EMPOWER NORTH DAKOTA COMMISSION - … · Great River Energy 1611 E Century Avenue ... could be...

Minutes of the

EMPOWER NORTH DAKOTA COMMISSION

March 19, 2018 Great River Energy

1611 E Century Avenue Bismarck, ND 58503

Members present: Jay Schuler, Al Christianson, Mark Nisbet, Ron Day, Mike Rud, Dale Niezwaag

Ex Officio Members present: Lt. Governor Sanford, Wade Boeshans, Julie Voeck, Mark Bring, Stacey Dahl

Others present: Carlee McLeod, USND Kathy Aas, Xcel Energy John Weeda, NDTA Brian Kalk, EERC Danette Welsh, Oneok Ted Hanson, Flint Group Zac Smith, NDAREC Shane Goettle, Odney Lance Gaebe, Clearwater Communications Justin Kringstad, NDPA Karlene Fine, ND Industrial Commission Andrea Pfennig, Industrial Commission Rachael Retterath, GRE Joel Gilbertson, GA Group John Olson, Olson Effertz Lobbying Geoff Simon, Western Dakota Energy Assoc. Jean Schafer, Basin Electric Justin Dever, MDU Resources Cory Fong, MDU Resources Rudie Martinson, Lockridge Grindal Nauen Dave Blair, Network Solutions & Services Brent Bogar, Jadestone Consulting Justin Kringstad, NDPA Zoe Wergeland, Commerce Dept. Joleen Leier, Commerce Dept.

CALL TO ORDER/WELCOME Chairman Schuler called the meeting to order at 1:30 p.m. and welcomed commission members and guests.

APPROVAL OF MINUTES Motion made by Day and seconded by Rud to approve the minutes of February 26th, 2018. Motion carried unanimously.

SelectUSA- Washington, DC Chairman Schuler talked about the ND Department of Commerce exhibiting at the U.S. Department of Commerce SelectUSA Investment Summit, June 20-22 at the Gaylord National Resort and Convention in Washington, DC. The SelectUSA Investment Summit is dedicated to promoting foreign direct investment (FDI) in the USA. Featuring senior government officials, C-Suite business executives and other thought leaders. The event brings together companies from all over the world, economic development organizations (EDO) and other business partners working to facilitate business investment in the US. The ND Department of Commerce will organize two track events on June 25th and 26th in Bismarck that will highlight the oil and gas and coal industries in ND; inviting travel to the Minot, Williston, and Watford City regions.

Rare Earth Elements Chairman Schuler and Brian Kalk talked about the work that the Energy & Environmental Research Center (EERC) is pursuing with rare earth elements (REE), elements used in high technology products, such as catalysts, cell phones, hard drives, hybrid engines, lasers, magnets, medical devices, televisions and other applications. Currently funding help is coming from the Department of Energy, ND industry, Lignite Energy Council and state funding. China controls 85-90% of the global supply or REE, and their supply is expected to run out in 15 years.

EmPower ND Subcommittee breakout sessions Commission members broke out into the subcommittee groups of Public Policy, Infrastructure, and Research & Development. The subcommittees reconvened back to the meeting after discussing their recommendations as follows:

Public Policy Legacy Fund – What is the criteria that will be

needed for future disbursement of the principle/interest in the fund.

Critical Infrastructure bill - Language that could be drafted or general statement for

Minutes of the

EMPOWER NORTH DAKOTA COMMISSION

March 19, 2018 Great River Energy

1611 E Century Avenue Bismarck, ND 58503

EmPower North Dakota Commission

sabotaging critical infrastructure. A proposed bill in Iowa and other states, such Wyoming and possibly Montana are looking to pass bills with federal prosecution.

Grid Resiliency Pricing Rule – Federal Energy Regulatory Commission (FERC) issued order for each Regional Transmission Organization (RTO) to submit a report on recommendations for baseload compensation. The committee agrees that the issue is best handled at the RTO level and a statement of support should be written in favor of handling at each regional level.

New Clean Power Plant/New Carbon Management Rule – The Clean Air Act has a set of rules that differ from federal level to state level. The old rule is to be rescinded, with a proposed new rule in June or end of year. The state level is tasked with ways to meet those federal guidelines. A statement needs to be written on those guidelines.

Infrastructure Utilization of Legacy funds to provide low

interest loans for municipalities for infrastructure. A support statement could come from the EmPower Commission.

Research & Development The R&D committee did not have representation at this meeting. Below are the recommendations from the February meeting.

The subcommittee discussed the need for a special future fund that will be used for large scale demonstration initiatives, benefiting both industries of coal, and oil & gas; with identifying the need for a carryover of funds, to be used for promising investments. This need for increased funding for pilot or commercial demonstrations still exists and what was created last year, was a great first step and more needs to be done next session with specific language.

