid 15-22 4H, Todd, t3/13; cum 12K 3/13;
• 22873, 2,835, Statoil, Pyramid 15-22 3H, Todd, t3/13; cum 9K 3/13;
• 22874, 1,884, Statoil, Pyramid 15-22 2TFH, Todd, t3/13; cum 3K 3/13;
• 22875, 2,341, Statoil, Pyramid 15-22 1H, Todd, t3/13; cum 600 3/13;
• 22941, 2,581, Statoil, West Bank 26-23 1H, t3/13; cum --
• 22942, 2,274, Statoil, Sullivan WMA 35-2 1H, t4/13; cum --
• 24994, 1,393, Whiting, Carkuff 13-14H, Sanish, t4/13; cum --

Twenty-four (24) new wells plugged or producing.

Dumb Ideas That Will Get Dumber With Time: Tesla

Updates

June 1, 2013: Speaking of dumb ideas. California mandates that EVs must account for 15% of all car sales by 2025 (currently, the number is about 1%). So, the car companies are pretty much giving them away. Why didn't California simply mandate that EV's must account for 100% of all car sales by 2014 and make it really exciting? Why does this story make me think of ObamaPhones -- free for everyone who couldn't otherwise afford them?

Original Post 

The Wall Street Journal is reporting:

Tesla Motors said Thursday it plans to significantly boost the number of electric-vehicle charging stations near key U.S. cities over the next couple of years. 

But there’s a catch: The so-called “superchargers” will only work for Tesla’s Model S. So, for example, drivers of Nissan Motor Co. Ltd.’s popular all-electric Leaf car– the electric vehicle of choice for the middle class – won’t be able to use the Tesla superchargers. 

Automakers have complained that a key barrier to greater public adoption of electric vehicles is a dearth of quick-charge public charging stations. Companies such as NRG Energy Inc. NRG and Ecotality Inc. have been working to install more higher-voltage fast-charging stations in California and other states, where drivers of just about any electric vehicle can recharge their battery more quickly than they can with the old, Level 2 slow-chargers that can take hours. 

Tesla drivers can use any public charging station to recharge their vehicle, a Tesla spokeswoman said.

This will endear them to Americans. And they say Apple is elitist.

EPP To Develop Two Texas Refined Products Export Terminals; Will Handle Panamax- And Aframax-Size Vessels

Oil & Gas Journal is reporting:

Enterprise Products Partners LP (EPP) is developing two refined products export terminals to meet growing demand for additional products export capability on the US Gulf Coast.

Terminal development will use EPP’s existing Southern Complex of refined products pipeline, storage, and terminal facilities in southeast Texas, to improve access to its marine facilities in Beaumont, Tex., and on the Houston Ship Channel (HSC). Export service at the reactivated Beaumont marine terminal will initially handle Panamax-size vessels and is expected to begin first-quarter 2014, followed in mid-2014 by expansions at marine terminal on the HSC initially sized to handle up to Aframax-class vessels.

Keystone XL? We Don't Need NO Keystone XL --

Oil & Gas Journal is reporting:

The Canadian Association of Oilwell Drilling Contractors has hiked its forecast of 2013 drilling in western Canada 2.3% to 10,649 wells based on first quarter performance that was stronger than expected in the association’s November 2012 forecast.

CAODC said industry averaged 496 rigs or 61% utilization in January through March, compared with the 60% utilization anticipated in the November forecast.

In first quarter drilling, Alberta utilization averaged 60% (365 rigs running in a fleet of 607), Saskatchewan 56% (70 rigs of 125 available), in British Columbia 81% (47 out of 58 available rigs), and in Manitoba 55% (13 out of 24 rigs available).

Lots of conflicting data points out there. 

Williston Wire; Minot Motel Occupancy Down To 57%

Headlines only; it is easy to subscribe to the Williston Wire.

• Home Depot's new address in Williston: 13960 West Front Street; recently housed Derrick Equipment Company.

• Renaissance Heights Apartments, Phase 1, ground breaking; amenities to include an indoor pool and spad, a modern fitness center, and theatre with lounge seating.

• Oil patch housing is shifting from temporary to permanent.

• Hotel occupancy in Minot in April: 57%. 

