Friday, March 18, 2016

One Up Is Better Than One Down; No New Permits -- March 18, 2016

Active rigs:

Active Rigs32107191186205

No new permits today.

No producing wells completed.

Five permits renewed --
  • BR (4), three Curtis wells, one Saddle Butte well, all in McKenzie County
  • Resource Energy, a Marlys permit in Divide County

Airline Boardings Decline In The Bakken -- March 18, 2016

Numbers often rounded on this blog.

From The Dickinson Press:
  • Dickinson:
    • two daily flights to Denver, CO
    • down 60% compared to February, 2015
    • 1,345 boardings in February, 2016
    • United only; Delta service ended in November, 2015
    • Dickinson’s boardings fell the most of any North Dakota airport by more than 20 percent
  • Williston:
    • nine daily flights
    • down 40% compared to February, 2015
    • 5,269 boardings in February, 2016
    • United and Delta to various destinations

Congratulations To Red River Oilfield Services -- Unit Train Project Completed Ahead Of Schedule -- March 18, 2016

This is really a huge story; I had a tour of the operation when I up in the Bakken a month ago (February).

The Williston Wire is reporting:
Red River Oilfield Services, Inc. of Williston has completed its Unit Train Project at the Stony Creek Rail Yard. Unseasonably warm weather benefited the project.
Patrick Construction of Havre, Montana, completed the project just in time for the Red River Switching Crews to stage up the departing empty Unit Train U-WILEOL0-02 scheduled for return to Illinois on Tuesday March 15, 2016. Partner Class 1 Railroad, the BNSF Railway, provided support along the way for this project.
Red River has been in business for 37 years in Williston.
I track CBR terminals in the Bakken here

T-REX -- Background And Update -- March 18, 2016

Finally, time to get serious, time to learn about the Rockies Express Pipeline.

First, some data points from wiki:
  • 1,679 miles long
  • wiki calls it a pipeline from the Rocky Mountains of Colorado to eastern Ohio (in fact, better to say the other way around, as we will see later)
  • three sections
  • one of the largest gas pipelines ever built in North America
  • diameter varies between 36 and 42 inches; primarily 42 inches
  • initial cost: $5 billion
  • compare with Trans-Alaska Pipeline: 800 miles, 48-inch diameter, Prudhoe Bay to Valdez; cost: $8 billion, plus $1 billion to Native Americans plus 150 million acres federal land (according to wiki, 300,000 people in Alaska in 1970; about 15% native American = 45,000 to divide up $1 billion, about $20,000 apiece (my calculations; I often make simple arithmetic errors)
REX - Entrega (Zone 1)
  • 328 miles
  • within the state of Colorado
REX - West (Zone 2)
  • 713 miles
  • Colorado to Missouri
REX - East (Zone 3)
  • 638 miles
  • Missouri to Clarington, Monroe County, Ohio
  • Final (current) upgrade: REX has filed with FERC for a 0.8 billion cubic feet per day expansion of Zone 3 east-to-west
  • this upgrade is anticipated to be completed in 4Q16
  • Rockies Express Pipeline, LLC, a partnership between:
    • Tallgrass Energy Partners
    • Phillips 66
    • Sempra Energy
  • Kinder Morgan Energy Partners and Sempra Energy acquired Entrega Gas Pipeline from EnCana, 2006
  • COP acquired 24% of the project in 2016
Now from RBN Energy, an update:
  • Zone 3 Capacity Enhancement expansion project (Z3CE): final approval to begin construction received last week (mid-March, 2016); to add 0.8 Bcf/d
  • will expand east-to-west capacity out of the Marcellus/Utica to a record 2.6 Bcf/d
  • East-to-West Expansion (E2W), came online last August (2015)
  • in one fell swoop, the E2W gave the Northeast producers their first substantial westbound capacity, totaling a full 1.8 Bcf/d
  • this will be the first winter (2016 - 2017) with nearly a full winter's worth of pipeline flow data
  • since last August (2015), westbound flows on REX have filled to capacity (1.8 Bcf/d)
  • winter-over-winter, we now know that westbound movements in Zone 3 have more than doubled, averaging about 1.7 Bcf/d this winter (2015/2016) to date, compared to about 0.6Bcf/d in the same period last winter
  • points along the way, especially Chicago Citygate are target demand markets

Making Good On Her Promise; Another Nominee For The 2016 Geico Rock Award -- March 18, 2016

Any union member, any blue-collar worker, anyone who holds a job in the manufacturing job and still supports Hillary has simply not been paying attention
"We (Hillary and President Obama's EPA) are going to put a lot of coal miners and coal companies out of business" when explaining her $30 billion economic transition plan for coal-dependent regions.
Clinton campaign spokesman Brian Fallon said McConnell and other critics "twisted Clinton's words to suggest she showed a disregard for coal workers and their livelihoods."
Yesterday, Peabody mentioned it will likely seek bankruptcy protection.

