l HISTORY One year ago · and 93.3 million bpd in 2015. OPEC’s estimated 2015 oil demand growth...

l L A N D & L E A S I N G

l M O V I N G H Y D R O C A R B O N S

Vol. 3, No. 38 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of January 4, 2015 • $2.50

Snaking through the railhead

A BNSF unit train approaches the loading racks at Hess Corp.’s railloading terminal at Tioga, North Dakota in mid-December. As part ofa plan to monetize its Bakken midstream assets, Hess announced inJuly intentions for an initial purchase offering for its wholly-ownedsubsidiary Hess Midstream Partners, which will inherit a 50 percentinterest in the facility. The terminal went into service in April 2012.

VER

N W

HIT

TEN

PH

OTO

GR

APH

Yl H I S T O R Y

page6

Statoil makes it 20 top IPs in 2014; QEP takes six of 10

One year agoPNB looks back at year-end 2013 issues and what has and hasn’t changed

By MIKE ELLERDPetroleum News Bakken

As 2014 drew to a close, Petroleum News Bakken

paused to look back at the last two editions of 2013 to

compare the important Bakken industry-related issues

making the news then with those making the news at the

end of 2014.

Obvious to anyone who follows the industry, 2014 was

fraught with change, including the major issue that wasn’t

even on anyone’s radar at the end of 2013 — the plum-

meting global crude oil market and its ripple effects in the

Williston Basin. But there were also a number of other key


l G O V E R N M E N T

Vol. 2, No. 37 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of December 29, 2013 • $2.50

page6

Burlington Resources wells fill firsttwo slots on weekly Top 10 IP list

VER

N W

HIT

TEN

PH

OTO

GR

APH

Y

Correction: The Dec. 22 edition of Petroleum News Bakken ran aphoto on the front page identified as construction at the DakotaPrairie refinery near Dickinson, but it was actually of theContinental Resources' Atlanta 14-well ECO-Pad in the Bakerfield in southwestern Williams County. Our apologies. Wegrabbed the wrong photo and missed it in proofing. The abovephoto is of construction of the Dakota Prairie refinery.

Next time, we’ll look twice

XL: pipe and rail?TransCanada considers rail as Keystone alternative from Canada to Cushing

By GARY PARKFor Petroleum News Bakken

I f TransCanada ever decides to throwin the towel on Keystone XL, the

announcement will be formal. But thesedays there are increasing reasons tointerpret comments by Chief ExecutiveOfficer Russ Girling that the companyis close to the breaking point with theObama administration.

In year-end interviews, he has disclosedTransCanada is in discussions with railroads andoil producers about the possibility of moving oilsands crude from Alberta to Cushing, Okla.,where it could enter the Gulf Coast pipeline, the

southern leg of XL that feeds Texasrefineries.

Girling also said Mexico’s plan toend its government monopoly on energydevelopment could open the way forTransCanada to add oil pipelines to twonatural gas delivery systems in Mexico.

In a less-than-subtle comment, hesaid TransCanada is unlikely to ever“stop pressing the pipeline option” tomove 830,000 barrels per day out ofAlberta and the North Dakota Bakken onKeystone XL.

“But there is a point in time at which we wouldconsider a rail option. If we need to bridge with

RUSS GIRLING

see KEYSTONE RAIL page 12

Tightening industry rulesNew North Dakota regulations put gathering pipelines under state jurisdiction

By MAXINE HERRFor Petroleum News Bakken

North Dakota officials often boastof having some of the toughest oil

and gas rules in the nation. Now they’repoised to tighten the reins even more.

At the state’s Dec. 19 IndustrialCommission meeting, Department ofMineral Resources, DMR, DirectorLynn Helms brought revised administra-tive rules for the commission’s approval.

O

facility, typically a well pad or tank bat-tery site, to a pipeline governed by thePublic Service Commission.

The new rules are a result of HouseBill 1333 from the 2013 legislative ses-sion, which includes a requirement foroil and gas pipeline companies to pro-vide the locations of these lines. Thelegislature directed the commission tocreate a system that will allow everypipeline since Aug. 1, 2011, to be regis-tered in a state GIS map The m d t

ALISON RITTER

New Brunswick refinery raisedconcerns about Bakken crude oil

Irving Oil, whose New Brunswick refinery was the destina-tion for Bakken crude involved in the Lac-Megantic disaster inJuly, had previously outlined its concerns about the testing ofcrude oil it was receiving by rail.In a presentation to a Crude Oil Quality Association confer-ence in Seattle, an Irving employee noted that crude testing at therefinery occurred after deliveries — “too late in the process toaddress any safety issues.” An Irving spokesman declined to comment on the presenta-tion because of a federal investigation by the Royal CanadianMounted Police and Transport Canada into the Quebec derail-

ND gives Statoil green light onproduced water storage proposal

A pilot project near the Little Muddy River in WilliamsCounty, ND, could result in huge reductions in freshwaterand trucking needs throughout the oil patch.A

see REFINERY CONCERNS page 9

see A LOOK BACK page 10

MT lease interest risesNominated acres for March auction up 8-fold and focused on Williston Basin


Activity picked up considerably for

Montana’s next oil and gas lease auction

scheduled for March with nominated acres up

eight-fold over the acres leased in the December

auction and most of the activity focuses on

Montana’s portion of the Williston Basin.

A total of 35,292 acres in 78 tracts have been

nominated for the March Montana Department of

Natural Resources and Conservation oil and gas

lease auction, an increase of 31,000 acres over the

4,292 acres leased in December and marking the

January BLM auction limited to 7 ND tracts

In contrast to the more than 35,000 acres

nominated for the Montana Department of

Natural Resources and Conservation’s

March oil and gas lease auction, only 1,742

acres will be offered in the Montana/Dakota

Bureau of Land Management office’s

January lease auction. Those acres, all in

North Dakota, are spread among seven tracts

in Dunn, McKenzie and Williams counties

see LEASE INTEREST page 12see BLM AUCTION page 12

Bumbling and stumblingKeystone XL gained little in 2014 and the case for approval weakens in Washington


It’s time for the annual stocktaking on the

Keystone XL, the sixth since the project that

has no parallel in the

history of energy

pipelines that extend

for hundreds of thousands of miles across North

America.

And the bottom line is virtually indisputable.

The outlook is bleak, certainly bleaker than a

year ago and unimaginably bleaker than when

TransCanada formally launched the venture in

2008.

The shadow over the plan to ship about

700,000 barrels per day of mostly heavy crude

from the Alberta oil sands and perhaps 100,000

bpd from the Bakken to refineries on the Gulf

Coast extends from the Oval Office.

