Friday, March 7, 2014 -- Morning

Note the date: March 7, 2014 -- posting was delayed due to traveling.

Active rigs:

	3/7/2014	03/07/2013	03/07/2012	03/07/2012	03/07/2011
Active Rigs	192	186	204	204	171

RBN Energy: on the road to New England. Natural gas continues to make in-roads into the Pacific Northwest's hydro-electricity. A war on hydro-electricity, next?

In Part 1 of our series, we provided an overview of the Pacific Northwest’s incredible hydro infrastructure, especially the series of hydro dams along the Columbia and Snake rivers that together can generate as much electricity as 20 nuclear plants. We also talked about how natural gas has always played second fiddle to hydro in the region, but that rising demand for electricity and plans to retire the last remaining coal-fired units is giving gas a higher profile. Depending on how successful the Pacific Northwest is at increasing the energy efficiency of its homes and businesses, several thousand MW of new gas-fired generating capacity may need to be added in the region over the next few years. A need that would only grow if a threat to remove one or more hydro plants for environmental reasons is carried out.

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ObamaCare and The Uninsured

The "30 million uninsured" was pure demagoguery, of course. But let's say it was accurate. If so, the numbers are even worse. McKinsey/Forbes took a look:

The Obama administration has, for months now, been peddling nice-sounding numbers as to how many people are gaining health coverage due to Obamacare.

But their numbers have been inflated on two fronts. First, not everyone who has “selected a marketplace plan” under Obamacare has actually paid the required premiums, payment being required to actually gain coverage. Second, only a fraction of people on the exchanges were previously uninsured.

A new survey from McKinsey gives us a better view into the real numbers. Of the 3.3 million people that the White House has touted as Obamacare exchange “sign-ups,” less than 500,000 are actual uninsured people who have actually gained health coverage.

If Hillary and Barack were accurate, that there were 30 million uninsured, only 1.7% of the uninsured have taken advantage of ObamaCare. Fail.

Of course, 30 million folks were not chronically uninsured; many were in-between jobs. Most had access to medical care. Be that as it may, less than 500,000 enrollees were actually uninsured prior to ObamaCare. 

Talk about a failed solution looking for a problem. 

Be that as it may, the perception on the street is that the entire ObamaCare program is now on hold through the end of 2017 (that is the perception, though it is not entirely accurate). That perception will create havoc in the health insurance industry, and perhaps spell the end of ObamaCare before it was even fully in place. I opined a long, long time ago, the best thing the GOP ever did was not defund ObamaCare. It failed on its own. They say the president is even beginning to recognize that. My hunch is that after March 31, 2014, we will never hear another speech by President Obama on the importance of enrolling in ObamaCare, if for no other other reason that the whole "enrollment thing" is now moot -- it's been delayed until after he and Michelle leave the White House with their daughters in tow.

The Fiscal Times also reported the same story / same data. 

Wind Projects In North Dakota -- A Random Update -- With Bragging Rights

For folks who like the prospect of seeing and hearing slicers and dicers for the rest of eternity on the Great Plains, this should be a welcome story and a welcome site (see photo at linked story). The Dickinson Press is reporting:

Anyone who’s spent a day in North Dakota knows it’s windy here, which is why energy companies are investing in wind farms throughout the state, including a new wind farm in southwest North Dakota near Hettinger.

“There’s about five projects in the state going on right now,” said Mike Fladeland, manager of energy business development for the North Dakota Department of Commerce in Bismarck.

“By the end of another year or two, we should have a little bit — we should have over two gigawatts of wind-generated power in the state.”

North Dakota has high wind energy potential — sixth in the nation — and ranks 11th for actual production.

Montana-Dakota Utilities is planning to purchase 105 megawatts of wind energy from the Thunder Spirit Wind project in Adams County, bringing their totals to 20 percent renewable, MDU spokesman Mark Hanson said.

“That contract will provide our customers with stable pricing over that 25-year contract that we signed,” Hanson said. The company owns windmills near Rhame and Baker, MT.

