Monday, June 23, 2014

Insurgents "Finally" Seize Baghdad Refinery; World Cup Could Set Record in Greenhouse Gas Emissions

BBC is reporting:
Sunni rebels in Iraq say they have fully captured the country's main oil refinery at Baiji, north of Baghdad.
The refinery had been under siege for 10 days with the militant offensive being repulsed several times.
The complex supplies a third of Iraq's refined fuel and the battle has already led to petrol rationing.
Insurgents, led by the group Isis, have overrun a swathe of territory north and west of Baghdad including Iraq's second-biggest city, Mosul.
They are bearing down on a vital dam near Haditha and have captured all border crossings to Syria and Jordan.
The spokesman said that the advance towards Baghdad would continue. 
The most interesting thing about this story: it's barely causing a ripple in the US mainstream press. It didn't even merit much of a spot at The Drudge Report. It is not yet being reported by The Los Angeles Times. Not yet being reported by

A country's refinery supplies one-third of Iraq's refined fuel and hardly a ripple in the mainstream media.
Mr Obama's Foreign Policy

The New York Times is reporting that Mr Obama's polls are plunging:
... the poll documents an increasing lack of faith in the president and his leadership ...
Speaking of "faith in the president," it appears that the Hillary camp is becoming more and more a religious cult. 

Global Warming

In other news, the 2014 World Cup (soccer) will set new records in terms of greenhouse gas emissions, too, according to 24/7 Wall Common sense tells me if folks were really worried about passing the "point of no return" every effort would be made to eliminate these events that result in unnecessary CO2 emissions.

7.9 Earthquake Hits Alaska -- Fracking In North Dakota; California Senators Want Answers

Yes, there is a report of a 7.9 magnitude earthquake in Alaska. At least one local resident says he has felt worse earthquakes in the 17 years he has lived in the area.

Yes, there is fracking going on in North Dakota -- in fact, Strata-X has announced it has just begun drilling east of the Bakken, and although a reasonable person would suggest there is no connection between an earthquake in Alaska and drilling in North Dakota, if one believes in the "butterfly wing flapping/chaos theory" I suppose anything is possible. Or it could be global warming. I'm not sure how George W. Bush could be responsible but we will know more in tomorrow's New York Times op-ed. The amount of damage will determine to what extent George W. Bush will be blamed for the earthquake. I assume Sarah Palin can see cracks in terra firma from her back porch.

As far as I know, no California senator wants specific answers on this most recent Alaska earthquake, but I know they (California senators) have asked if there is any connection between drilling in Kern County, California, and the swarm of minor tremors over the past few months being recorded in southern California, averaging two such tremors every two or three day. I do believe that it's pretty settled science that the San Francisco earthquake of 1906 was not due to fracking, though the earthquake did cause natural gas pipelines to rupture.

Folks in earthquake-prone Oklahoma are preparing for the tsunami by moving to higher ground, which in Oklahoma can be hard to find. Perhaps the CLR skyscraper, top floor.

Nebraska will use this as another reason to delay the Keystone XL.

Finally, this is why there are no penguins in Alaska; earthquakes scared them away many years ago.

Discussion Of "Zones" In The Bakken

Disclaimer: this is all opinion. This is how I understand the subject. I throw it out there to help understand the concept of "zones." On a long note like this, I assume there are typographical errors, including spelling errors ("now" for "not" is a huge error) and my flunkie helper who proofreads what I write often misses things. If something seems wrong, it probably is. We'll sort it out over time

I'm getting a lot of questions regarding "zones" in the Bakken in the state of North Dakota. I had avoided posting a stand-alone post on this issue because I do not / did not fully understand it. But with the large Big Bend-Bakken, Slawson case, I have a better understanding (I think).

"Zones" are administrative areas in a particular oil field-pool (for example, Parshall Oil Field-Bakken) in which the area is defined, and rules and regulations are spelled out that affect all wells for which permits are granted in a particular zone. These rules and regulations specify how many wells can be drilled in a particular area; the spacing rules (inherent); the siting rules; the stratigraphic limits; and, other rules and regulations affecting all aspects of oil and gas exploration and production.