Entering 2014, there was a reasonable degree

of hope that President Barack Obama might give

a green light to XL, given that the State

see KEYSTONE XL page 11

Commentary

As the year progressed Obama soundedprogressively more negative, shrinking

the chances that he will issue aPresidential Permit during his final two

years in office.

South Dakota holding hearingson ETP Bakken Crude pipeline

The South Dakota Public Utilities Commission has sched-

uled three public hearings on Energy Transfer Partners’

Bakken Crude Oil pipeline, sometimes referred to as the

Dakota Access pipeline, a line proposed to run from the

Bakken in northwest North Dakota to a Midcontinent hub at

Patoka, Illinois.

The proposed route traverses 13 counties, entering the

state at Campbell County in north-central South Dakota and

running approximately 272 miles southeast to exit the state

in Lincoln County in far southeast South Dakota. The

pipeline would have one pump station in South Dakota.

Two of the hearings will be held on Jan. 21, one in

Bowdle beginning at noon and the other in Redfield begin-

ning at 6 p.m. The other two hearings are scheduled for Jan.

22 at Iroquois beginning at 10:30 a.m. and in Sioux Falls

beginning at 5:30 p.m. All four towns are on the proposed

2015 global oil demand growthestimates get revised downward

As a new year begins amid a depressed global crude oil mar-

ket, the International Energy Agency, the Organization for

Petroleum Exporting Countries and the U.S. Energy

Information Agency have all revised downward their estimates

for global oil demand growth in 2015.

In its December oil market report, the International Energy

Agency now projects global oil demand to grow by 900,000

barrels per day, a downward revision of 230,000 bpd from its

November projection, based on lower production expectations

from former Soviet Union states as well as other oil exporting

countries. “A strong dollar and the lifting of subsidies have so

far limited supportive price effects on demand.” IEA estimates

global crude oil demand to average 92.4 million bpd in 2014

and 93.3 million bpd in 2015.

OPEC’s estimated 2015 oil demand growth is slightly high-

er at 930,000 bpd “mainly as a result of lower-than-expected

consumption in the OECD region,” the cartel said in its

December Monthly Oil Market Report. That is a downward

revision of 120,000 bpd from OPEC’s previous projection in

November. However, OPEC’s estimated average 2015 global

demand is lower than IEAs at approximately 91.13 million bpd.

The U.S. EIA’s December Oil Market Report projects 2015

see PIPELINE HEARINGS page 4

see DEMAND GROWTH page 4

http://www.petroleumnewsbakken.com

2 PETROLEUM NEWS BAKKEN • WEEK OF JANUARY 4, 2015

Petroleum News Bakkencontents

MOVING HYDROCARBONS

3 Samson says North Stockyard on hold

Non-op said low oil prices put breaks on drillingprogram in Slawson-operated Bakken project, but output expected to rise in 2015

COMPANY UPDATE

5 Enbridge fixes leak and restarts deliveries

BAKKEN STATS6 QEP and Statoil dominate week’s top 10 ND IPs

6 Bakken producers’ stock prices

7 IPs for ND Bakken wells, Dec. 23-29

8 North Dakota oil permit activity, Dec. 23-29

9 ND weekly county permit totals, Dec. 23-29

9 Top 10 Bakken wells by IP rate, Dec. 23-29

Get Carried Away.

Know your message is found in the right hands.

To advertise in Petroleum News Bakken, call907.522.9469 or visit PetroleumNewsBakken.com

www.PetroleumNewsBakken.com

LEGAL COLUMN3 Good faith purchase for value saves case

With a competing title claim, includingmineral transactions, a subsequent purchasermust make payment of valuable consideration

South Dakota holding hearings on ETP Bakken Crude pipeline

2015 global oil demand growth estimates get revised downward

ON THE COVEROne year ago

PNB looks back at year-end 2013 issues and what has and hasn’t changed

MT lease interest rises

Nominated acres for March auction up 8-fold and focused on Williston Basin

Bumbling and stumbling

Keystone XL gained little in 2014 and the case for approval weakens in Washington

BUILDINGSTRONGwanzek.com

We have a proven history of performing complete construction and maintenance services to major compressor stations, pump stations, meter stations, LNG facilities, tank farms, liquid handling facilities and NGL stations.

SIDEBAR, Page 1: January BLM auction limited to 7 ND tracts


l G O V E R N M E N T

l C O M P A N Y U P D A T E

Vol. 2, No. 37 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of December 29, 2013 • $2.50

page6

Burlington Resources wells fill firsttwo slots on weekly Top 10 IP list

VER

N W

HIT

TEN

PH

OTO

GR

APH

Y

Correction: The Dec. 22 edition of Petroleum News Bakken ran aphoto on the front page identified as construction at the DakotaPrairie refinery near Dickinson, but it was actually of theContinental Resources' Atlanta 14-well ECO-Pad in the Bakerfield in southwestern Williams County. Our apologies. Wegrabbed the wrong photo and missed it in proofing. The abovephoto is of construction of the Dakota Prairie refinery.

Next time, we’ll look twice

XL: pipe and rail?TransCanada considers rail as Keystone alternative from Canada to Cushing


I f TransCanada ever decides to throwin the towel on Keystone XL, the

announcement will be formal. But thesedays there are increasing reasons tointerpret comments by Chief ExecutiveOfficer Russ Girling that the companyis close to the breaking point with theObama administration.

In year-end interviews, he has disclosedTransCanada is in discussions with railroads andoil producers about the possibility of moving oilsands crude from Alberta to Cushing, Okla.,where it could enter the Gulf Coast pipeline, the

southern leg of XL that feeds Texasrefineries.

Girling also said Mexico’s plan toend its government monopoly on energydevelopment could open the way forTransCanada to add oil pipelines to twonatural gas delivery systems in Mexico.

In a less-than-subtle comment, hesaid TransCanada is unlikely to ever“stop pressing the pipeline option” tomove 830,000 barrels per day out of

Alberta and the North Dakota Bakken onKeystone XL.

“But there is a point in time at which we wouldconsider a rail option. If we need to bridge with

RUSS GIRLING

see KEYSTONE RAIL page 12

Optimizing developmentKodiak sets a lower 2014 Bakken capex as positive downspacing testing continues


Denver-based Kodiak Oil and GasCorp.’s board of directors has

approved a 2014 capital expenditure,capex, budget totaling $940 million, allof which will go into the Bakken-focused independent’s Williston Basinoperations.

Of the $940 million total capex, $890million is earmarked for the drilling and comple-tion of an estimated 100 Bakken and Three Forkswells, and the remaining $50 million is going intothe building of infrastructure as well as the acqui-sition of new, small acreages.