Catching Up With Other News; Odds And Ends; Comments And Commentary -- March 8, 2014

The Wall Street Journal

Headline story first page: job rebound eases fears of spring stall. US businesses add 175,000 workers; better than expected. There are three things that affected the number, I would suppose:

• global economy
• the severe winter brought on by global warming
• and a third (to be noted later)

My hunch is that the global economy did not all of a sudden improve to the extent that US businesses should have already added 175,000 workers. So, global economy is a wash.

It's my gut feeling -- based on news articles over the past two months -- that most analysts expected job growth to be challenged by the very severe winter weather. All things being equal, severe winter weather should have resulted in fewer workers joining the work force. But that didn't happen, despite the severe winter brought on by global warming.

No, the third of the three "things" was not the delay of ObamaCare until 2017 (that announcement came out too late to effect this most recent jobs number).

No, the the third of the three "things" was the fact that long-term unemployment benefits (99+ weeks of benefits) has been terminated (or better said, neither renewed nor extended) by Congress. [This reminds me of something a 70-year-old woman working at CashWise in the Bakken told me last week: "If you can't find a job in Williston, you are either lazy or sickly."]

Unless the numbers are being fudged (which cannot be ruled out in an election year), that's it: global economy, severe weather, unemployment benefits are the three major factors affecting employment (note: an increase in the minimal wage was not a factor, yet).

I mentioned this to my wife, who usually disagrees with about everything I say (smart woman). She mentioned that The Wall Street Journal discussed this very issue a few days ago and mentioned the same thing: the relationship between jobs and unemployment benefits.

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Crimean/Ukraine: diplomatic crisis. Russia threatens to cut natural gas to the Ukraine. Spring is coming. EU will step in. US will step in. John Kerry's concern: global warming. I can't make this stuff up. In the middle of this "crisis," Kerry is making global warming speeches. This tells me how serious a) global warming is; and, b) how serious the Ukraine/Crimean crisis is.

Speaking of the Crimean, now some are suggesting this will be an expensive "acquisition" for Russia. In less than a week, we've gone from a military "cold war" crisis, to a diplomatic mission to a business deal in the Crimean. Not to worry. Facebook made an expensive acquisition buying WhatsApp. It's just money. By the way I guess the WhatsApp deal was too much for the Turks. The Turkish prime minister threatens to ban YouTube and Facebook. This will help the country's goal of joining the EU.

Wow, buried in the front section: Boeing 777 goes missing.

Japan's Fukushima's toughest cleanup stage is yet to come. The plant's operator estimates it is still six years away from grappling with the biggest cleanup problem: removing melted nuclear fuel. Six years away from removing the melted fuel. Wow, in six years, the Bakken will just be reaching its stride.

Government Motors really is "government" motors: the company has apologized profusely in recent days for an ignition-switch defect that existed for nine years and has been tied to at least 13 deaths in the US. Sort of like the "Obama-apology tour," I guess. 

The Ukraine/Crimean has reminded Europeans that energy diversity might be important. Could we see Germany return to nuclear energy? How about the Ukraine? Iran is certainly preparing for the future by turning to nuclear energy to diversify.

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A Note to the Granddaughters

I had a productive trip to the Bakken.

For as long as I can remember, I always wanted to learn to play mahjong. I now know how. What a great game. Great memories.

I also bought eight new books to read. I bought three from the Pioneer Trails Regional Museum in Bowman, and four books from Books on Broadway, Williston, North Dakota. The eighth book, on birding, I bought at the Service Drugstore in Williston. I can't remember if it is still called Service Drugstore but that's how I remember it. 

The three from PTRM: one on Custer; one on Ulysses S. Grant, and one on dinosaurs.

The four from Books on Broadway included On the Origin of Tepees: the Evolution of Ideas (and Ourselves), Jonnnie Huges, c. 2011.

I first saw this book in Chuck Wilder's bookstore on Broadway last summer, but it didn't quite interest me enough to buy it at the time. For whatever reason, it captured my attention this time and I bought it. I'm almost finished the first time through. It's an incredibly good book.