These "zones" are determined by the North Dakota Industrial Commission (NDIC). The NDIC is analogous to the Texas Railroad Commission which has the same responsibility as the NDIC with regard to gas and oil exploration and production. Zones are not determined by operators.

These "zones" can be as small as a half-section, perhaps smaller (I don't know). The "zones" would not be as big as an oil field-pool because one needs "zones" only if there are different areas of the oil field-pool that need different rules/regulations. If there are no "zones" in an oil field-pool, then the entire oil field-pool comes under uniform rules and regulations.

Having said that, let's look at some zones in Big Bend Oil Field-Bakken. These examples are taken from the recent case/order.

Paragraph (1) in the order, page 16:
Zone II: the west half of section 10-151-92, Mountrail county, a standup 320-acre spacing unit; five horizontal wells within the Big Bend-Bakken Pool. Note, the boilerplate: "existing and future vertical and directional wells drilled within the spacing unit herein established shall not be subject to this order."
Paragraph (2) in the order, page 16:
Zone VI: the south half of sections 34 and 35, Township 152 North, Range 92 West, and section 35-151-92, Mountrail County, a 640-acre unit; four horizontal wells within each spacing unit ... the same boilerplate follows as in Zone 1. This is a great example of why "zones" are necessary. Look how much easier it is to refer to ZONE VI, rather than saying/writing the "South half of Sections 34 and 35, Township 152 North, Range 92 West, and Section 35, Township 151 North, Range 92 West." See how much simpler it is to simply write/say, Zone VI.
So, there, we have a "zone" as small as half a section for four wells, and another zone encompassing parts of three sections. But note something else: the sections involved are not even abutting each other. Section 35-152-92 is several miles away from 35-151-92.

Paragraph (15) in the order, page 18:
In this order, the NDIC re-defined Zone XXI. This is a great example of why folks like "administrative shorthand." Can you imagine referring to the "long title" of Zone XXI: Sections 2 and 3; Sections 13 and 14; Sections 23 and 24, Township 151 North, Range 92 West; Section 36, Township 151 North, Range 92 West and Section 31, Township 151 North Range 91 West; and Sections 2 and 3, Township 151 North, Range 91 West, Mountrail County.
This zone will allow up to ten (10) horizontal wells, and the order goes on to define the rules and regulations of the zone; how close to the section lines the wells can be sited, for example.

Another wrinkle: a specific section or even portion of a section can be in more than one zone. At first this did not make sense to me, but now it does. Example: section 3 could be in Zone II, a 640-acre spacing unit with its specific rules and regulations, and section 3 could be one of two sections in a 1280-unit in Zone VIII with its one rules; and finally section 3 could be part of a 4-section, 2560-acre unit in Zone XXI, with its own rules and regulations with regard to siting, etc. Zone II might allow one horizontal well; Zone VIII might allow 4 horizontal wells; and Zone XXI might allow one horizontal well to "catch" the section line. At least that's how I see it.

I'm going to quit there. I may have this wrong, but that's how I see it. There may be some additional nuances that I'm missing, and I may have made some wrong assumptions. But I throw it out there for others to tell me where I'm wrong, so we can all learn from this case.


A reader pointed out that all things being equal, one will have less interest in a 2560-acre-spaced well than a 640-acre-spaced well.  One might also remember that some of the newer 2560-acre wells might actually return more than an older 640-acre well. There are a lot of things to consider.