Along with other Williston Basin operators,

Kodiak has seen improvements in wellefficiencies. Kodiak’s average well costfor all of 2012 was approximately $12million per well. In the third quarter, itswell costs ranged between $9.2 millionand $9.5 million. The company project-ed costs to be even lower in the fourthquarter. The lower wells costs arereflected in the company’s 2014 capex,which is approximately $60 millionlower than its 2013 total capex of $1 bil-

lion. The company, however, plans to drill thesame number of wells.

“Our 2014 capital budget is a reflection of thisphilosophy and we will take a measured approachnext year as we continue to optimize our develop-

LYNN PETERSON

see KODIAK CAPEX page 11

Tightening industry rulesNew North Dakota regulations put gathering pipelines under state jurisdiction

By MAXINE HERRFor Petroleum News Bakken

North Dakota officials often boastof having some of the toughest oil

and gas rules in the nation. Now they’repoised to tighten the reins even more.

At the state’s Dec. 19 IndustrialCommission meeting, Department ofMineral Resources, DMR, DirectorLynn Helms brought revised administra-tive rules for the commission’s approval.

One particular rule change requires the state toregulate all gathering pipelines that carry oil,water, gas or carbon dioxide from the edge of the

facility, typically a well pad or tank bat-tery site, to a pipeline governed by thePublic Service Commission.

The new rules are a result of HouseBill 1333 from the 2013 legislative ses-sion, which includes a requirement foroil and gas pipeline companies to pro-vide the locations of these lines. Thelegislature directed the commission tocreate a system that will allow everypipeline since Aug. 1, 2011, to be regis-

tered in a state GIS map. The map data mustinclude the diameter, building material, pressure,fluid passing through, and burial depth of every

ALISON RITTER

see INDUSTRY RULES page 10

New Brunswick refinery raisedconcerns about Bakken crude oil

Irving Oil, whose New Brunswick refinery was the destina-tion for Bakken crude involved in the Lac-Megantic disaster inJuly, had previously outlined its concerns about the testing ofcrude oil it was receiving by rail.

In a presentation to a Crude Oil Quality Association confer-ence in Seattle, an Irving employee noted that crude testing at therefinery occurred after deliveries — “too late in the process toaddress any safety issues.”

An Irving spokesman declined to comment on the presenta-tion because of a federal investigation by the Royal CanadianMounted Police and Transport Canada into the Quebec derail-

ND gives Statoil green light onproduced water storage proposal

A pilot project near the Little Muddy River in WilliamsCounty, ND, could result in huge reductions in freshwaterand trucking needs throughout the oil patch.

At their Dec. 19 meeting, the state Industrial Commissionapproved a request by Statoil Oil and Gas to use double-wall,open-top tanks for storing produced water, an exception toadministrative rule that forbids storage in open receptaclesexcept in an emergency.

“If this is successful, it has the potential to reduce 14 to 15million gallons of freshwater needs per day and reduce trucktraffic from 900 to 250 semi loads per well,” Lynn Helms,director of the state’s Department of Mineral Resources,

Online bidding open to Jan. 6 on two NDTL O&G lease parcels

Online bidding opened on Dec. 23 on two adjacent oil and gasleases totaling 240 net acres (320 gross acres) in an existing andactive spacing unit in Billings County, N.D. Bidding will remainopen through Jan. 6. The Minerals Management Division of theNorth Dakota Department of Trust Lands is offering the leasesthrough its online auction provider EnergyNet.

The two un-leased tracts are part of a standup 1,280-acre unitwhere Continental Resources spudded a Three Forks test well inNovember. The successful bidder will participate in the well on a3/16ths royalty rate, and will have an option to participate in anauthorization for expenditure at a working interest of 18.75 per-cent.

see REFINERY CONCERNS page 9

see WATER PLAN page 9

see ONLINE BIDDING page 9

http://www.wanzek.com



By JANNELLE STEGER COMBSFor Petroleum News Bakken

On Dec. 22 the North Dakota Supreme Court

affirmed a District Court ruling on a quiet title in

McKenzie County, North Dakota. While the case did not

directly involve minerals, the ruling has application for

many oil and gas title cases.

History of caseIn January 1986, Norman and Mildred Dahl con-

veyed a 1.667 acre tract to Harry and Linda Chornuk,

but the deed was not recorded until June 24, 2010. On

June 17, 2005, after Norman Dahl passed away,

Mildred Dahl conveyed the same 1.667 acre tract by

warranty deed to Craig and Julie Nelson, along with

other adjacent land. That deed was recorded July 5,

2005.

In September 2010, the

Chornuks sued the Nelsons to

quiet title to the parcel and also

sought monetary damages for tres-

pass and conversion.

After a court trial, the District

Court quieted title in favor of the

Chornuks. The Chornuks mowed

the 1.667 acre parcel “three or

four times per year, planted trees

on the property, installed drip irri-

gation lines for the trees, installed flower boxes on the

property and performed other general maintenance.”

That conduct put the Nelsons on notice that someone

else had an interest in the property and that they should

have made further inquiry before purchasing the land

from Mildred Dahl.

Good faith purchaser for valueAfter failing to persuade the District Court of their

argument, the Nelsons unsuccessfully appealed to the

state Supreme Court. They argued that they had pur-

chased the property in good faith and for valuable con-

sideration, and because the Chornuks did not record

their deed until years after the Nelsons purchased the

property and recorded the deed, the Nelsons’ claim is

superior under North Dakota’s good faith purchaser

statute.

North Dakota Century Code 47-19-46 provides, “An

unrecorded instrument is valid between the parties

thereto and those who have notice thereof.” In order to

l L E G A L C O L U M N

Good faith purchase for value saves caseWith a competing title claim, including mineral transactions, a subsequent purchaser must make payment of valuable consideration

PETROLEUM NEWS BAKKEN • WEEK OF JANUARY 4, 2015 3

RENTAL

JANNELLE STEGERCOMBS

see LEGAL COLUMN page 5

l C O M P A N Y U P D A T E

Samson O&G says North Stockyard on holdNon-op said low oil prices put breaks on drilling program in Slawson-operated Bakken project, but output expected to rise in 2015

By STEVE SUTHERLINFor Petroleum News Bakken

Due to low oil prices, Australia-based Samson Oil

and Gas will see a suspension of drilling in its

Slawson Exploration-operated North Stockyard project

in Williams County, North Dakota, the company said in

a Dec. 15 operational update.

“With the completion of Ironbank 6 expected later

this week, Frontier 24 will be laid down and no further

drilling in the field is contemplated in light of the recent

slide in the oil price,” Samson said in the December

update.

Despite the drilling shutdown, Samson expects pro-

duction from North Stockyard to increase in early 2015.

The company anticipates that among its existing non-

op inventory, three wells will be fractured and clean-out

will be necessary on five wells that have been fractured.