• Misperception about a "wild west" mentality in the Bakken oil patch.

• K-9 unit marks second year in Williston.

• ND's oil production at record pace: almost 800,000 bopd.

• Garden Creek III, near Watford City, approved. Previously posted.

• Amtrak considers Culbertson stop.

The Utica: 2012 --

From Ohio's Department of Natural Resources (like the NDIC):

Production reports were submitted for 85 wells in 2012. Of these, 63 were commercial producing wells, 19 were tested and shut-in and 3 were dry and abandoned.

It was interesting to see how Ohio presented that data. On their front page, no data. One had to download the Excel spreadsheet. The amount of oil produced by Ohio in 2012: about 636,000 bbls.

North Dakota does that about every three weeks.

Yes, I know, the Utica is starting out as a natural gas play but bills itself as a promising natural gas play AND crude oil play.

The Utica, natural gas: 13 billion cubic feet in 2012. 13 billion/365 = 35 million cubic feet/day.

For all the ink used to write about the Utica, the data coming out of the Utica is downright unimpressive. 

Eighty-five (85) wells were producing oil and/or gas in Ohio in 2012. North Dakota drills that many wells in a week. Okay, maybe two weeks. Maybe 5/day x 14 days = 70 wells. (In the last Director's Cut, the director said 140 wells were completed in March, 2013, most recent data.  That was down from 30 the month before.

So, let's see what else folks said about the Utica in the past month or so. This should be fun:

• Analyst says Ohio data may not be particularly useful (posted before the data was released).
• ODNR itself says Utica shale is putting up big production numbers. Okay.

A typical vertical well in Ohio annually produces about 50,000 cubic feet of gas a day and less than one 42-gallon barrel of oil.

North Dakota, an oil play: 850 million cubic feet/natural gas/month = 28 million cubic feet/day.

Unless I missed it, the report did not include the amount of natural gas flared. 

Disclaimer: don't trust the math. I often make mistakes with basic arithmetic. 
 

Some Disconnected Rambling

Updates

May 18, 2014: the man behind killing the Keystone. It turns out to be a gentleman who started his own investment company which is heavily invested in a competing pipeline company. LOL.  The man is billionaire environmentalist Thomas Steyer.

The leftwing Steyer undoubtedly is sincere in his green beliefs but sincerity on an issue is easier if you also stand to make a fortune from it. The conservative Daily Caller (Nov. 8, 2013) noted, “Most of Steyer’s $1.4 billion fortune came through investments in fossil fuels. In fact, Steyer’s biggest cash cow is Farallon Capital Management. Farallon has stakes in a number of oil, gas and pipeline companies, including a large investment in Kinder Morgan, an oil and gas pipeline outfit that plans to expand its own TransMountain pipeline to transport oil from Alberta to refineries and shipping terminals in the U.S. and Canada.”

(Steyer actually founded Farallon with $15 million in start-up money.)

Keystone threatens Steyer’s profits in several ways. A glut of Canadian oil would drive down energy costs in America, and the new supplier would be a competitor. But more than anything else, the method of supply would also compete with Steyer’s self-interest.

The Business Insider (June 17, 2013) observed that, if TransMountain’s “expansion is approved, TransMountain will be the only available outlet for Alberta crude.

If Keystone XL is killed, it will leave TransMountain as the only game in town for transporting oil directly from the oil sands to export terminals, up to 900,000 barrels a day. And most of that oil will be shipped west to China.”

No wonder Steyer has not breathed a word of criticism about TransMountain, which is functionally the same as Keystone. No wonder he lobbied against the Northern Gateway pipeline which would take oil from Edmonton to the west coast. It, too, would compete with TransMountain.

Later, 5:29 pm: Chinese bought more US assets in 2013 than they did in nine of the past full ten years. The Wall Street Journal is reporting:

The $9.8 billion in announced deals by Chinese firms scooping up U.S. companies is the highest ever at this point of the year, according to Dealogic. In fact, the year is off to such a strong start that there already has been more Chinese acquisitions announced in the U.S. in 2013 than were announced nine of the past 10 full years, the data provider shows.

Original Post

So, the Chinese are buying our shale assets in Oklahoma and Texas.