Pipeline Authority Update Justin Kringstad

Justin gave an overview of the economics, current activity, oil transportation means, understanding of the current and future oil production, natural gas production, flaring, capture, NGLs and a pipeline construction update. Appendix A

Legislative Agenda for Interim Committees ED&T Committee – March 8, 2018

Julie Voeck mentioned that NextEra Energy presented to the ED&T Committee on the cost of renewables, responding to RFPs, PPAs, repowering and what that means to turbines in full or partial capacity, the history of Production Tax Credits and the economic impact study of wind, that was conducted by NDSU.

Future Meeting The next meeting will be held April 23rd at Great River Energy in Bismarck. This meeting will be used to prepare for the collaboration meeting with the ED&T committee, May 9th at the EERC building in Grand Forks.

PUBLIC COMMENT No comments

ADJOURNMENT The meeting was adjourned unanimously at 3:30 p.m.

Chairman Schuler Date

Sherri Frieze Date Recording Secretary

North Dakota

EmPower Commission

March 19, 2018

Justin J KringstadGeological Engineer

Director

North Dakota Pipeline Authority

2JJ Kringstad - North Dakota Pipeline Authority

Presentation Outline

• Economics

• Current Activity and oil transportation dynamics

• Understanding current and future oil production

– Pricing update

– Activity

– Oil forecasts

• North Dakota natural gas production

– Flaring and gas capture

– Natural gas liquids

• Pipeline construction update

JJ Kringstad - North Dakota Pipeline Authority 3


Global Supply & Demand Outlooks


EIA Domestic Oil Price Outlook


WTI Price and Domestic Storage

Data: EIA

7

Assumptions about the size of U.S. resources and the improvement in technology affect domestic oil and natural gas prices—

0

50

100

150

200

250

2010 2030 2050

North Sea Brent oil price

2017 dollars per barrel

2017

history projections

0

1

2

3

4

5

6

7

8

9

10

2010 2030 2050

Henry Hub natural gas price

2017 dollars per million Btu

2017

history projections Low Oil and Gas

Resource and

Technology

High Oil Price

Reference

Low Oil Price

High Oil and Gas

Resource and

Technology

Objective

Define where the Bakken/Three Forks system may be economic in the

current oil price environment.

Method

Analyze past well performance across the region and estimate well

economics for various production levels.

Disclaimer

The goal of this work is not to imply individual company actions or

intentions. All view expressed are strictly that of Justin J. Kringstad.

Neither the State of North Dakota, nor any agency, officer, or employee

of the State of North Dakota warrants the accuracy or reliability of this

product and shall not be held responsible for any losses related to its

use.


Key Economic Assumptions

• $6-$8 Million Well Costs

• $59/BBL & $5.00/MCF Wellhead Pricing

• 1/6 Royalty

• Zero Flaring

• Assumed 10-20% IRR to drill (calculated after

production taxes and royalties)

• No Tax Incentives Included

• Production rate is 30-day average

• All Bakken/Three Forks wells drilled in 2008+


© OpenStreetMap contributors


Peak Month Minimum400 BOPD

$59 Wellhead

7,397 Wells




5,691 Wells

$59 Wellhead




4,148 Wells

$59 Wellhead




2,837 Wells

$59 Wellhead



Peak Month Minimum 800 BOPD

1,924 Wells

$59 Wellhead



Peak Month Minimum 900 BOPD

1,257 Wells

$59 Wellhead



Peak Month Minimum 1,000 BOPD

831 Wells

$59 Wellhead



Peak Month Minimum1,250 BOPD

300 Wells

$59 Wellhead



Peak Month Minimum1,500 BOPD

100 Wells

$59 Wellhead


Summary of $59 Wellhead Oil


Breakeven Summary

Bakken Breakeven Analysis

Important Considerations

• Breakeven areas were determined by neighboring well performance and are expected to expand as new completion technology is applied in areas outside “the core.”

• Just because an area is considered “economic” does not mean that it is the most economic option for the industry participant(s). Competition for capital continues to exist inside and outside the region.



Bakken Breakeven Price Range (20% IRR)

Bakken Breakeven Prices

$6 - $8 Million

Completed Wells Cost

Background Map: Esri, HERE, DeLorme, MapmyIndia, © OpenStreetMap contributors, and the GIS user community


44% Economic Area Increase 2017 to 2018

North Dakota Impact of Smaller Discount

• 2016 Weighted Average Discount: $7.71

• June-December 2017 Wt. Average Discount: $4.53

• $3.18/BBL Improvement Post DAPL Commercial In-Service

• 236,093,163 Taxable Barrels In June-December 2017

• Wt. Avg. Tax Rate in June-December 2017: 9.74%

Seven Month Revenue Impact

• 9.74% x 236,093,163 x $3.18 =

$73.1 Million Additional State Revenue

When Compared to Avg. 2016 Discount

Does Not Include Royalty Owner

and Industry Revenue Impact

2424JJ Kringstad - North Dakota Pipeline Authority 24


• Economics



– Pricing update

– Activity

– Oil forecasts






North Dakota Drilling Activity


Estimated Williston Basin Oil Transportation

27


28

Estimated ND Rail Export Volumes



• Economics



– Pricing update

– Activity

– Oil forecasts






Forecasting Challenges: Activity vs. Price


North Dakota Forecast Activity Assumptions

31


North Dakota Oil Production Forecast

32


Williston Basin Oil Production & Export Capacity, BOPD

Production forecast is for visual demonstration purposes only and should

not be considered accurate for any near or long term planning.