Fifteen (15) New Permits -- The Williston Basin, North Dakota

Wells coming off confidential list Tuesday:
  • 25365, 545, OXY USA, State Jaeger B 4-27-34H-144-97, Cabernet, t12/13; cum 40K 4/14;
  • 25367, 606, OXY USA, State Jaeger B 6-27-34H-144-97, Cabernet, t12/13; cum 27K 4/14;
  • 26190, drl, CLR, Montpelier 4-14H, Indian Hill, no production data,
Active rigs:

Active Rigs190189210172124

Fifteen (15) new permits --
  • Operators: MRO (6), Emerald (5), HRC (3), Oasis,
  • Fields: Murphy Creek (Dunn), Bailey (Dunn), Moline (McKenzie), Sheep Butte (McKenzie), McGregory Buttes (Dunn), Willow Creek (Williams)
  • Comments: I believe this is the second permit for Sheep Butte in the current boom; the first, #20429, was an XTO well with an IP of 337; t2/12; cum 25K 4/14 and still producing; an earlier Red River well (#7648) was spud in 1980; cum 120K, now PA;
Wells coming off confidential list over weekend, Monday, were posted earlier; see sidebar at the right. 

Seven (7) producing wells completed:
  • 26958, 1,746, KOG, P Moen 155-99-14-11-2-4H, East Fork, t5/14; cum --
  • 25335, 2,616, XTO, Martin Federal 21X-33B, Cedar Coulee, t5/14; cum --
  • 27372, 726, OXY USA, Delvin Dukart 4-30-31H-143-95, Manning, t5/14; cum --
  • 27370, 103, OXY USA, Kubik Trust 4-19-18H-143-95, Manning, t5/14; cum --
  • 27523, 908, OXY USA, State Kary 5-19-18H-144-96, Murphy Creek, t6/14; cum --
  • 27524, 607, OXY USA, Martin 5-30-31H-144-96, Cabernet, t6/14; cum --
  • 26960, 1,527, KOG, P Moen 155-99-14-11-2-3H, East Fork, t5/14; cum -- 
From Yahoo!In-Play

Hi-Crush Partners announces new long-term frac sand purchase agreement with Halliburton:
Co announced the entry into a new long-term frac sand purchase agreement between Hi-Crush Operating LLC, a subsidiary of Hi-Crush, and Halliburton Energy Services, Inc., or Halliburton, which amends and restates the existing supply agreements between Hi-Crush and its affiliates and Halliburton. The new agreement increases the annual minimum committed volumes under the previous agreements, extends the term through December 31, 2018 and requires Halliburton to pay a specified price for a specified minimum volume of frac sand each month. In addition, the new agreement provides for further significant increases in annual volumes dependent on Halliburton's aggregate annual demand for Northern White frac sand. 

All Words, Not Much Substance, Again As Usual -- Yes, Talking About President Obama And His Commitments To Native Americans

The link is here.

The article beings:
When President Barack Obama paid his much-ballyhooed visit to the Standing Rock Indian Reservation in North Dakota – a rare presidential visit to Indian country – tribal sovereignty was a big part of the narrative. The President touted policies like the Violence Against Women Act, which gave tribes the authority to prosecute crimes committed on Indian lands by non-tribal members.
“I know that throughout history, the United States often didn’t give the nation-to-nation relationship the respect that it deserved,” the President said during his brief address in Cannon Ball, North Dakota. “So I promised when I ran to be a President who’d change that — a President who honors our sacred trust, and who respects your sovereignty, and upholds treaty obligations, and who works with you in a spirit of true partnership, in mutual respect, to give our children the future that they deserve.”
Lofty rhetoric, to be sure, but just a week after the President spoke those words a member of his administration was before the House Natural Resources Committee to argue against a bill that would give tribes greater sovereignty in regulating oil and gas development on Indian land.
Something you’d think President Obama would support, given his promise to respect the sovereignty of the tribes.
Data points or the writer's contention:
  • flaring of natural gas is seen as a problem in the Bakken
  • the worse flaring appears to be on the Fort Berthold Indian Reservation
  • this is due to partly to a) pace of drilling; and, b) difficulty the terrain presents in laying pipeline (but I have a bit of a problem with "difficult terrain"; oil companies have worked with much more difficult terrain than encountered in North Dakota
  • much of the problem appears to be due to federal red tape in permitting
  • Native Americans, working with state, think they could solve problem more quickly without federal obstacles
  • President Obama says "no"; Native Americans and the state are not smart enough to do this on their own; they need federal bureaucracy to do it right
  • the rest of the state is doing much better in capturing natural gas rather than flaring it
And so it goes.