“This means that eight wells will be brought on line

in the near term,” Samson said.

In November, the North Stockyard field saw an

increase in production as existing wells were returned to

production following a shut-in for safety and operational

reasons while infill development was undertaken, the

company said.

“We are expecting that the field will be largely on

stream in January 2015 as the infill development comes

to a close.”

Samson reported that total overall net company pro-

duction rose to 19,180 barrels of oil equivalent (639 boe

per day)in November, up from 8,030 boe (260 boepd) in

October. In the third quarter of 2014, the company’s net

production was 43,361 boe (481 boepd), down from

59,041 boe (656 boepd) in the second quarter of the year.

see PROJECT HOLD page 5

http://www.halconresources.com


Kay Cashman PUBLISHER & EXECUTIVE EDITOR

Mike Ellerd EDITOR-IN-CHIEF

Gary Park CONTRIBUTING WRITER (CANADA)

Maxine Herr CONTRIBUTING WRITER

Steve Sutherlin CONTRIBUTING WRITER

Rose Ragsdale CONTRIBUTING WRITER

Jannelle Steger Combs LEGAL COLUMNIST

Eric Lidji CONTRIBUTING WRITER

Ray Tyson CONTRIBUTING WRITER

Bighorn Engineering MAPPING/GIS

Mary Mack CEO & GENERAL MANAGER

Raylene Combs BAKKEN ADVERTISING EXECUTIVE

Ashley Lindly RESEARCH ASSOCIATE

Mark Cashman RESEARCH ASSOCIATE

Susan Crane ADVERTISING DIRECTOR

Bonnie Yonker AK / NATL ADVERTISING SPECIALIST

Steven Merritt PRODUCTION DIRECTOR

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Tom Kearney ADVERTISING DESIGN MANAGER

Heather Yates BOOKKEEPER & CIRCULATION MANAGER

Renee Garbutt CIRCULATION SALES

Shane Lasley IT CHIEF

Dee Cashman RESEARCH ASSOCIATE

ADDRESSP.O. Box 231647

Anchorage, AK 99523-1647

NEWSMIKE ELLERD

406.551.0815

[email protected]

CIRCULATION 907.522.9469

[email protected]

ADVERTISING 907.522.9469

[email protected]

FAX NUMBER907.522.9583

OWNER: Petroleum Newspapers of Alaska LLC (PNA)Petroleum News Bakken • Vol. 3, No. 38 • Week of January 4, 2015

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to: P.O. Box 231647 Anchorage, AK 99523-1647)

Subscription prices in U.S. — $98.00 1 year, $176.00 2 years • Canada — $185.95 1 year, $334.95 2 years Overseas (sent air mail) — $220.00 1 year, $396.00 2 years

POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647.

www.PetroleumNewsBakken.com

Several of the individualslisted above are

independent contractors

A Proud Past—A Bright Future NYSE: QEP www.qepres.com

independent crude oil and QEP Resources is a leading

independent crude oil and QEP Resources is a leading

A Proud Past—A Bright Future NYSE: QEP www


continental United States.prolific resource plays in the operations in some of the most production company withnatural gas exploration and independent crude oil and

.qepres.com

continental United States.prolific resource plays in the operations in some of the most production company withnatural gas exploration and


Serving the Oil & Gas Industry since 1971

100% ESOP-Owned

Upstream | Midstream | DownstreamSafety �� Quality �� Experience �� Leadership �� Resources

Value to every client on every project ANCHORAGE, AK

509 W. 3RD AVE BELLINGHAM, WA 1675 W. Bakerview

BILLINGS, MT 1015 Broadwater

CONCORD, CA 5600 Imhoff Dr.

pipeline route.

The pipeline is a joint venture between

Energy Transfer, which is a general part-

ner of Sunoco Logistics, and Phillips 66,

with Energy Transfer holding a 75 per-

cent interest and Phillips 66 holding 25

percent. The 1,134-mile project would

have an initial capacity of 450,000 bar-

rels per day with an expansion capacity

of up to 570,000 bpd. The pipeline has

six proposed loading terminals in

McKenzie, Mountrail and Williams

counties, North Dakota. Plans also

include Bakken rail loading facilities.

At Patoka, the pipeline would connect

with the Energy Transfer Crude Oil

pipeline, a trunkline conversion that runs

to Sunoco and Phillips 66 facilities on the

Gulf Coast at Nederland, Texas. Energy

Transfer estimates the combined cost for

the two pipelines at between $4.8 billion

and $5 billion.

Energy Transfer says it expects the

pipeline to be in service in the fourth

quarter of 2016.

—MIKE ELLERD

global oil demand at 92.3 million bpd,

essentially splitting the difference between

IEA’s and OPEC’s projections. EIA’s pro-

jection is a downward revision of 200,000

bpd from its November projection “based

on weaker global economic growth

prospects for next year.”

Global production and supplyOPEC estimates the global crude oil

supply at 92.69 million bpd in November;

however, OPEC’s production actually

declined in November, falling by 390,000

bpd. OPEC put its share of crude oil in the

global market at 32.4 percent which puts

the cartel’s average production at approxi-

mately 30.03 million bpd. OPEC’s decline

was partially offset by production from

non-OPEC countries which increased in

November by 200,000 bpd. OPEC’s 32.4

percent of global supply puts non-OPEC

supply in November at approximately

62.66 million bpd.

IEA put global crude oil supplies higher

than OPEC at 94.1 million bpd in

November, down 340,000 bpd from

October, due primarily to lower OPEC sup-

plies. IEA also said increasing U.S. pro-

duction could increase non-OPEC produc-

tion to record growth in 2014, but that

growth is expected to slow in 2015.

“Surging US light tight oil supply looks set

to push total non-OPEC production to

record growth of 1.9 mb/d this year, but the

pace is expected to slow to 1.3 mb/d in

2015.”

With OPEC announcing in November

that it will maintain its current target pro-

duction of 30 million bpd, the U.S. EIA

expects that “global liquid fuels supply will

continue to outpace consumption.” The

result, according to EIA, will be an average

building of stocks of 400,000 barrels per

day.

However, even with OPEC’s decision to

maintain production, EIA anticipates its

production will decline in 2015. EIA puts

OPEC’s 2013 production at 29.9 million

bpd, but anticipates a decline of 100,000

barrels per day over 2014 and an addition-

al decline of 200,000 bpd in 2015. And EIA

expects OPEC’s largest producer, Saudi

Arabia, to trim its production in 2015.

“EIA projects that Saudi Arabia will cut

production below its current level of 9.6

million bbl/d amid high non-OPEC supply

growth, but maintain output above 9.0 mil-

lion bbl/d through 2015.”