The Chinese are buying our pork.

The Europeans are clear-cutting our North Carolina forests for wood chips for fuel.

The IRS commissioner visits the White House a gazillion times more often than Hillary and all the others combined.

And the activist environmentalists are worried about fracking.

Okay.

How Much Is A 26-Car Parking Lot Worth? In Williston, Way More Than $16 Million

Updates

February 27, 2014: apparently this project has been approved (verbal discussion with long-time Williston resident and very, very reliable source).

Later, 11:38 pm: I was correct. Incredible. I joked below that Williston city commissioners voting again the project must be realtors, turned out to be (at least partly) true. The Williston Herald also noted it:

Discussion continued Tuesday night on the potential sale of a downtown parking lot, but no action was ultimately taken.

Commissioners accepted a bid on May 14 for a total of $17 million, and numerous questions were raised about the bid and the pending purchase agreement.

Commissioner Tate Cymbaluk, who originally voted against the bid citing already-present parking issues downtown, peppered the commission with more concerns over the project.

Cymbaluk, who doubles as a realtor, said if the project’s footings are in place, the city could face potential liens if construction was not adequate to the agreement, which could cost more money to buy it back.

Sounds like the city could require bonds to minimize adverse exposure.

I still think the Chicago developer needs to take his proposal to the 13-mile corner. 

It doesn't take a rocket scientist to guess who was against man-camps; the result was $200/night lodging, and very, very expensive housing. But that's an old story.

 

Original Post

A Chicago developer wants to invest $16 million in downtown Williston.

Some in Williston are vehemently opposed: they don't want to lose a parking lot.

Even the city commissioners are divided 3-2.

Nancy Kapp, president and CEO of The Renaissance Companies, proposes a six-story complex on Williston’s Main Street that would house retail, office space, 45 apartments and underground parking.

The Renaissance on Main project, which would replace a city-owned parking lot, has created a divide among Williston city commissioners and residents. Commissioners recently supported the project in a 3-2 vote and will make a final decision on selling the lot in a special meeting tonight.

Call me crazy but I must be missing something. Let me guess. Two of the Williston city commissioners are realtors. Or own the parking meters on the parking lot.

The Dickinson Press is reporting.

I definitely understand the concerns of the local retailers, but if I were the Chicago developer and got that kind of welcome (two of five commissioners voting against the proposal), I would take my offer to the proposed Bakken City 13 miles north of Williston.

A $16 million project in downtown Williston would be just the start of a transformation. Downtown Williston, compared to all the activity in the area (and compared to the economic data just released -- more retail sales than Fargo), looks tiny, parochial, and pathetic. JCP and Hedderich's are the big buildings downtown? From the 1950s or 60s? Think of the property tax revenue this project would bring. Think of the huge number of shoppers this would bring to downtown.

Williston, April, 2013

Thursday Morning News And Links

Active rigs: 184 (steady, reversed recent downward trend)

RBN Energy: Condensate markets east of the Suez Canal, part II. 

Jobs Report

Reuters is reporting: "unemployment benefits applications rise unexpectedly BUT still within 2013 range." Okay.  Talk about beating a dead horse. Up 10,000.  Up to 354,000. Last week's numbers were revised UPWARD. No surprise. Four-week moving average edged up to 347,250.

Original GPD estimates for 1Q13 were revised downward to 2.1%.

WSJ Links

Section D (Personal Journal):

• FAA targets certain flights to be delayed to manage overall system. Incredible.

Section C (Money & Investing):

• KKR lands Petraeus.
• Banks see record profits.

Section B (Marketplace):

• Bankruptcy court says Patriot Coal can scrap union contracts.
• Everyone cutting their internet service -- wi-fi everywhere.
• Two Flying J Truck Stop employees in plea deals.

Section A:

• New tack in preventing hospital infections: hand-washing.
• Op-Ed: just a reminder. Senator Durbin wants to look into silencing bloggers and tweeters.

No links, but one trend: both GE and Berkshire Hathaway continue to expand their holdings in fossil fuel entities.