As they used to say, "White Man speaks with forked tongue." I would add the obvious but I won't.

Well Density And How It Might Affect Mineral Rights Owners; Case Study, Slawson Case 22272, Order 24606

Disclaimer: these kinds of posts lend themselves to a lot of errors on my part. Read with caution. I recommend that you refer to the source document, Case 22272, Order 24606

Yesterday, I received a note from a reader talking about the "huge" Slawson case. He/she owns a few mineral acres in two non-adjacent sections in Big Bend oil field, affected by this case. When we ran through the numbers we both agreed this amounted to 28 drilling locations for one individual who happened to own mineral acres in two non-adjacent sections in this field.

I remarked many years ago, and have repeated it often, that anyone who receives royalties from one well in the Bakken will eventually receive royalties from 12 wells in the best Bakken, 8 wells in the better Bakken and 4 wells almost everywhere in the Bakken.

I don't want to risk the reader's anonymity from yesterday, so instead of posting the two sections we looked at yesterday, here is what it looks like for a mineral owner who might happen to have acres in two non-adjacent sections in Big Bend oil field, specifically:
  • 26-151-92
  • 36-151-92
They sit "kitty-corner" from each other which is a very possible scenario for a farmer in that area.

So, here are the results from the case with reference to those to sections. The format is: first line is the number of the paragraph in the NDIC order; the second line is the section or sections involved; the third line is the spacing unit size; the fourth line is the Zone number; the fifth line is the number of wells authorized in this order; and, if necessary a sixth line that would show total wells. I do not understand how "overlapping" works (I think I know, but not well enough to post), and I did this quickly, so there may be errors. The purpose is not to be absolutely correct. It is to give newbies an understanding of just how staggering the Bakken is going to be for some mineral owners. It is very possible for a mineral owner who now receives royalties from two wells, one each in two non-adjacent sections, could eventually be receiving royalties from as many as 40 wells or more, based on this single NDIC order:

Paragraph 97
sections 36 and 26
Zone XIV
6 wells each
12 wells (because the two sections will be in separate drilling spacing units)

Paragraph 137
section 36
Zone XXI
10 wells

Paragraph 163
section 36
10 wells

Paragraph 178
section 26 and 36
1 well

Paragraph 188
section 26
2 wells

Paragraph 193
section 26
2 wells

Paragraph 199
section 36
11 wells

So: 11 + 2 + 2 + 1 + 10 + 10 +12 = 48 wells

For Investors Only -- June 23, 2014 -- US Existing Home Sales, Inventory Surge In May; North Dakota Farmers To Be Paid More For Planting Bee-Friendly Crops -- Obama; North Dakota Big Winner In Bee-Friendly Program

Mid-day trading, trading at new 52-week highs so far today (I think a lot of these were at their highs at the market open and have since pulled back): APA, APC, BHI, BK, BP, CFN, CHK, CLR, COP, CVX, EOG, ERF, HAL, HK, KOG, MPO, MRO, NFX, NOV, OXY, PSX, PXD, TPLM, TSO, WFT, WIN, WLL, WPX, XOM.

Early trading: oil down slightly, market down slightly. Shares in publicly traded oil and oil service companies generally up:
  • HK: up 1%
  • TPLM: up almost 2%
  • AMZG: flat
  • SD: flat, up slightly
  • CHK: up 1.5%
  • OAS: up 0.8%
  • KOG: up over 1%
  • WLL: up almost 1%
  • CLR: up 1%
  • CVX: up .6%
  • COP: up over 1%
  • XOM: up about half a percent
  • BHI: down slightly
  • SLB: flat
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

AXAS has been a big winner. Zack's is reporting:
AXAS was a big mover last session, as the company saw its shares rise nearly 7% on the day. The move came on solid volume too with far more shares changing hands than in a normal session. This breaks the recent trend of the company, as the stock is now trading above the volatile price range of $4.65 to $5.42 in the past one-month time frame.
Other than the headline, I did not read this story over at Seeking Alpha. It seems fairly obvious and high oil prices won't help only KOG but every oil company out there. However, beware of the hedging issue. Some smaller companies could actually get hurt by high oil prices if they didn't hedge correctly or hedged too conservatively.