Clinton campaign spokesman Brian Fallon has been nominated for the 2016 Geico Rock Award; he apparently did not hear Clinton's speech.

Reason #44 Why I Love To Blog -- March 18, 2016

Remember that story about India: "India's oil demand on verge of "take-off"? Posted just a few days ago.

Look at this, from Reuters: India in driver's seat as fuel demand roars at fastest rate ever.

Not just increased demand, but demand growing at fastest rate ever.

From the linked story:
Hundreds of thousands of Indians, spurred by cheap credit and rising incomes, are buying cars each month to free themselves from creaky, unreliable public transport.
This is expected to help push India ahead of China as the energy demand growth leader, with its total fuel consumption rising by a tenth to a record in the fiscal year-to-date. 
Underpinned by annual economic growth of 7-8 percent, India's fuel demand is seen as a key oil price support over 2016-2017, eating into a supply overhang that has pulled down global crude as much as 70 percent since mid-2014. 
India has already pipped Japan as the world's third-largest oil consumer. By 2040, India will have more than doubled its current oil use to 10 million barrels per day (bpd), according to the International Energy Agency (IEA), about on par with China's consumption last year. 
This roar of motor - as well as power and household - fuel use means some refineries initially planned for exports, such as the 300,000 bpd Paradip refinery on India's east coast, have been flipped to serve domestic oil demand.
The graphic below has so many story lines, I won't even begin, but the one that stands out most of me is the steady decline in the second graph, regarding Japan. That is simply incredible. A gentrifying population that prohibits immigration must not need much energy.

At Least It's Easy To Treat -- March 18, 2016

Tweeting now: RDO Equipment expands into 36,00o-square foot facility in Williston, ND.
Braving a cold wind and blowing snow, a crowd gathered Wednesday morning to cut a ribbon outside a new Williams County retail space dedicated to the construction industry.
RDO Equipment Co. held its grand opening in the business’s new building just outside Williston, where the store relocated after operating for about seven years closer to town.
The new location on 49th Street NW employs 28 people, covers more than 36,000 square feet, and is one of the Fargo-based company’s larger stores.
 Assuming Google maps has it correct, this is the location:,+Williston,+ND+58801/@48.1267253,-103.745842,13z/data=!4m8!4m7!1m0!1m5!1m1!1s0x53215939d840e1a9:0xbdf278e95c552661!2m2!1d-103.725071!2d48.12684?hl=en

At Least It's Easy To Treat -- President Obama
Sort Of Like Isis, I Guess, Easy To Defeat

Tweeting now: WHO sending specialists in response to Guinea Ebola flare-up. From ABC News:
The World Health Organization deployed specialists to southeast Guinea on Friday after two new Ebola cases were confirmed.

The cases were announced just hours after Sierra Leone heralded the end of its recent Ebola flare-up, again dashing hopes that the deadly disease was gone from West Africa. [This outbreak, which began in 2013, is the largest Ebola outbreak to date.]

The new cases occurred in Koropara, in the remote N'Zerekore prefecture in southeast Guinea, 1,000 kilometers (620 miles) from the capital, said Ibrahima Sylla, a spokesman for the national coordination for the fight against Ebola.