The book is hard to describe. To a great extent, it's a travelogue with the author and his brother (both visiting from England) traveling cross-country in their "Chrysler" from Minneapolis, Minnesota, to Dickinson, North Dakota, and then to the Black Hills, via Amidon, North Dakota, with the photograph of the famous speed trap. Then to Wyoming, Montana, and up into Canada. Along the way, we learn the origin of the American buffalo and North American horses. We learn a bit about the "evolution" of the American Indians, and, of course, the origin of the tepees. Spoiler alert: the three-pole tepee most likely evolved from the four-pole tepee. For the first time, I really understand the concept of the "meme." He also notes that on the day of "Custer's Last Stand," Alexander Graham Bell was demonstrating his telephone at the World Exposition in Philadelphia, both of which were taking place even as Charles Darwin was trying to put into writing how he came upon his "idea" for the origin of the species.

It will end up being one of the better books I have ever come across. Highly recommended for folks interested in learning about the Great Plains, evolution, and "memes."

By the way, for an important clue to why humans do so much "better" than other primates in passing along "memes," read this internet article, paying special attention to astrocytes and thrombospondin.  

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The other three books from Books on Broadway:

• Crazy Horse: A Lakota Life, Kingsley M. Bray, c. 2006
• I'm Your Man: The Life of Leonard Cohen, Sylvie Simmons, c. 2012
• Grand Pursuit: The Story of Economic Genius, Sylvia Nasar, c. 2011

Unintended Consequences

Don alerted me to this story a few days ago, but because I was traveling I did not have a chance to really think about it.

This is very, very interesting. Eyes have been on Mexico's oil company to improve their operations in the Gulf of Mexico. It turns out the company is improving its operations, but it is focused on oil, not natural gas, which is to be expected. But the unintended consequences is that Mexico is going to be more dependent that ever on US natural gas.

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

From SeekingAlpha:

Furthermore, it is expected that SandRidge can gain from its natural gas production due to the fact that gas export to Mexico will more than double by 2016. The expected increase is from demand levels of 2 Bcf/d in 2013 to 2.2 Bcf/d in 2014, 3.5 Bcf/d in 2015 and will reach 4.5 Bcf/d in 2016. Mexico's production of natural gas is decreasing while the state-owned oil company, Pemex, is focusing on oil production, which means that there is not much growth expected in gas production.

However, demand for gas is expected to increase by 2.7 Bcf/d in 2018, of which 1.4 Bcf/d will be used in gas fired generation. State-owned Comision Federal de Electricidad has planned to increase its gas-fired generation capacity by 24.5 GW (from 2010 to 2025), which will further increase the demand for natural gas by 3.9 Bcf/d. The export of natural gas to Mexico will greatly help SandRidge in generating high revenues as the expected production of the company for 2014 is 102 Bcf and the projected increase in demand from abroad will push the price of natural gas upwards.

Rounding the numbers, Mexico's natural gas demands will more than double by 2016:

• 2013: 2 billion cubic feet/day
• 2014: 2.2 bcf/d
• 2015: 3.5 bcf/d
• 2016: 4.5 bcf/d

And then antoher 2.7 bcf/d in 2018. More than half of that will be used to generate electricity. The demand for natural gas will continue to increase through 2025. 

Montana Update: CLR Completes Two Bakken Wells In Richland County

In Richland County:

• CLR, Lepel 1-34H, TD = 14,210 feet; IP of 297 
• CLR, Levengood 2-5H, TD = 13,818 feetIP of 713 

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Italy: How's That Renewable Energy Working Out

Don alerted me to this story. This is a headline Yahoo!Finance story. Reuters is reporting:

The boxy white and grey factory of this rainy northern town makes fewer than half the washing machines it did when Italy joined the euro. It is one of the many symbols of Southern Europe's industrial decline.

Today, however, the Porcia plant is also a testing ground for the region's industrial future.

Home appliance maker Electrolux, which owns the factory, wants to cut the salaries of some 5,000 workers at the plant and three other factories across Italy by up to 15 percent over the next three years. The Swedish company says lowering labor costs is the only way its washing machines, fridges and other home appliances can compete against rival products made in eastern Europe and Asia.

The Italian government, unions and workers say any wage cut would impoverish thousands of families who rely on the plant and its suppliers.

When you go to the linked article, do a word search for either "energy" or "electricity." You won't find either word in the article (with one unimportant exception).

It appears the authors of this article conveniently forgot to mention the cost of energy in Italy.