This Should Scare Folks

The Daily Caller is reporting:

The narrative and the graph are absolutely amazing:

Shulman’s extensive access to the White House first came to light during his testimony last week before the House Oversight and Government Reform Committee. Shulman gave assorted answers when asked why he had visited the White House 118 times during the period that the IRS was targeting tea party and conservative nonprofits for extra scrutiny and delays on their tax-exempt applications.

By contrast, Shulman’s predecessor Mark Everson only visited the White House once during four years of service in the George W. Bush administration and compared the IRS’s remoteness from the president to “Siberia.” But the scope of Shulman’s White House visits — which strongly suggests coordination by White House officials in the campaign against the president’s political opponents — is even more striking in comparison to the publicly recorded access of cabinet members.

The tea-tards had it right.

And the mainstream media will let this slide. Hero-worship. That tingle down their collective legs.

RBN Energy Correction To Yesterday's Story

Link to yesterday's post.

The correction:

Yesterday in our blog titled “To the Pipelines, Robin” we examined Genscape data that showed lower volumes moving via out of the Bakken and higher volumes moving via pipe.  One of the terminals in the data table was Inergy’s Colt terminal, which showed a decline this month versus last.  We got an email from our good friends at Inergy saying that in fact April volumes at Colt were in excess of the reported volumes and more importantly their May actual volumes increased 12% versus April.  Genscape uses remote cameras to record the goings and comings of rail cars at these terminals.  It turns out that there was a camera malfunction for a week, so the table should have reflected that fact.  We apologize for the error.

Fascinating, to say the least.

Investment Trends, The Bakken, 1Q13, Part V -- Filloon

Part V. This is how another excellent analysis begins:

Past articles in this series show where the Bakken is headed in 2013 and beyond. 

Operators have done a great job, as they have developed pad drilling, zipper fracs, and pressure pumping techniques that not only have improved EURs, but also reduced costs. Companies have turned ideas into reality, and this is only the beginning. 

Operators are getting more proficient, as the first quarter was spent drilling and not completing wells. 

This is building an inventory, and now that the weather is nice we should see a large number of pad completions turned to sales in the third quarter. 

Most operators are using two mile thirty stage laterals with large amounts of sand and ceramic tails. Better results are being seen from companies using more water and proppant. As the source rock is better stimulated, it will take more of both to fill in the fractures and keep crude flowing to the well bore. In my [previous] article, I covered EOG Resources (EOG). Its comment about Bakken rate of return could prove to be a turning point for this play. EOG is seeing returns in its Bakken wells that rival the Eagle Ford. These are triple digit returns, and more importantly show us that EOG's technologies and not geography are the reason for its outperformance.

**************************** 

From earlier posts, Parts I - IV of this series. Part IV.

Well costs continue to head lower. Most operators are reporting well costs decreasing 20% to 30% year-over-year. The unusually late winter in North Dakota forced some to put off completion work until the second quarter and just focus on getting wells drilled.

This is much more convenient now that pads production looks to increase exponentially over 2012. Companies like Kodiak put its mobile rigs to work punching holes. Since there was little to no completion crews to worry about, Kodiak didn't have to worry about time frames and how that would affect fraccing. Once the drilling is completed, the completion crew will zipper frac the wells. This can decrease times by a third. This coupled with lower oil service costs across the board, increase rates of return to levels that are much more economic.

Drilling in the first quarter threw analyst projections off as costs were higher as more drilling work got done, but very few wells were put to sales. I am expecting some very big top and bottom line numbers in the third quarter of this year.

An incredible amount of information in this post, again, as usual.

From an earlier post:

Part I and Part II were linked here.

Part III:

The first quarter has turned out to be much better than expected in the Bakken. Most operators spent time drilling from pads, which was a good thing as the winter lasted longer with more snow than originally expected. Pad drilling requires that all the wells be drilled before completion work begins. Batch drilling saves time and money.

Zipper fracs allow multiple wells to be fracced at the same time, which also lowers costs. The larger percentage of drilling vs. completion work means less production began in the first quarter. This did lower revenues, but more importantly, is the beginning of a new dynamic in the Bakken and at other basins in the United States.