FedEx Rant -- March 18, 2016

Earlier I linked this story but did not have a change to do more than that. is reporting the rant that the FedEx/CEO made the other day while discussing its 3Q15 earnings report. Some excerpts from the story:
FedEx Corp. executives said retailers should be paying more for shipments to help offset the cost of expanding its network to meet the growing demands of e-commerce.
"There's an enormous interest in people having things delivered to themselves. It does not change, one iota, the input costs of the delivery," Chief Executive Fred Smith said in an interview.
FedEx this year increased its capital spending to $4.8 billion, with the largest increase in its ground division which handles most of its e-commerce business, and intends to continue the increases in the next two years.
Mr. Smith said he thought it was unbelievable that some have suggested that Amazon would be able to build out a network to compete with FedEx and rival United Parcel Service Inc.
Just because Amazon has created a network of warehouses to support its retail operations, doesn't mean that could translate to something akin to FedEx's massive network for deliveries, Mr. Smith said. "The key driver of any delivery system is route density and revenue per delivery stop," he said.
Mr. Smith said Amazon is an important customer and that they expect to continue to do business with them for a long time. Last week Amazon said it agreed to lease as many as 20 planes from an air-cargo company for transporting merchandise around the U.S., something FedEx said it expected.
No single customer, including Amazon, makes up more than 3% of FedEx's total revenue.
One way that FedEx intends to boost its e-commerce returns is by increasing fees attached to the growing number of large shipments such as kayaks and other items that don't fit into its ground network.
Mr. Smith blamed some of the trend in low-cost e-commerce expectations on the U.S. Postal Service, which it and other delivery companies, including UPS and Amazon, use to deliver packages the most expensive leg of the trip—to resident's doors.
"The postal service's rates, which are the primary driver of e-commerce…they're going to have to go up as mail service goes down," Mr. Smith said.
I laughed at this observation by the CEO when I first read it, but reflecting a bit on this, there is something important being said:
"There's an enormous interest in people having things delivered to themselves."
But I think he's wrong on the second part:
It does not change, one iota, the input costs of the delivery. 
Common sense tells me that if FedEx delivers two products to my house at the same time, that should cut delivery costs compared to shipping one product each on two separate days. Extend that analogy to one delivery in my apartment complex/day vs 20 deliveries in my apartment complex/day.

With the CEO's concern about financing expansion with debt, what's new about that? Amazon has been doing that for decades; I don't think Amazon has shown a profit much more than three quarters over all the years it's been in business.

With regard to his comments about the USPS, the CEO did not note that both UPS and FedEx use the USPS to ship packages that originate with them via USPS to remote locations in Montana, Texas, and the entire southwest United States.

But he did confirm what I've always know: UPS and FedEx are expensive compared to USPS.

Can You Imagine, 35,000 Tons Of Coal Per Day, Day In, Day Out For Decades -- Wow! -- March 18, 2016

This is quite a story. I suspect 99% of Americans don't know about it, and I suspect 99.9% of Americans that have heard about it, won't/don't care. The story originates in Canada and I would wager that 75% of Canadians haven't heard about this story either or don't care; it's someone else's problem.

But it's a huge story. The Christian Science Monitor is reporting that North America's largest coal power plant, decommissioned in 2013, finds new life as a solar farm. Is "whoopee" spelled with one "e' or two?

Again, this is North America's largest coal power plant that was decommissioned in 2013, and is now being replaced as a solar farm.

Note: numbers often rounded in this blog.

The coal plant: 4,000 MW
The solar farm: 40 MW
That's not 10%, that's 1%.

So, some data points, first from wiki:
  • at full capacity, 3,964 MW; let's call it 4,000
  • located in Nanticoke, Ontario
  • Nanticoke is located directly across Lake Erie from Erie, PA; about 60 miles west of Niagara Falls, ON, Canada
  • decommissioned in 2013
  • location selected partly due to proximity of US coal supplies
  • Canadian $800 million; operations started in 1972 (North Dakota has wells that have been producing longer than that)
  • over the years, another $900 million for upgrades (including emission controls)
  • 35,000 tonnes of coal per day at height (1981) 
    • one coal train: 125 x 125 = 15,000 tons; two 100-unit trains every day
    • open hopper cars hold 100 - 125 tons of coal
    • coal train 100 - 125 cars
Source of electricity for Ontario:
  • nuclear: 65%
  • hydro: 24%
  • natural gas: 6%
  • wind: 5%
Nuclear power in Ontario:
  • 60% of Ontario's electricity comes from three nuclear plants: Pickering, Darlington, and Bruce
  • the Bruce Nuclear Generating Station is the largest nuclear generation station in the world; constructed in stages between 1970 and 1987; most recent operating license extends operations to 2020 (Japan had larger nuclear generating stations but they are off-line following Fukushima)
Ontario electricity rates:
Ontario sees hydro rates jump -- again -- November 1, 2015; next hike would come two months later when end of Clean Energy Benefit pushes rates up another 10%; off-peak, 8.3 cents/kWh; mid-peak, 12.8 cents/kWh; on-peak, 17.5 cents/kWh
  • electric rates have jumped 77% in five years; was 9.9 cents/kWh in 2010
  • 2010: average monthly bill -- $100/month; 2015: $131/month
  • The OEB said several factors are driving the price hike, including increased costs related to Ontario Power Generation's nuclear and hydro-electric power plants, as well as costs from renewable sources, such as wind and solar.
Consumer response:
Energy consultant Tom Adams said he hears two things from consumers about the ongoing upward trend in hydro rates.
"Just confusion — What the heck is going on?" Adams told CBC Queen's Park reporter Mike Crawley of the reaction.
"And anger, just people increasingly angry."
Consumers won't get any happier in the new year, either. Their bills will go up again on Jan. 1, when the 10 per cent discount known as the Clean Energy Benefit will end.
Further rate hikes are also expected in the coming years. The provincial government forecasts that hydro bills will hit more than $190 per month in a little more than six years.
"None of it shows any decreases in prices," Adams said. "It only moves in one direction."
Garry Jodoin was one of a handful of residents who went to Energy Minister Bob Chiarelli's office in Ottawa to voice displeasure with the rate hikes.
"A lot of people just can't afford it who are on fixed incomes, pension, etc. And we know this, and that's why I'm out here to complain about it because I'm a senior myself," Jodoin said.
Back To The Christian Monitor Story