EIA estimates non-OPEC production to

grow by 1.9 million bpd in 2014 and by

another 800,000 bpd in 2015 with the U.S.

making the largest contribution to those

increases. EIA projects non-OPEC supply

to increase by 1.6 million bpd in 2014 and

1.0 million bpd in 2015.

U.S. crude oil production averaged 9

million bpd in November according to

EIA, an increase of 100,000 bpd over

October production. EIA has revised

downward its 2015 domestic crude produc-

tion estimate by 100,000 bpd from the

November projection. For 2015, EIS proj-

ects U.S. production to average 9.3 million

bpd.

—MIKE ELLERD

continued from page 1

PIPELINE HEARINGS


DEMAND GROWTH

http://www.qepres.com

http://www.anvilcorp.com


Made in the USA.

1.866.643.1010

Easy to disassemble and relocate. Low in cost per square foot. Store and access equipment and supplies. Clearance to operate machinery.

Abundant natural light reduces energy costs.

ClearSpan.com/ADPN1.866.643.1010

CLEARSPAN CREATES UNPARALLELEDWORKSPACE FOR OIL AND GAS PROFESSIONALS

7-YEAR FINANCINGZERO DOWN, NO INTEREST & PAYMENTS

- FOR UP TO ONE FULL YEAR -

MOVING HYDROCARBONSEnbridge fixes leak and restarts deliveries

Enbridge said it was quickly able to restart crude oil deliveries to customers,

including those in the United States Midwest, after a leak on Dec. 18 of 1,350 barrels

within its terminal in north Regina, Saskatchewan.

The company said in a statement that it would “continue to work with all shippers,

receivers and feeder facilities to manage any

potential impacts to delivery schedules.”

The incident did not require the declara-

tion of a force majeure, which would have

excused Enbridge from meeting its commit-

ments because of events beyond its control,

the company said.

It also said Canada’s National Energy

Board was on the site and had not expressed

any concerns about Enbridge’s restart plan

which involved the use of Line 4 — a

796,000-barrel per day system that carries

heavy, medium and light sour crude from Edmonton, Alberta, to Superior, Wisconsin.

The Transportation Safety Board of Canada also sent a team to the Regina site, but

has yet to indicate any findings.

An Enbridge spokesman said any spill is viewed as “significant” by the company

and a volume of the size involved “is something that we would want to take very seri-

ously and look carefully at what the causes might be so that we can ensure this par-

ticular type of scenario doesn’t occur again in our system.”

He said it took up to 11 minutes between the time a leak was reported and when

the line was shut down.

An initial investigation by Enbridge pointed to a valve failure as the likely cause.

About 30 Enbridge employees and contractors were involved in shutting off the

leak and cleaning up the site.

The company said the spill occurred entirely within the pumping station and was

contained on-site in designated catchment areas.

Enbridge said there were no impacts to the public, wildlife or waterways, although

nearby residents and businesses might have detected “a faint odor.”

In a letter to the U.S. State Department in June, Enbridge said it was building a con-

nection between Line 4 and Line 67 so that shipments could be diverted in the event

of a prolonged disruption.

Lipow Oil Associates said an extended shut down of Line 4 would have forced

Midwest refiners to access Gulf Coast supplies and surplus crude in storage at

Cushing, Oklahoma, by using Marathon Oil’s Capline line system.

—GARY PARK

Lipow Oil Associates said anextended shut down of Line 4would have forced Midwest

refiners to access Gulf Coastsupplies and surplus crude in

storage at Cushing, Oklahoma,by using Marathon Oil’s

Capline line system.

13 wells on holdSamson said its infill development

plan for North Stockyard consists of eight

Middle Bakken wells that have been

drilled and 22 Three Forks wells of which

nine have been drilled. Eight of the nine

Three Forks wells were drilled in the first

bench, and one well was drilled in the

second bench.

“Given the infill development curtail-

ment there will remain an undrilled bal-

ance of 13 wells.”

At the Tofte 1 pad, the Billabong 2-13-

14HBK well has been drilled to a lateral

length of 6,147 feet, with fracking sched-

uled for January.

The 6,375 foot lateral Sail and Anchor

4-13-14HBK, the 8,383 foot lateral

Blackdog 3-13-14 HBK well, and the

7,578 foot lateral Little Creature 3-15-

14HBK well have been shut-in for the

frack program. The three wells have

turned in a cumulative production of

54,978 barrels of oil, 109,878 barrels, and

72,284 barrels respectively.

The 6,740-foot lateral Tooheys 4-15-

14HBK and the 6,360 foot lateral

Coopers 2-15-14HBK are on production

with cumulative production of 62,805

barrels and 53,476 barrels respectively.

All of the Tofte pad wells are targeting

the Bakken.

At the Matilda Bay pad, the 4,215 foot

lateral Matilda Bay 2-15-HBK and the

4,215 foot lateral Matilda Bay1-15-HBK

are on production, with 29,159 barrels

and 8,979 barrels of cumulative produc-

tion from the Bakken formation.

At the TF North pad, the 7,211 foot

lateral Bootleg 4-14-15TFH and the

7,495 foot lateral Bootleg 5-14-15TFH

are on production, with 41,178 barrels

and 31,909 barrels of cumulative produc-

tion from the Three Forks, respectively.

Flowback has commenced at the

7,466-foot lateral Ironbank 4-14-13TFH

and the 7,495 foot lateral Ironbank 5-14-

13TFH. Both wells are awaiting a

cleanout from a coiled tubing unit.

At the TF South pad, fracking has been

completed on the 6,867 foot lateral

Bootleg 6-14-15TFH, the 6,973 foot lat-

eral Bootleg 7-14-15TFH and the 6,771

foot lateral Bootleg 8-14-15TFH.

Drilling is completed on the 7,458 foot

lateral Ironbank 7-14-13TFH.

As of mid-December, lateral drilling

was under way at 18,464 feet on the

Ironbank 6-14-13TFH, which will have a

7,434-foot lateral.

At the Continental Resources-operated

Rainbow Project in Williams County, the

9,558 foot lateral Gladys 1-20 H was

flowing with 30,781 barrels cumulative

production to date. l


PROJECT HOLD

have protection of the good faith pur-

chaser statute, the subsequent purchaser

must buy the property in good faith and

for valuable consideration. This case

hinged on whether the Nelsons were

good faith purchasers or if they had

notice of the Chornuks’ interest in the

property.

Good faith requires “an honest inten-

tion to abstain from taking any unconsci-

entious advantage of another even

through the forms or technicalities of

law, together with an absence of all infor-

mation or believe of facts which would

render the transaction unconscientious.”