According to wiki:

Italy has one of Europe's highest final electricity prices. In particular, unlike all other countries, price per kWh tends to be lower for lower consumption levels. This policy aims at encouraging energy saving. Higher final prices are also a consequence of the extensive use of natural gas, which is more expensive than other fossil fuels, and the expenses from renewable energy incentives, which is expected to reach a total cost of more than €10 billion in 2012.

Let's highlight that again for those who might have missed it the first time: "... and the expenses from renewable energy incentives, which is expected to reach a total cost of more than €10 billion in 2012."

Also, look at the graph at the linked wiki article for electric energy sources: up until the late 50's, almost all of Italy's electricity came from hydroelectric power; now, most of it from natural gas. Waht changed? The graph is incredible.

Also: note that despite the huge amount of money Italy has put into renewable energy, look at how small a dent wind/solar has made. It's absolutely negligible. This is the pat the Obama administration wants to take the United States. 

How expensive is electricity in Italy. According to wiki, Italy has one of Europe's highest final electricity prices. In fact, Italy has the distinction of having the most expensive electricity outside of that small island country of Malta and another island country, Cyprus.  

The graph at Eurostat shows that Italy's electricity is almost twice as expensive as the rest of the EU. The most recent figures are for 2011, and the price of electricity in Italy has increased year-over-year since 2009. Although another source suggests electricity in Italy costs 22 cents/kwh, this table shows Italy's electricity costs 17 cents/kwh. This compares with:

• France: 8 cents
• Germany: 12 cents
• Estonia: 8 cents
• United Kingdom: 10 cents
• Norway: 9 cents

The cost of natural gas in the EU is likely to go up, not down in the next few years. 

It looks like the problem is not the cost of labor, but the cost of energy/electricity. It appears the high cost of electricity in Italy is due simply to policy decisions. By the way, what is the cost of electricity in that other failed EU state, Greece? 11 cents. How can electricity in Greece cost so little. Wiki, again, has the answer:

Almost half (48%) of DEI's power output is generated using lignite, a drop from the 51.6% in 2009.

DEI is the public power company of Greece that accounts for 85% of the country's energy output. 

UPS Will Add 1,000 Propane-Fueled Trucks

The PrairieBizMag is reporting:

United Parcel Service Inc. is spending $70 million to add 1,000 propane-fueled trucks to its delivery fleet, the biggest bulk purchase of propane-fired vehicles yet as output of the fuel in the United States hits record highs.

The fleet, which UPS is buying from Daimler AG's Freightliner Custom Chassis Corp., will replace gasoline and diesel vehicles in Louisiana and Oklahoma, UPS said in a statement on Wednesday. The investment will include 50 new fueling stations.

The transition is expected to begin in the middle of this year and be completed early next year, UPS said. It also plans to introduce propane-fueled vehicles in other U.S. states.

The North American energy revolution continues. 

Week 10: March 2, 2014 -- March 8, 2014

Operations
CLR cancels 13 Linbeck permits in Alkali Creek
GMX Resources transfers about 22 wells to Thunderbird Resources, LP
Landmen interested in the Tyler (?) in Slope County
American Eagle announced estimated proved reserves for 2013
QEP withdraws proposal to unitize the Grail oil field
Three Forks wells in northwest North Dakota look promising
March NDIC hearing dockets -- Whiting with 243 more drilling locations

Rail
BNSF making huge investment in North Dakota; record amount being spent
CBR surges in the Bakken

Pipeline
Bakken pipeline analysis in The Oil & Gas Journal
ETP proposing new Bakken pipeline to the Texas gulf coast
Enbridge to replace Line 3; continues to reverse Line 9

Bakken Economy
Williston bypass gets environmental approval
Belle Fourche industrial park ramping up to serve Montana, North Dakota, and Wyoming

Commentary
The early Bakken wells were not all that good

Miscellaneous
Judge rules in favor of Harold in Hamm divorce case

Huge BNSF Investment In North Dakota; BNSF To Make Largest, Single-Year CAPEX In Company's History -- All Driven By CBR And The Bakken; March 8, 2014

A reader tells me that there are 300 BNSF job openings in Minot. It wouldn't surprise me.

BNSF is making a huge investment in North Dakota according to The Minot Daily News: 

BNSF will be making record infrastructural investments in North Dakota, including in the Minot area, to improve rail transportation in the state.