Could a colder climate (the earth has not been warming for 18 years) PLUS putting all that acreage into corn-for-ethanol be causing the demise of the US honey bee industry? 

After years of taking bee-friendly crops out of production in the midwest, to plant corn for ethanol, the US government -- through an Obama initiative -- will now pay farmers to plant bee-friendly crops in land, in a last-ditch effort to stem the impending demise of the honeybee.

North Dakota farmers:
  • some of the best cropland to begin with
  • plenty of moisture past few years -- due to global cooling, perhaps?
  • encouraged to plant more corn for ethanol -- better prices than wheat
  • income from wind farms
  • surface rights income from oil companies
  • mineral rights in the Bakken
  • and now, getting paid for planting bee-friendly crops through a new Obama farm program -- what's not to like?
The Bismarck Tribune is reporting:
Farmers and landowners who plant forage for North Dakota’s bee population are now eligible for federal funding.
The program is designed to help preserve what is left of the declining honeybee population in the United States.
The U.S. Department of Agriculture has allocated $8 million as part of the Conservation Reserve Program for producers in five states that serve as homes to bees during the summer — Michigan, Minnesota, North Dakota, South Dakota and Wisconsin.
More than half of the commercially managed honey bees are in those five states.
North Dakota is the nation’s No. 1 honey producer with half a million colonies.
I remember seeing an article on this issue a couple days ago; while Iraq was imploding, Mr Obama was making a bee-friendly speech for North Dakota. One can only assume it was brought to his attention when he visited North Dakota ten days ago.

Honeybee Paradox

This is the problem with activist environmentalists. By being splintered and trying to save every species (generally only if the species is located where the Koch Brothers want to lay a pipeline), "we" lose sight of the really important species that we don't want to lose. For example, call me crazy, but I wonder if we lost the "snail darter," would anyone really notice. On the other hand, if we lose the honeybee, ....

And that's the problem; money spent litigating the snail darter's future would have been better spent studying the impending demise of the honey bee.

Likewise, environmental activists were jubilant replacing bee-friendly crops in North Dakota with corn for ethanol.

Going It Alone

As regular readers know, Canada was the first country to renounce the Kyoto Protocol, "taking back their signature," after being one of the original signers of the protocol.  Now Australia announces yet another country turning its back on this scam:
Prime Minister Tony Abbott reintroduced legislation to the Australian Parliament on Monday that would repeal a carbon tax that the nation's worst greenhouse gas polluters have to pay.
The opposition center-left Labor Party and minor Greens party used their Senate majority in March to block the bills that would remove the 24.15 Australian dollar ($22.79) tax per metric ton of carbon dioxide that was introduced by a Labor government in July 2012. The bills were defeated 33 votes to 29.
But with new senators to take their seats on July 7 for the first time since Abbott's conservative coalition government took power in an election in September, the bills are expected to be passed by a narrow margin. Coal mining magnate and carbon tax critic Clive Palmer leads four new senators who have promised their allegiance to his influential Palmer United Party.
But Things Might Be Changing In The United States

The AP is reporting:
The Supreme Court on Monday placed limits on the sole Obama administration program already in place to deal with power plant and factory emissions of gases blamed for global warming.
The justices said that the Environmental Protection Agency lacks authority in some cases to force companies to evaluate ways to reduce carbon dioxide emissions. This rule applies when a company needs a permit to expand facilities or build new ones that would increase overall pollution. Carbon dioxide is the chief gas linked to global warming.
Carbon dioxide makes up about 3 tenths of a percent 350ppm = 0.035% (more like three one hundredths) of the atmosphere or something like that. Water vapor is the major greenhouse gas. 