So, with that as background, the linked story at The Christian Monitor reports that where the 4,000-MW coal plant was, the province will now install a 40-MW solar farm.

These are some of the things story did not mention:
  • the name of the new solar farm: the "the Canadian Feel-Good Farm"
  • the number of lost jobs in US coal industry
  • the number of lost jobs in US rail industry
  • high energy costs kill manufacturing; over time less and less manufacturing jobs in Ontario
  • the loss of huge, huge property taxes the coal plant would have paid; now taxpayers will subsidize a wind farm
  • the loss of a huge number of jobs at the power plant, vs essentially no jobs once the "feel-good farm" is up and running
  • the fact that, in general, the sun does not shine during the night; the minuscule "feel-good farm" will be backed up easily by existing nuclear/hydro energy, but will create havoc for the grid
  • rates will continue to increase because the province plans to increase the number of "feel-good farms" over time -- from this 40-MW farm to 400 MW, eventually
  • development of the solar farm will be led by SunEdison -- whose parent company appears to be in deep doo-doo; filed just 18 hours ago, Zacks is reporting that SunEdison postpones 10-K filing again; YieldCo in trouble; this delay also put SunEdison’s yieldco TerraForm Power TERP in trouble. TerraForm Power is unable to file the 10-K as it has to rely on SunEdison systems and personnel to complete its financial reporting and control processes. The high debt burden is mainly due to SunEdison’s aggressive acquisition policy which took a toll on the balance sheet with total outstanding debt nearly doubling to $11.7 billion at the end of third-quarter 2015 from $6.3 billion a year ago. On the news, SunEdison's shares fell again Tuesday (this week). Up to Tuesday's close, SunEdison's shares had fallen more than 90 percent in the past 12 months while TerraForm's had dropped about 70 percent.

Slowly But Surely -- March 18, 2016

US crude oil exports slowly increasing:
Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map.
With American stockpiles at unprecedented levels, oil tankers laden with U.S. crude have docked in, or are heading to, countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing.
One reason behind the rise in exports is cheap pipeline and railway fees to move crude from the fields in Texas, Oklahoma and North Dakota into the ports of the U.S. Gulf of Mexico. Another is that U.S. oil prices have been trading at a discount to Brent crude, allowing traders to move oil from one shore of the Atlantic to another at a profit.
Exxon in early March became the first major U.S. oil company to ship American crude from elsewhere, sending the Maran Sagitta tanker from Beaumont, Texas, into a refinery it owns in Sicily, Italy. Days later, Sinopec lifted on the Pinnacle Spirt tanker a cargo of U.S. crude, a first for a Chinese oil group.
Oil traders are starting to export American crude to store it overseas and profit from a market condition called contango. That’s where prices of oil for delivery today are lower than those in future months. Buyers with access to storage can fill up their tanks with cheap crude and sell higher-priced futures contracts to lock in a profit.
Where fools rush in: The Wall Street Journal reports that auto supplier Lear in talks to return jobs to Detroit. The company is pressing the UAW to agree to lower wages in exchange for relocating jobs from Mexico.

On The Way To Looking Up Something Else

I would have bet that of the 192 countries listed by wiki, vehicles per capita, North Korea would have been #191, just ahead of Cuba. I was dead wrong. North Korea is actually doing quite well compared to those below it. North Korea is ranged #170. Countries with fewer vehicles per capita than North Korea include: Uganda, Gambia, Niger, Sierra Leone, Chad, Democratic Republic of the Congo, Central African Republic, Lesotho, Ethiopia, Somalia, Liberia, and Bangladesh.

