Keystone Showdown Likely for New Year

Bakken pipeline threatened
Bakken pipeline threatened

President Obama’s strong remarks at Friday’s press conference set the stage for what is likely to be a New Year’s showdown over the future of the Keystone pipeline. As the new Republican-led Congress is poised to make this issue its top priority when it reconvenes in January, Obama expressed his concern that the benefits to the U.S. have been exaggerated.

Congress narrowly rejected a bill in November that would approve continued construction that would wind through the Bakken formation of Montana and North Dakota. The votes fell predictably along party lines, but with recent elections bringing Republicans into the majority, a new bill is likely to pass quickly in the new year.  It isn't clear whether the President will veto new legislation, but it will not be smooth sailing.

Commenting on the pipeline, President Obama said that, “It’s very good for Canadian oil companies and it’s good for the Canadian oil industry, but it’s not going to be a huge benefit to U.S. consumers.

At issue is whether the benefits of the new section of the Keystone pipeline outweighs the potential dangers espoused by democrats and environmental groups. These opposing voices claim that the pipeline will potentially bring great risk to the climate, air quality, the ecosystem, public health, the water supply and landowner rights.

Certainly this issue is complicated, and with the continued debate and outcry over the current methods of transportation for Bakken crude, alternatives must be explored and genuinely considered. Living in the modern world means risk, and at some point it becomes a matter of which risk we are more willing to take. We cannot continue to enjoy, even demand, the lifestyle that this crude affords us without also being willing to make the hard choices that its production demands.

Read more from www.wsj.com.

Bakken Operators Slash Budgets for 2015

North Dakota Oil Tax Reductions
Bakken Producers Slash 2015 Budgets

As the free-fall in crude prices continues, major Bakken operators are expressing their caution by slashing their budgets for 2015.

Marathon Oil is the latest giant to announce that its projected budget will curb exploration spending by a whopping 20% for 2015. Though the company still forecasts spending in upwards of $4.4 billion, the decrease is another sign that the spiraling oil prices are casting a dark shadow over the incredible growth that is taking place in the shale regions.

We remain confident in our investment opportunities in the three U.S. resource plays,” Marathon Oil President and Chief Executive Officer Lee Tillman said in a statement. “Our 2015 capital program is not opportunity constrained but will reflect sound discipline in managing cash flows in the current price environment.

Related: Eagle Ford and Bakken Drilling Permits Fall 30%

This news comes as oil plunged Thursday to an incredible $54.11, prices not seen since 2009. And Marathon is not the only E&P company to back off on growth plans. ConocoPhillips is also shaving 20% off for 2015, by deferring investment in unconventional plays. The company, however, is continuing to affirm its commitment to Bakken region, which continues to be a major source of growth for the company. Bakken’s largest operator, Continental Resources, also seems to be getting skittish as it announced Wednesday it will reduce spending in 2015 by $600 million and delay new rig starts while they wait out the current situation.

For more on 2015 budgets visit Reuters.com

Bakken Oil Transport Still Not Safe

Lac-Mégantic rail disaster
Lac-Mégantic rail disaster

When the North Dakota Industrial Commission issued its landmark ruling last week concerning the conditioning of oil, it appeared that they were making a serious move towards improving the safety of transporting crude out of the Bakken. But according to an article in the StarTribune, the new regulations, which go into effect April 2, 2015, won’t bring the industry any closer to a solution for a serious problem that is drawing fire from legislators, concerned citizens and environmental groups.

Alan Stankevitz, an expert on the DOT 111 tanker car, explains in the StarTribune that the standards set by the commission, which includes Gov. Jack Dalrymple, are not enough to adequately address the problem. The order establishes new regulations that demand facilities to maintain an operating pressure at less than 13.7 psi. This is a much larger number than the volatility point for Bakken crude, which is between 11.5 and 11.8 psi.

Stankevitz writes, “The bottom line is that the limit has been set so high by North Dakota that the mandate is toothless. The same volatile oil that caused the massive explosions in Casselton, N.D., and Lac-Mégantic would still have been allowed to ride the rails, according to this new mandate.

Stankevitz goes on to charge the commission with using ‘smoke and mirror tactics’ to divert attention away from the real issue, which he believes to be the routine use of old and outdated tanker cars that are leased by the petroleum industry for transportation.

Read more in the Star Tribune.

New Regulations for Oil Transportation in the Bakken

new regulations for Bakken add strict guidelines
new regulations for Bakken add strict guidelines

In an effort to improve the safety of crude production in the Bakken region, the North Dakota Industrial Commission issued an order on December 9th that will impose new regulations on oil producers.

The order (no. 25417) is the result of an investigation that began at an emotionally charged hearing in September. Over the past two months, commission members Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring considered oral and written comments from technical witnesses, manufacturers, land/royalty owners and the general public.

The new regulations will go into effect on April 1, 2015 and require that all new wells in the Bakken Petroleum System utilize equipment that controls vapor pressure in order to lessen the likelihood of explosions during transportation. This order comes as a series of troublesome events in 2014 escalated a growing national concern over the transportation methods of Bakken crude.

The commission issued a joint statement that “The North Dakota Industrial Commission reiterates the importance of making Bakken crude oil as safe as possible for transportation. This order will bring every barrel of Bakken crude within standards to improve the safety of oil for transport.

In order to come into compliance, producers will have to shell out millions of dollars for new equipment, updated facilities and increased personnel. The order also establishes the Commission’s jurisdiction over these matters and provides for potential criminal and civil penalties for producers that are deemed noncompliant.

Read the Commission Report here.

North Dakota's Future - The Legislature Wants to Know

Bakken population will increase ~30%
Bakken population will increase ~30%

Throughout 2014, the energy market experienced unprecedented production along with wildly fluctuating prices in crude, leaving many to wonder about the long-range future of the Bakken Shale region.

The North Dakota legislature recently commissioned a massive study from KLJ, Inc. to analyze the economic forecast and possible trends for 19 counties through the year 2019. This unprecedented study concentrated on areas such as population growth, employment, housing.

The oil boom means more job opportunities in companies directly involved in oil and gas production as well as in industries that indirectly support this production. The study predicts that these jobs will spur a population increase in some North Dakota counties of more than 30%, a staggering number compared to the national average of 1.5%. This increase will add a strain on the already overtaxed housing market in the area, where a great deal of permanent housing has been depleted. In even the most modest scenario, the study anticipates that housing needs will increase by close to 30,000 units for the Minot, Dickenson and Williston regions. This may play a factor in the population projection as workers will have to make hard decisions about whether to bring family along as they move to the area for work.

Permanent population will be largely driven by the supply of permanent housing in the region,” the study says. “Due to a lack of housing, the region will continue to have a total (service) population that is substantially larger than the permanent population measured by the U.S. Census.

KLJ’s study was completed before oil prices began to drop sharply. Analysts will watch closely to see if falling prices affect the accuracy of this forecast.