Completing multiple wells with in a short time frame means production will be very high at those times. This means some quarters will have high revenues and EPS while others could be very low. This lumpy production will provide buying opportunities in the first and second quarters of the year. In parts one and two of this series, I discussed how the Bakken operators continue to benefit. Part 3 also touches on these points, but more importantly, starts with Oasis, which blew the doors off estimates.

Cost of wells is well below $10 million. 

Huge amount of information regarding Oasis.

With regard to COP:

Now the Eagle Ford, Permian, and Bakken have higher margins than the average of all of Conoco's production combined. This shows the economics of shale liquids are very good. Conoco's WTI/Bakken differentials are minus $5, and the Eagle Ford is plus $5. Even with well cost improvements in the Bakken, the Eagle Ford continues to be a better overall play.

Costs for OXY USA wells has come down significantly:

Occidental is realizing improved well costs throughout all of its U.S. acreage. From 2012 to 2013, the Williston Basin has seen a 32% decrease. This was the best percentage of all U.S. plays for Occidental. Its drilling program is now planned months in advance. This not only decreases costs associated with downtime, but it has been able to decrease the number of hours needed to complete the wells. It has decreased the number of strings of casing. It has switched its cemented liners for slotted liners. Occidental is optimizing water usage, by using flow back-end or produced water on completions. Stimulation contracted costs are also headed lower. Four months ago, Occidental Bakken well costs averaged $10 million. Today the average is $8.2 million with a goal of $7.5 million. In 2013, it will run 6 to 7 rigs.

Bakken Is Now $6/Bbl Cheaper Than WTI -- Due To "Over-Supply" In The Bakken; Widest Discount So Far This Year

Bloomberg is reporting:

Bakken crude weakened to the lowest level this year against U.S. benchmark West Texas Intermediate with the number of wells and the amount of production in the North Dakota shale formation at record highs.

Wells drilled in the Bakken grew to 562 from 556 in the first quarter, according to data from Bloomberg Industries. Monthly production also set a record in March, increasing 0.5 percent to 718,791 barrels a day, the state Industrial Commission said May 15.

“What you’re really starting to see is the advent of pad drilling,” said Christian O’Neill, an energy analyst in New York with Bloomberg Industries. “The companies have more time within these plays, they’re getting more and more efficient and their recovery rates are also steadily rising.”

Bakken fell $1 a barrel to $6 below WTI at 2:05 p.m. New York time, according to data compiled by Bloomberg. That’s the lowest level since Nov. 16.

One 30-second data point: 550 wells/quarter = 2,200 wells/annum.

It should be noted that:

• the first quarter is the most difficult quarter to drill/complete a well due to weather
• a lot of drilled wells are waiting to be fracked

It should be noted that, a lot of wells are waiting to be fracked due to

• winter weather
• pad drilling (they often won't frack until the last well on a pad reaches total depth)

For these reasons, Mike Filloon recently commented:

Drilling in the first quarter threw analyst projections off as costs were higher as more drilling work got done, but very few wells were put to sales. I am expecting some very big top and bottom line numbers in the third quarter of this year. This will see the bulk of pad drilling production, and this will be very difficult to model given the large number of completed wells. Differentials could be the biggest story.

OPEC Disbands Its Production Quota Monitoring Committee; Peak Oil? What Peak Oil -- Iraq On Track To More Than Double Its Production By 2020 (To More Than 6 Million BOPD)

Rigzone is reporting that OPEC will disband its committee that monitors production compliance. That in itself is news, but in addition, there are some very interesting statistics that seem about as accurate as any statistics that pertain to OPEC:

By 2020, Iraq's oil output is on track to more than double to 6.1 million barrels a day, according to data from the International Energy Agency. At the same time, demand for OPEC's oil is expected to diminish as production from the U.S. and Canada increases by a fifth to 11.9 million barrels a day by 2018, compared with this year, the IEA said.

From just over 30 million barrels a day last year, demand for OPEC crude is expected to fall to 29.2 million barrels a day by 2015, the IEA said. But OPEC's production capacity will rise from 35 million barrels a day last year to 36.4 million barrels a day by 2015, it said.

The implication of this is, in order to prevent an oversupply, OPEC will have to withhold an additional 2.3 million barrels a day of oil from the market by 2015.

