North Dakota Fights Fracking Rule

June 15, 2015 Elizabeth Alford

North Dakota officials are warning that a new federal fracking rule will likely cost the state $300 a year in income and 1,900 jobs.

In March,the Bureau of Land Management (BLM) finalized new rules to regulate hydraulic oil and gas fracturing on public lands. Several states have filed suit, arguing that the new rules supersede the state’s authority and “invade” the jurisdiction of the state regulatory bodies.

The ruling is particularly significant to North Dakota because of it vast public lands. It is estimated that BLM has an interest in about a third of the drilling units in North Dakota that were acquired the mineral rights on defaulted farms during the the Great Depression.

Lynn Helms, director of the Department of Mineral Resources believes that the ruling will cause companies to leave North Dakota, which could cost the state $9.4 billion in royalties and taxes.

The rule is set to take effect on June 24th and to delay implementation, North Dakota filed a request for a preliminary injunction against the BLM while the court reviewed previous challenges. A hearing is set for June 23 in U.S. District Court in Casper, Wyo.

OPEC Decision Doesn't Intimidate

June 10, 2015 Elizabeth Alford

Crude Plunges to Six Year Low — OPEC to Keep Oil Production High

OPEC announced last Friday that it will stick with its policy to produce oil at a high rate, a measure that may signal they are underestimating Bakken producers.

If the measure by OPEC was meant to intimidate U.S. energy producers, they may want to try again. Despite this tactic to crush competitors, U.S. oil companies have worked to streamline operations an become more efficient. Many now claim they can remain profitable at the lower crude prices for some time.

“Lynn Helms, head of North Dakota’s Department of Mineral Resources says that “OPEC is still is our main competition. But what you’re seeing now is the Bakken becoming the swing producer, something that has happened relatively quickly because of efficiencies in drilling and completion technology.”

In response to OPEC’s announcement, oil prices fell on Monday and analysts project this will prolong the supply glut for the rest of the year. But despite forecasted demands and increasing supplies, OPEC said it expected that the world’s oversupply of crude will likely ease over the coming quarters and that U.S. production will decline in the third quarter.

Heitkamp Urges Repeal of Oil Export Ban

June 8, 2015 Elizabeth Alford

Heidi Heitkamp, U.S. Senator from North Dakota is urging lawmakers to repeal a 1970’s era ban on oil exports.

Taking the Senate floor last month, Heitkamp said that the existing restrictions on U.S. oil producers are harming America’s competitiveness. Heitkamp hopes to level the playing field by doing away with restrictions that hinder America’s economic growth and that threaten our long-term goal of becoming energy independent.

Not everyone is in favor of lifting the ban, however.

“Athan Manual, the director of the Lands Protection Program at the Sierra Club, said his biggest concern is how increased oil consumption around the world will impact climate change. “We don’t think we should be exporting global warming, basically, to other countries,” he said. “We think all the countries in the world should do what the U.S. is doing and dramatically reduce their use of fossil fuels, especially oil, to fight climate change.”

Floods Threaten Bakken Producers

June 4, 2015 Elizabeth Alford

North Dakota experienced its wettest May on record and all the rain is causing trouble for some oil and gas producers.

The region had almost 8 inches of rain last month and now flood waters threaten operators near the confluence of the Missouri and Yellowstone rivers. More rain is expected and could cause raise flood levels to 22 feet by this weekend. North Dakota regulators have stepped up inspections and are urging producers to take precautions. Inclement weather can easily wreak havoc on the energy infrastructure including well flooding, road closures and truck bans.

“Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said 13 companies were notified to secure their equipment. “The well sites might not flood but the access roads might,” Ritter said. “So we want to make sure they have everything secure now in case they lose access.”

Last year, a well owned by Zavanna LLC was swamped with water causing 1,400 gallons of oil to leak and eventually coated brush, trees and grass in the area.$3 million in fines were levied last year against 19 companies that failed to protect against spring flooding.

Other affected producers include Statoil, Exxon Mobil's XTO Energy and Oasis Petroleum, who have been given the option of voluntarily shutting in wells.

Shale Oil: The Sky’s the Limit

June 3, 2015 Elizabeth Alford

As crude prices plunged throughout the fall of 2014, producers tightened their budgets and changed their strategies to wait out the crisis.

Not only are these tactics working for individual companies, but the efficiencies and innovations that are occurring may be setting the stage for another season of prosperity.

Cutting Costs Producers have slashed costs associated with drilling through greater efficiencies and supplier reductions, including these first quarter results:

Sanchez reported Q1 costs at 30 to 40% below fourth quarter 2014
Matador reduced operating costs 30% to 40% for Q1
Continental’s drilling and completion costs fell by 15%
EOG announced it has benefitted greatly from the pull-back in activity and progress is being made to lowering cost in each phase of their operations

Innovation Looking for greater efficiency also means innovation. Cutting edge producers are pushing the science and technology to new levels as they work to get the most out of their resources. These include advancements in 3-D seismic research, telemetry, remote guidance and innovations in CO2 or nitrogen-style completions. Chesapeake recently reported that their drilling team broke several records including drilling their deepest well with a total measured depth of just under 21,000 feet, fastest spud-to-rig-release time of 7.8 days, and lowest drilling cost well at $1.1 million.

“A Wall Street Journal article recently said that this increased efficiency has fundamentally changed the industry. “Oil production is becoming a modern manufacturing process. The frackers are engaged in ‘just-in-time’ production, analogous to the methods pioneered by Japanese manufacturers in the 1970s and 1980s, which led directly to hyper-efficient global supply-chain management perfected by Wal-Mart in the 1990s.”

All of these advances have come during lean times, so what will happen as crude prices continue to increase? Since some operators report that they are more profitable today at $65 a barrel than they were at $95 a barrel three years ago, we could find ourselves in another boom very soon.