The Nelsons live about one-half mile

north of the property, and they used a

road in front of the parcel to get to their

home. “Craig Nelson testified he drives

past the disputed property daily and

sometimes multiple times per day, he saw

the Chornuks mowing the grass and

watering the trees on the property and he

knew Dahl was not using the property

when he purchased it.”

While this parcel excepted minerals

from the Chornuk deed, the principles

apply to many contested cases involving

minerals in North Dakota. Good faith

purchase for value arguments are often

the best defense for mineral buyers or

lessees who lease minerals that have title

defects. In addition to paying actual valu-

able consideration, a party claiming to be

a good faith purchaser must not have

actual or constructive notice of the

defect. Constructive notice means that a

purchaser obtains information that would

make a prudent person investigate the

defect further.

Stray deeds and leases are often the

most common type of document that

would cause a prudent person to inquire

further. In many due diligence projects, a

company may wish to save time and

money by obtaining a complete chain of

title only up until the seller or lessor

obtains title and then omit any document

except those specifically signed by the

seller. The risk with that type of inquiry

is that those recorded documents, which

would give a purchaser notice of a claim,

would be missed. l


LEGAL COLUMN

What's the big attraction?

A. an industry institutionB. quality, accurate reportingC. attractive, readable designD. 93 percent market saturation

To advertise in Petroleum News Bakkencall Susan Crane at 907-770-5592, BonnieYonker at 425-483-9705, Renee Garbutt at 907-522-9469. or Raylene Combs at 209-290-5903.

Subscribe at:www.PetroleumNewsBakken.com


http://www.clearspan.com/ADPN


BAKKENStats● B A K K E N C O M M E N T A R Y

QEP and Statoil dominate week’s top 10 ND IPs

MIKE ELLERDPetroleum News Bakken

Three operators filled this week’s top 10

North Dakota initial production, IP, list

with QEP and Statoil bringing in nine of

the top 10 24-hour IPs reported between

Dec. 23 and 29 for North Dakota Bakken

wells. Marathon Oil was the other operator

making this week’s list (see pages 7 and 9).

For the 20th time in 2014, a Statoil well

came in with the highest reported weekly

IP, 2,980 barrels from a middle Bakken

well in the Stony Creek field in Williams

County (see map, this page). In addition,

two other wells on the same pad, both

Three Forks wells, made the top 10 list, one

in the No. 2 spot at 2,439 barrels and the

other in the No. 9 spot at 1,896 barrels.

While not topping the list, QEP Energy

had six of the top 10 IP wells, all in the

Grail field in far eastern McKenzie County.

Four of those six are common-pad wells

that came in with the Nos. 4 through 7 IPs

with volumes ranging from 2,163 to 2,245

barrels. The highest of those four IPs came

from a Three Forks well while the other

three are middle Bakken wells.

Two nearby, common-pad QEP wells

filled the No. 8 and the No. 10 spots, both

middle Bakken wells with IPs of 1,664 and

2,096 barrels.

Last but not least on the week’s IP list is

Marathon Oil, which had the No. 3 IP from

a middle Bakken well in the Bailey field in

Dunn County which produced 2,361 bar-

rels in the first 24 hours on production.

ND permittingA total of 43 drilling permits were

issued in North Dakota between Dec. 23

and 29, down from the 69 permits issued

the previous week.

Of those 43 permits, 17 each were

issued in McKenzie and Mountrail coun-

ties, with four issued in Divide County, two

each in Stark and Williams counties, and

one in Dunn County (see pages 8 and 9).

Receiving the most permits was

Continental Resources which was issued

nine permits for the Elm Tree field in

McKenzie County and four for the Sanish

field in Mountrail County for a total of 13

permits.

EOG was issued seven permits for the

Parshall field in Mountrail County. Hess

was issued four permits for the Robinson

Lake field in Mountrail County, SM

Energy received four permits for the West

Ambrose field in Divide County, and

Whiting was issued two permits for the

Bully field in McKenzie County and two

for the Bell field in Stark County. XTO

received three permits for the Siverston

field in McKenzie County.

Burlington Resources, Murex, Oxy,

Slawson and Triangle also received per-

mits.

Only five permits were cancelled

between Dec. 23 and 29, down from the 16

permits cancelled the previous week and

the 55 cancelled two weeks ago. ●

BIG

HO

RN

EN

GIN

EER

ING

Company Exchange Symbol Closing price Previous Tues.

Abraxas Petroleum Corporation NASDAQ AXAS $2.94 $3.29

American Eagle Energy Corporation NYSE AMZG $0.66 $0.60

Arsenal Energy USA, Inc. TSE AEI $6.88 $6.86

Baytex Energy USA Ltd. NYSE BTE $16.67 $17.18

Burlington Resources Co., LP (ConocoPhillips) NYSE COP $69.93 $71.05

Condor Petroleum TSE CPI $0.18 $0.17

Continental Resources, Inc. NYSE CLR $38.09 $40.26

Crescent Point Energy US Corporation TSE CPG $27.22 $28.48

Denbury Onshore, LLC NYSE DNR $8.16 $8.33

Emerald Oil, Inc. NYSEMKT EOX $1.16 $1.28

Enerplus Resources USA Corporation NYSE ERF $9.61 $10.18

EOG Resources, Inc. NYSE EOG $92.70 $96.41

Fidelity Exploration & Production (MDU) NYSE MDU $23.93 $23.21

Halcon Resources NYSE HK $1.73 $2.04

Hess Corporation NYSE HES $74.13 $75.36

Kodiak Oil and Gas (USA), Inc. NYSE KOG $6.56 $6.56

Legacy Reserves Operating LP NASDAQ LGCY $11.41 $12.35

Marathon Oil Company NYSE MRO $28.42 $28.70

Mountain Divide, LLC (Mountainview Energy) CVE MVW.V $0.09 $0.14

Newfield Production Company NYSE NFX $27.29 $28.25

Northern Oil and Gas NYSE NOG $5.71 $6.34

Oasis Petroleum North America NYSE OAS $16.31 $17.71

Oxy USA, Inc. (Occidental Petroleum) NYSE OXY $81.40 $82.90

PetroShale Inc. CVE PSH $1.30 $1.25

QEP Energy Company YSE QEP $19.70 $19.77

Samson Resources Company (KKR & Co ) NYSE KKR $23.23 $22.90

SM Energy Company NYSE SM $38.60 $39.18

Statoil Oil and Gas LP NYSE STO $17.77 $18.25

Triangle USA Petroleum Corporation NYSE TPLM $4.97 $6.15

Whiting Oil and Gas Corporation NYSE WLL $33.32 $35.53

WPX Energy Williston, LLC NYSE WPX $11.45 $11.93

XTO Energy, Inc. (ExxonMobil) NYSE XOM $93.02 $94.59

Bakken producers’ stock pricesClosing prices as of Dec. 30 along with those from previous Tuesday

North DakotaThe best list for North Dakota is updated daily by the North Dakota Oil and Gas Division at www.dmr.nd.gov/oilgas/riglist.asp

SaskatchewanWeekly drilling activity report from the government of Saskatchewan: www.economy.gov.sk.ca/Daily-Well-Bulletin-Weekly-Drilling-Reports

ManitobaWeekly drilling activity report from the government of Manitoba: www.manitoba.ca/iem/petroleum/wwar/index.html

PHOTO COURTESY CONTINENTAL RESOURCES

Looking for a rig report?