Great Update On The REX -- March 18, 2016; Peabody Warns Of Bankruptcy

Being reported all over: natural gas will surpass coal this year in US for electricity production
The U.S. Energy Information Administration believes natural gas will provide 33% of generation in 2016, while coal’s share will likely fall to 32%. That would be the first time that natural gas beats coal on an annual basis. 
The EIA says natural gas and coal each contributed one-third of all electricity generation in 2015. 
Coal accounted for half of all U.S. electricity generation between 2000 and 2008. 
But coal use has declined sharply over the last decade, as the U.S. fracking boom flooded the market with cheap natural gas. As a result, coal companies have come under intense pressure, and the Obama administration’s efforts to implement new regulations on coal-fired power plants have created even more uncertainty for the industry
Some coal plants have shifted generation to natural gas in response. 
Peabody Energy (BTU), the largest coal miner in the U.S., said this week it doesn’t expect to meet certain financial obligations by March 31, warning that bankruptcy could be the next step
Peabody, which has reported annual losses four years running, noted that “sustained depressed” prices have hurt its bottom line. Patriot Coal, a spinoff of Peabody, went through bankruptcy last year. Alpha Natural Resources, another major coal miner, filed for Chapter 11 bankruptcy protection in August 2015.
Active rigs:

Active Rigs31107191186205

RBN Energy: again, RBN Energy does a superb job on their energy updates. This time is an update on the REX, Zone 3 east-to-west expansion.
Tallgrass Energy’s Rockies Express Pipeline (REX) last week received final approval to begin construction on its Zone 3 Capacity Enhancement expansion project (Z3CE), which would expand east-to-west capacity out of the Marcellus/Utica shale production area to a record 2.6 Bcf/d. This project comes on the heels of REX’s East-to-West expansion (E2W), which came online last August and in one fell swoop gave Northeast producers their first substantial westbound firm forward-haul transportation capacity, totaling a full 1.8 Bcf/d. The upcoming Z3CE capacity (0.8 Bcf/d) will mark yet another milestone in the Great Pipeline Reversal that’s expected to ease supply congestion in the Northeast and support beleaguered Marcellus/Utica pricing points. That new capacity is not due in-service until late 2016. But now with nearly a full winter’s worth of pipeline flow data for the first E2W expansion, we can get a preview of potential impacts of the additional capacity on flows and pricing. Today we look at winter-to-date gas flows on REX and what they tell us about the Marcellus/Utica market.
Last June, in Big Deal! REX to Open the Floodgates, we recapped REX’s inception as an eastbound pipeline for Rockies gas producers to send their gas to higher priced Northeast markets, and then covered the impact that shale supply growth and price discounts in the Northeast have had on the region – culminating in REX, along with other Northeast-bound pipes, to provide for flows moving in the opposite direction. In the case of REX, that means it now receives supply near Clarington, OH and the general vicinity, and then moves it west to interconnect with other interstate pipelines along its easternmost Zone 3 leg. We detailed the REX reversal efforts and impacts prior to E2W going into service, including the build-out and expansion of the Seneca Lateral and third-party receipt point connections near Clarington, OH. Until that point, design capacity and long-term shipper contracts for such westbound flows were limited to 600 MMcf/d, though operationally, REX had been flowing close to or more than 1.0 Bcf/d of Marcellus and Utica supply west since February 2015.
Then, last fall (August 1, 2015), REX flipped the switch on new E2W capacity, and just like that an incremental 1.2 Bcf/d of firm contracts kicked in for “forward-haul” capacity westbound from the Clarington, OH area to Moultrie County, IL. We documented the in-service of that expansion in Waiting For a REX Like You. This capacity was in addition to the 600 MMcf/d of westbound commitments already in place for supply from MarkWest’s Seneca processing plant via the Seneca Lateral. Together, they brought the total Zone 3 east-to-west contracted capacity to a total 1.8 Bcf/d, backed by 20-year firm contracts for east-to-west flows from four shippers besides MarkWest:  American Energy Appalachia, EQT Energy, Gulfport Energy Corp, and Rice Energy. In addition to expanding bidirectional capacity of the mainline pipe in its Zone 3, E2W also increased delivery point capacity at interconnects with ANR in Shelby, IN, Panhandle Eastern Pipe Line in Putnam, IN, Trunkline in Douglas County, IL and Midwestern in Edgar, IL, and Natural Gas Pipe Line of America (NGPL) in Moultrie, IL.