RBN Energy: Western Canadian CBR

I generally don't do this, a stand-alone post on RBN Energy, but this is a nice update on Canadian CBR from RBN.

Some data points:

CBR from Canada has increased ten-fold in two years
  • 2012: 16,000 bopd (CBR)
  • 2014: 160,000 bopd (CBR)
CBR driven primarily by pipeline capacity constraints
Canadian crude production has expanded steadily over the past few years
  • 2003: 2.5 million bopd 
  • 2013: 3.4 million bopd
  • 2014: 3.6 million bopd
  • 2019e: 5 million bopd
most from Western Canadian Sedimentary Basin (WCSB)
  • 2012: 1.8 million bopd
  • 2020e: 3.6 million bopd
bitumen is very viscous: Canadians using steam to get it out of the ground
  • pipelines transport dibit: diluent - bitumen mixture (30% diluent)
  • CBR transports purebit (raw) or railbit (20% diluent)
Pipeline onstraints make it unlikely to see significant new pipeline before 2017; the following approved, but many, many hurdles; progress will be slowed significantly
  • Kinder Morgan TransMountain Express
  • Enbridge Northern Gateway
    TransCanada Energy East
CBR premium: $15/bbl -- cost of diluent PLUS transportation
Two drivers for CBR: small producers and larger producers
  • future looks gloomy for small producers
  • larger producers looking to put in five new or expanded CBR terminals
  • steam facilities required to unload railbit or purebit
  • only one US facility can download railbit/purebit: Genesis Energy at Natchez, Mississippi
CBR regulations will likely slow CBR expansion
future of CBR depends on delays in pipeline expansion

The Bakken, June 23, 2014, In Perspective

Pat on back: I was the first Bakken blogger whose blog has no ads to discuss the growing Turkish-Kurdish alliance.  And now, in today's New York Times: Turkey's best ally: the Kurds.


Active rigs in North Dakota:

Active Rigs190189210172124

RBN Energy: takeaway capacity for Canadian bitumen crude. Great update on the CBR situation coming out of Canada.


The Wall Street Journal

New GOP House Leader says he may not support reauthorizing the charter of the Export-Import Bank of the US, placing in doubt the future of a major agency that facilitates US exports. So, what's this all about?

Climate change? Soaked Midwesterners are staring anxiously at the sky after days of rain, flood warnings and rising rivers. Minnesota, South Dakota, North Dakota affected.

Pakistan offensive poses new perils in polio crisis. I assume many Americans are unaware that we still immunize against polio in this country.

Bad news for Egypt's new President, Abdel Fattah Al Sisi. He has just received "strong support" from John Kerry.

Gauge of China's factory activity hits seven-month high. I thought everyone said China was "slowing down."

The New York Times

Iraq's military seen as unlikely to turn the tide. Well, duh.

And I love this headline: "Relief Over US Exist From Iraq Fades as Reality Overtake Hope."  It could have been: change overcomes hope.

Hawaii's homeless population has surged 32% in past five years. New view of the beach: destitution.

Some time ago, a reader asked me why I did not care for Michele's "healthy-eating program." The New Yorks Times provides the answer: fresh fruits and vegetables are going from food line to child's tray directly to compost. Every day, whether they are in the mood for it or not, each child gets a mandatory banana (plus other mandatory stuff), and some (many, most, all) bananas are going directly into the compost bin unpeeled. The story explains why. I assume after time, it will become a game to see how much food the students can throw into the compost. Speaks volumes about Michele's program and it's in The New York Times front section; it reads like it comes from Fox News.


Sounds like Hillary has atrial fibrillation: fainting, blood clots, bad valve.

Iraq-Syria-Jordan borders crumble. This is Reuters:
... even as Baghdad's forces abandoned the border with Jordan, leaving the entire Western frontier outside government control.
Sunni tribes took the Turaibil border crossing, the only legal crossing point between Iraq and Jordan, after Iraqi security forces fled, Iraqi and Jordanian security sources said.
"Baghdad Bob" says "the borders are still secure and Allah-willing, I will still have my head tomorrow."