That's because the spare capacity OPEC withheld from the market totaled 4.9 million barrels a day in 2012, and will rise to 7.2 million barrels a day by 2015, the IEA said.

The unofficial OPEC production quota is 30 million bopd. Again, according to the linked article:

The decision to axe the committee comes at a time when OPEC member countries no longer have individual production quotas. Instead, since December 2011, OPEC has had a collective production ceiling of 30 million barrels a day, although the group's output has consistently remained above that level. 

Highlights of CVX's 2013 Annual Stockholder Meeting

Rigzone is reporting:

Watson discussed Chevron's strong 2012 financial and operational performance, with earnings exceeding $26 billion and return on capital employed (ROCE) approaching 19 percent. In 2012, the company marked its 25th consecutive year of annual dividend payment increases, which included last year's annual dividend increase of 13.6 percent. Chevron announced another quarterly dividend increase of 11.1 percent in April 2013. Watson also said that for the fourth consecutive year, Chevron led its peers in five-year total stockholder return.

Disclaimer: this is not an investment site. Do not make any investment decisions based on something you read here or think you read here. 

Two New Fields In The Williston Basin, North Dakota: Alexandria And Sioux Trail Oil Fields

There appear to be two relatively new fields in the Williston Basin, North Dakota. They are in Divide County, northeast of Grenora, and each is about one township in size:

• Alexandria: T161N-R100W (south of West Ambrose oil field)
• Sioux Trail: T160N-R101W (east of Fertile Valley oil field)

There are a few producing wells in each of those two fields, and the fields are in the NDIC well search database.

However, neither field is identified on the GIS map server.

There are four well files in Sioux Trail: Hunt (2) and North Plains Energy (2).

There are six well files in Alexandria: Hunt (4) and SM Energy (2).

Interestingly, there are two townships in the immediate area, just to the west of Alexandria:
T161N-R101W and T161N-R102W are not yet designated as a field.

North Dakota Taxable Sales And Purchases Sets Record; "Billion" With A "B"

The Bismarck Tribune added this story to the earlier story (see below); numbers rounded:

Bismarck’s taxable sales and purchase were up 12 percent to $1.7 billion for 2012. Mandan’s were up 18 percent to $230 million.

Williston’s 2012 taxable sales and purchase surpassed Fargo’s by more than $600 million, Fong said: “That’s pretty remarkable.”

Minot is on the heels of catching Bismarck with $1.5 billion collected. Bismarck City Administrator Bill Wocken said the city is “pleased with the activity” in Bismarck, which was growing pre-oil boom and has continued since at an even higher rate.

The Dickinson Press is reporting:

North Dakota’s taxable sales and purchases climbed more than $5 billion, or 28.7 percent, from 2011 to 2012, according to an annual report released Wednesday.

The report, issued by the state tax department, found that during the fourth quarter of 2012 — October, November and December — North Dakota’s taxable sales and purchases were $6.74 billion, up 9.7 percent from $6.1 billion in the fourth quarter of 2011. The 2012 calendar year saw more than $25.29 billion, a 28.7 percent jump from $19.6 billion in 2011.

The four major population cities — Bismarck, Fargo, Grand Forks and Minot — reported growth for 2012 ranging from 9 percent in Fargo, a total of $2.64 billion, to 18.3 percent in Minot, $1.6 billion. These four cities alone reported taxable sales and purchases of $7.29 billion, an increase of $771 million over 2011, the report said.  

Unless I missed it, Williston was not mentioned in The Dickinson Press story, but Williston was mentioned in The Bismarck Tribune story:

The biggest growth is coming from western North Dakota's oil-producing region. Taxable sales and purchases in Williams County totaled $4.6 billion for the year, up more than 43 percent, data show.

The city of Williston, where the official population count is pegged at 26,697, had more taxable sales and purchases during the year than Fargo, North Dakota's biggest city with a population of more than 107,000. Williston, in the heart of the state's oil patch, recorded $3.51 billion in taxable sales and purchases during 2012, compared with Fargo's $2.6 billion.