• Economics



– Pricing update

– Activity

– Oil forecasts






NDPA ND Gas Production Forecast


Simple Terms

Blue – Lack of pipelines

Orange – Challenges on existing

infrastructure

GREEN – % of gas captured and sold

Blue – % flared from zero sales wells

Orange – % flared from wells with at

least one mcf sold.

Dec 2017 Data – Non-Confidential WellsStatewide


Solving the Flaring Challenge

Major Gas Pipeline and

Processing Infrastructure

WBI Transmission

Whiting



Solving the Flaring Challenge

Raw Natural Gas

(1400+ BTU)Processing Plant

Consumer Quality Dry Natural Gas

“Residue Gas”

Methane

57.67%

NGL’S (8-12 gallons per 1,000 cubic feet

of raw gas)

Y-Grade or Fractionated

“Y-Grade” if NGL’S are left together in

one mix for separation later

Ethane

19.94%

Propane

11.33%

Butane

3.80%

Natural Gasoline

1.29%

39

Natural Gas Processing – “Ethane Capture”


Raw Natural Gas

(1400+ BTU)Processing Plant

Consumer Quality Dry Natural Gas

“Residue Gas”

Methane

57.67%

Ethane

19.94%

NGL’S (8-12 gallons per 1,000 cubic feet

of raw gas)

Y-Grade or Fractionated

“Y-Grade” if NGL’S are left together in

one mix for separation later

Propane

11.33%

Butane

3.80%

Natural Gasoline

1.29%

40

Natural Gas Processing – “Ethane Rejection”


North Dakota Captured* NGL’s


*Non-flared NGL’s & Assumes 10 GPM

41

Major NGL Pipeline and

Processing Infrastructure

Kinder



ONEOK Elk Creek NGL Pipeline

Project Highlights

• 900 Miles - 20” Pipeline

• $1.4 Billion

• 240,000 BPD Capacity

• Expandable to 400,000

BPD

• End of 2019 Proposed

Completion

• Y-Grade Transportation

NGL Pipeline Takeaway Options

44


• 42” Pipeline

• Carries Canadian (Port of Morgan) and Domestic Gas

• Receives Gas From ND Plants, WBI Transmission Interconnections, and WY Pipelines (Bison & Grasslands)

• Midcontinent Deliveries

Northern Border Pipeline


Simplified Example NB Calculations


Conclusion: IF no other gas export options open and all other deliveries on other pipelines stay static, ND

gas production could increase 1.58-1.88 BCFD (from Nov-17) before Northern Border is 100% Bakken

production. BTU management becomes increasingly important for Bakken residue gas.

North Dakota Gas Infrastructure

47


*All Locations Are Generalized for Security Purposes

Finding Opportunities…(“Super-Served” Communities)


WBI Energy Gas

Map Information: DOT PHMSA

Finding Opportunities…


42” Northern Border Pipeline

2.4 Billion Cubic of Gas Each Day


Northern Border Shippers


Major Gas Compressor Locations

52




• Economics



– Pricing update

– Activity

– Oil forecasts






North Dakota Pipeline Construction


Sources: NDIC & PHMSA

54

North Dakota Pipeline Construction


Sources: NDIC & PHMSA

55


New Miles and Well Completions


20086,262 mi2

20096,493 mi2

20109,866 mi2

201113,735 mi2

201216,267 mi2

201313,428 mi2

201412,053 mi2

20158,433 mi2

20164,206 mi2

2017-Oct3,578 mi2

Background Map: Esri, HERE, DeLorme, MapmyIndia, © OpenStreetMap contributors, and the GIS user community

2 Mile Buffer Around New

Wells By Year


New Miles and Activity Footprint

*2017 Forecasted


Predicting New Miles With Activity Footprint

Evolution of Oil Gathering in NDStatewide Totals


Evolution of Oil Gathering in ND


Looking Forward• Gas capture infrastructure

• Liquids gathering infrastructure (oil/water)

• Residue gas transmission

• Additional oil transmission

• NGL utilization needs (storage)

• Enhanced oil recovery infrastructure

(working fluid distribution)


Justin J. Kringstad, DirectorNorth Dakota Pipeline Authority

600 E. Boulevard Ave. Dept. 405Bismarck, ND 58505-0840

Phone: (701)220-6227Fax: (701)328-2820

E-mail: [email protected]

Websites: www.pipeline.nd.gov

www.northdakotapipelines.com


Contact Information

63

http://www.pipeline.nd.gov/

http://www.ndpipelines.wordpress.com/

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