IPs for ND Bakken wellsDec. 23-29, 2014

This chart contains initial production rates, or IPs, for active wells that were filed as completed with the state of North Dakota from Dec. 23-29, 2014 in the Bakken petroleum system,which includes formations such as the Bakken and Three Forks. The completed wells that did not have an available IP rate (N/A) likely haven’t been tested or were awarded confidential(tight-hole) status by the North Dakota Industrial Commission’s Department of Minerals. This chart also contains a section with active wells that were released from confidential statusduring the same period, Dec. 23-29. Again, some IP rates were not available (N/A). The information was assembled by Petroleum News Bakken from NDIC daily activity reports and othersources. The name of the well operator is as it appears in state records, with the loss of an occasional Inc., LLC or Corporation because of space limitations. Some of the companies, ortheir Bakken petroleum system assets, have been acquired by others. In some of those cases, the current owner’s name is in parenthesis behind the owner of record, such as ExxonMobilin parenthesis behind XTO Energy. If the chart is missing current owner’s names, please contact Ashley Lindly at [email protected].

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GDV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL: McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams

see ND IP page 9


North Dakota oil permit activityDec. 23-29, 2014

Abbreviations - Following are the abbreviations used in the report and what they mean:FNL = From North Line | FEL = From East LineFSL = From South Line | FWL = From West Line

see ND PERMITS page 9


Top 10 Bakken wells by IP rateDec. 23-29, 2014

ND weekly county permit totalsDec. 23-29, 2014

Note: This chart contains initial production rates, or IPs, from the adjacent IP chart for active wells that werefiled as completed with the state of North Dakota from Dec. 23-29, 2014 in the Bakken petroleum system, aswell as active wells that were released from tight- hole (confidential) status during the same period. The welloperator’s name is on the upper line, followed by individual wells; the NDIC file number; well name; field;county; IP oil flow rate in barrels of oil.

—Ashley Lindly | [email protected]

ND IP continued from page 7

ND PERMITS continued from page 8

* Note: The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the following fields produce from the Bakken pool; Big Bend, Dublin, Little Knife, Painted Woods, Parshall,Robinson Lake, Sand Creek, Sanish, Siverston, and West Ambrose.

—Ashley Lindly | [email protected]


ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

Bakken Players

Oil Patch Bits

AbutecAlaska TextilesAmerican Association of Railroads (AAR)Anvil Corporation..................................................4Arctic CateringBeaver Creek ArchaeologyBluetickBrock WhiteBTL LinersCESI ChemicalCity of Grand Forks, NDClearSpan Fabric Structures..................................5Cruz Energy Services LLC (A CIRI Co.)CST StorageD&S FactorsDakota LandingDAWA Solutions GroupDeister, Ward & Witcher, Inc.DET-TRONICSDiamond R Enterprises .........................................3E3 Environmental, LLC

Empire Oil CompanyEnviron Corp.Fortis Energy ServicesFour Seasons EquipmentFutarisHalcon Resources ..................................................3HMG Automation, Inc.Kilo Technologies Ltd.Lister IndustriesLounsbury & AssociatesLT EnvironmentalLyndenM SPACEMarmit PlasticsMcAda Drilling Fluids Inc.Midwest Industrial SupplyMiller Insulation Co.MT Rigmat LLCMuth Pump LLCNetzsch Pumps North AmericaNorth Dakota Petroleum Council

North Slope Telecom (NSTI)Northern Electric Inc.Northern Oilfield Services Inc.Northwest Linings & GeotextileOasis PetroleumOilfield ImprovementsPacific TorquePercheron, LLCPetroleum News BakkenPetroShalePolyguard ProductsQEP Resources.......................................................4Quality MatR360 Environmental SolutionsShelterLogicTenCateTrinity Health Occupational MedicineUmiaqUnit Drilling CompanyVactor ManufacturingWanzek Construction ............................................2

NDPC announces $187,000 in 2014 year-end donationsThe North Dakota Petroleum Council and its board of directors presented donations

Dec. 11 totaling $187,000 to six charitable organizations, including the State HistoricalSociety of North Dakota Foundation, Village Family Services Center, Dolly Parton’sImagination Library, the Dakota Heritage Foundation, Lewis and Clark Fort MandanFoundation and the Children’s Museum of Minot. Funds were donated from revenues gen-erated by the Williston Basin Petroleum Conference in May and the Oil Can! Fishing Derbyheld each summer.

The ceremony also marked the completion of the NDPC’s 1st Annual Fuel Food andFood Drive, which collected more than 5,360 pounds of food for western North Dakotafood pantries and 589 toys for Toys for Tots to deliver to underprivileged children in west-ern North Dakota.

“Having a positive impact in our communities continues to be a priority for us and ourmembers,” said Ron Ness, president of the NDPC. “Companies have done so much on anindividual basis, but we wanted to come together this holiday season through the FuelFood and Fun Drive to make a real impact and bring joy and resources to those less fortu-nate.”

Since 1952, the Petroleum Council has been the primary voice of the oil and gas indus-try in North Dakota. For more information, go to www.ndoil.org.

CO

URT

ESY

ND

PC

issues that continued from 2013 and developed through

2014. And then there were some industry-related issues

that didn’t change at all, and the one that stands out is the

Keystone XL pipeline.

The top story on the front page of the Dec. 29, 2013,

edition was titled “XL: pipe and rail?” and reported that

TransCanada was considering a rail option to the

Keystone XL pipeline as an attempt to keep alive the

project intended to move oil sands crude from Alberta —

and pick up Bakken crude along the way — to the south-

ern leg of the Keystone pipeline at Cushing, Oklahoma

with options on to the Gulf Coast.

One year later, and six years after the project began

the permitting process, Keystone XL remains mired in

politics and is no closer to approval at the beginning of

2015 than it was at the end of 2013 (see related story on

page 1).

ND pipeline regulationThe second main story on the front page of the Dec.

29, 2013, edition reported on the North Dakota Industrial

Commission considering a change to the state’s adminis-

trative rules giving the commission the authority to reg-

ulate all crude oil, natural gas, water and carbon dioxide

gathering pipelines from wellhead facilities to transport

pipelines regulated by the state’s Public Service

Commission.