So:

• Fargo, Bismarck, Grand Forks, and Minot combined: $7.3 billion
• Williston: $3.5 billion

Wells Coming Off Confidential List Thursday; XTO, KOG With Some Huge Wells

• 19755, 149, Whiting, Anderson Butte Federal 11-17TFH, North Elkhorn Ranch, t1/13; cum 8K 3/13;
• 22086, 2,052, KOG, P. Thomas 153-98-5-3-2-1H3, Truax, t4/13; cum --
• 23834, 3,458, XTO, Lundin 44X-11H, Siverston, t4/13; cum --
• 23840, 2,079, XTO, Leiseth 24X-22F, North Tobacco Garden, t4/13; cum --
• 24135, drl, Hess, LK-Little Chase Creek 147-97-2116H-2, Little Knife,
• 24284, drl, CLR, Hawkinson 9-22H3, Oakdale,
• 24502, 559, Petro-Hunt, State 150-104-3A-10-1H, Nelson Bridge, t2/13; cum 13K 4/13;

Random Update On Costs Of Mining Western Canadian Oil Sands Bitumen -- Costs Have Increased By As Much As 13% This Past Year -- And Keystone XL Not Yet Approved

Oil & Gas Journal is reporting:

The estimated cost of producing bitumen in Canada has increased by 6.3-13.2% in the past year, depending on the production method ....

Supply costs at the plant gate, CERI says in an annual report, are C$30.32/bbl for primary recovery, $47.57/bbl for steam-assisted gravity drainage, C$99.02/bbl for integrated mining and upgrading, and $68.30/bbl for mining alone.

Compared with CERI’s estimates last year, the costs are up 6.3% for SAGD, 10.9% for integrated mining, and 13.2% for stand-alone mining.

Meanwhile, costs are dropping in the Bakken to drill a well. 

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA -- Fifteen (15) Producing Wells Completed -- XTO With Two Very Nice Wells

Active rigs: 183 (trending down, quickly)

Eleven (11) new permits --

• Operators: OXY USA (4), EOG (2), North Plains (2), Legacy (2), Fidelity
• Fields: Red Rock (Bottineau), Parshall (Mountrail), Sioux Trail (Divide), Cabernet (Dunn), Murphy Creek (Dunn), Sanish (Mountrail)
• Comments: Nice to see OXY USA activity
  

Wells coming off confidential list were posted earlier; see sidebar at the right.

Lots of activity today.

Fifteen (15) producing wells completed:

• 23081, 1,293, Whiting, Sondrol 11-3H, Bully, t4/13; cum --
• 23823, 920, Hess, EN-State D 154-93-2635H-2, Robinson Lake, t5/13; cum --
• 23129, 943, Hess, SC-Norman 154-98-3130H-3, Truax, t5/13; cum --
• 23571, 1,290, Hess, AN-Bohmbach 153-94-2734H-3, Antelope, t5/13; cum --
• 24184, 1,726, Whiting, Sondrol 11-3-2H, Bully, t4/13; cum --
• 23082, 438, Whiting, Sondrol 11-3TFH, Bully, t4/13; cum --
• 20503, 560, XTO, Wood 21X-25B, Truax, t4/13; cum --
• 20250, 1,944, XTO, Wayne 34X-34F, West Capa, t3/13; cum 9K 3/13;
• 23469, 3,146, XTO, Lawlar 41-15SEH, North Tobacco Garden, t4/13; cum --
• 22366, 1,336, Hess, HA-Swenson 152-95-1819H-3, Hawkeye, t5/13; cum --
• 23370, 597, CLR, Atlanta 3-6H, Baker, 4-section spacing, t4/13; cum --
• 05579, 33, Enduro, Engebretson 8-9, Little Deep Creek, a Madison well; t5/75; cum 53K 3/13;
• 22635, 1,114, Hess, HA-Swenson-152-95-1819H-5, Hawkeye, t5/13; cum --
• 23833, 2,653, XTO, Lundin 44X-11C, Siverston, t4/13; cum --
• 23815, 134, Corinthian, Corinthian Backman 4-35 1H, North Souris, a Spearfish well; t5/13; cum -  

Surge Energy cancelled eight (8) permits in Bottineau County (three Haram wells, and five Scandia wells). See discussion here; this probably has to do with Surge selling its North Dakota operations and nothing to do with potential of this area.