"In 2014 we plan to make our largest, single-year capital investment in our company's history. Our investments of capital in expansion and maintenance in North Dakota will be a critical part of efficiently, and safely, facilitating the growth from the state, in particular, crude and agriculture, and growth elsewhere on the network," Ice said.

Ice said BNSF's maintenance investment grows as volumes grow. "In North Dakota this year, BNSF is spending $125 million to keep the existing tracks and facilities strong. Last year set a record for replacement and maintenance spending in the state $112 million."

He said replacement capital expenditures in North Dakota and elsewhere have also been growing since 2009.

"Our planned expansion and efficiency capital will be more than $900 million in 2014, of which $265 million will be spent in North Dakota. This spending is part of a three-year capital expansion plan for North Dakota. We plan to spend $396 million over three years on the Glasgow subdivision alone that will result in over 100 miles of double track and the construction of three critical sidings.

From the Tioga Tribune:

The work planned this season includes 46 miles of new second main track between Minot and Williston.

“In particular, crews are building a railroad bridge just east of Tioga,” McBeth said.

“There is currently a bridge for the existing main track and this additional bridge will be constructed for the second main track.”

Work on the bridge portion of the project should be complete later in the spring, she said.

West of Tioga, crews have been laying track for the second main track, she said. Work will continue on that project in stages throughout the summer.

Specifics:

• double track the line from Minot to Glasgow, MT ($162 million)
• add sidings between Fargo and Grand Forks ($26 million)
• add sidings between Bismarck and Glendive, MT ($14 million)
• add sidings along Devils Lake ($13 million)
• add sidings and an interchange track through the Port of Pembina ($13 million)
• invest in Centralized Traffic Control along the Jamestown, ND, subdivision ($11 million)
• add sidings along the KO subdivision, between Fargo and Minot ($8 million)

Meanwhile:

Random update on BNSF efforts to improve agricultural shipments in the northern tier, The Dickinson Press is reporting:

... customers were notified Feb. 20 that a predicted return to cold temperatures would hamper equipment velocities, particularly in the north. He said there are also problems with throughput in the Chicago network caused by previous weather events and heavy volume. He said the company is shifting some traffic through Memphis and St. Louis, and that wet conditions in the Pacific Northwest have hampered unloading there at some facilities.

U.S. past-due grain car shipments last week increased to 11,698 throughout its system — up 632 cars from the previous week. The U.S. average past-due car count increased to 17.9 days, up from 15.4 the previous week. A past-due shipment is every single car that is at least four days past the “want date” requested by the elevator or shipper.

Past-due shipments in North Dakota increased to 5,512 — up by 451 cars from the previous week. The average North Dakota delay is 18.6 days per car, which increased from 17 days late the previous week.

Obama's "War On Coal" -- Pretty Much A War On American Consumers

Nothing like a little conflict in the Crimean to get the facts out. A picture is worth a thousand words:

It doesn't take a rocket scientist to figure out what's going on in Obama's war on coal. And this is "just" Europe. Imagine how much coal is being shipped to Asia from Australia and the United States. No wonder Canada dropped out of the Kyoto Protocol years ago.

By the way, how much is the "war on coal" costing Americans? At least $4/short ton of coal. Bangor Daily News is reporting:

The price for power plants to emit 1 ton of carbon dioxide in nine northeastern states cleared at a record $4 per short ton at the Regional Greenhouse Gas Initiative’s 23rd permit auction, the market’s administrator said Friday.

The electronic auction, held on Wednesday, raised a total of $93.96 million that can be used by the participating states to invest in clean energy and other consumer benefit programs.

"Clean energy and consumer benefit programs" are aka "slush funds" for the participating states.

For more on Russia, Europe, natural gas, and coal:

RUSSIA AND NATURAL GAS

Europe responds to high-priced Russian natural gas, January, 2014

Russian natural gas exports to Europe; American coal exports to Europe -- May, 2013 

Rising price of Russian natural gas, September, 2011

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So Much For All That Commercial Flight Security

Within hours of a Boeing 777 with 239 souls on board goes missing, the media is already reporting that at least two passengers were traveling on stolen passports. These passports had been stolen quite some time ago and one would think that computerized data bases would have this information -- unless, of course, this was "an inside job."