One year later, gathering pipelines have been under

the state’s regulatory authority for nine months. The new

rules were the result of HB 1333 that was passed in the

2013 legislature and directed the Industrial Commission

to require all gathering pipeline systems installed after

Aug. 1, 2011, to register with the state and provide infor-

mation including GIS data and detailed construction

information. Those rules gave the Department of

Mineral Resources’ Oil and Gas Division regulatory

authority over some 18,000 miles of existing gathering

pipelines and an anticipated 30,000 miles of gathering

pipe expected to be constructed in the full development

of the Bakken play. The rules make North Dakota the

only U.S. state to adopt such rules.

Kodiak ceased to existenceThe third main story on the front page of the last 2013

edition was a company update on Bakken-focused

Kodiak Oil and Gas, whose board of directors had just

approved a $940 million capital expenditure budget for

2014. The story reported that Kodiak had an active hedg-

ing program with more than 26,000 barrels per day of

production — approximately 60 percent of the compa-

ny’s estimated 2014 Bakken output — hedged at an aver-

age price of $93.29 per barrel (see discussion on crude

oil prices below). Also in the story was coverage of

Kodiak’s 2014 production guidance, which put Bakken

output at 42,000 to 44,000 barrels of oil equivalent per

day as well as downspacing pilots the company was con-

ducting in its core acreage in McKenzie and Williams

Counties.

One year later Kodiak no longer exists, having been

acquired by Whiting Petroleum Corp. in a transaction

first announced in July and finalized in December. That

move elevated Whiting past both Hess Corp. and

Continental Resources as the Williston Basin’s top

Bakken oil producer averaging 127,448 bpd in October.

At the end of 2013, Kodiak ranked as North Dakota’s

seventh largest Bakken producer averaging 42,928 bpd.

Prior to its acquisition by Whiting in late 2014, Kodiak

ranked as the 10th largest producer averaging 51,286

bpd.

Bakken crude conditioningA brief ran on page 1 reporting concerns that a

Canadian refinery in New Brunswick had about potential

risks associated with Bakken crude oil. Those concerns

had been voiced prior to the July 2013 rail disaster at

Lac-Megantic, Quebec.

The previous week in the Dec. 22, 2013, edition, two

front page stories reported on the safety of transporting

Bakken crude via rail, one about the Canadian transport

ministry elevating the hazardous designation of Bakken

crude, and the other about the U.S. Pipeline and

Hazardous Materials Safety Administration considering

mandatory new rail tank car standards.

One year later a lot has changed about how Bakken

crude is viewed from a transportation safety standpoint.

Following considerable debate among industry and gov-

ernment, including a study of Bakken crude properties

commissioned by the North Dakota Petroleum Council,

the Industrial Commission adopted new rules which will

go into effect on April 1, 2015, requiring all Bakken

crude oil to be “conditioned” to reduce the vapor pres-

sure to below 13.7 pounds per square inch prior to trans-

port from the well pad.

Throughout 2014, Transport Canada unfolded a series

of new regulations including hazardous materials label-

ing; tougher tank car safety rules; and requiring railroads

to conduct risk assessments, develop emergency

response plans and enhance security of parked trains.


A LOOK BACK

see A LOOK BACK page 11


Department had issued a preliminary sign that approval

and support for the project among Americans had

remained robust.

Instead, Obama has portrayed the pipeline as a con-

tributor to climate change.

He is now using the term “tar sands” rather than “oil

sands” and persists in making a public case that XL

crude would come largely from Canada, cross the United

States and end up in markets beyond North America —

a claim that has caused TransCanada Chief Executive

Officer Russ Girling to accuse Obama of engaging in

“pure fabrication.”

There were observers who thought Obama might

seize a chance to dampen some Republican momentum

heading into mid-term elections and approve the

pipeline, but that was not to be.

As the year progressed Obama sounded progressively

more negative, diminishing the chances that he will issue

a Presidential Permit during his final two years in office.

Obama’s messageObama’s well-honed message on XL gets delivered

whether he is quizzed by reporters at a pre-holiday news

conference at the White House or by the quirky host on the

Colbert Report.

“There is very little impact, nominal impact, on U.S.

(gasoline) prices — what the average American cares

about — by having this pipeline come through (U.S. terri-

tory).

“It’s 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 and it’s not even going to be a

nominal benefit to U.S. consumers.”

He also scaled down his previous estimates of XL’s

prospects of creating manufacturing and construction

jobs, rating the $8 billion venture as a “blip” for the U.S.

economy.

“The construction of the pipeline itself will create prob-

ably a couple of thousand jobs — those are temporary

jobs,” he said.

“There’s probably some additional jobs that can be cre-

ated in the refining process down in the Gulf. Those aren’t

insignificant ... but when you consider what we could be

doing if we were rebuilding our roads and bridges around

the country, we would probably create hundreds of thou-

sands of jobs.”

Obama also said claims that XL would wean the U.S.

off Venezuela, Nigerian and Middle East oil have been

exaggerated.

“There’s been this tendency to really hype this thing as

some magic formula to what ails the U.S. economy. It’s

hard to see on paper where exactly they are getting that

information from.”

Industry doesn’t buy itHaving absorbed Obama’s latest assessment of XL,

TransCanada and the American Petroleum Institute were

left to reiterate their usual defenses of the project.

TransCanada said in a statement that moving crude on

XL, apart from providing “thousands” of construction

jobs for American men and women, would be “safer, pro-

duce fewer (greenhouse gas) emissions to get the product

to a refinery and would be a much more efficient way to

move these crude oils over longer distances.”

The API stressed that at least 2,400 U.S. companies in

49 states are already involved directly or indirectly in the

oil sands.

“The president continues to talk about enhancing this

nation’s infrastructure, yet for more than six years he has

delayed the biggest shovel-ready infrastructure project out

there: The Keystone XL pipeline.

“The president continues to ignore the findings of his

own State Department and continues to side with the

fringe anti-Keystone XL minority, whose only goal is to

shut down fossil fuel development altogether — and the

jobs, economic growth and energy security that comes

with it.”

Matt Dempsey, a spokesman for the pro-pipeline Oil

Sands Fact Check, said Obama “doesn’t seem to under-

stand that oil from Canada is helping provide relief at the

pump — right now.”

Canada’s Foreign Minister John Baird said only that he

would press with efforts to persuade Washington of XL’s

benefits, while continuing to “promote Canada’s interest.”

But Prime Minister Stephen Harper, who once said that

approving XL was a “no-brainer” and that he would not

take a “no” from Obama as an answer, has quieted on the

project while facing pointed criticism at home that he has

misread Obama’s resolve.

The carbon cardThe Canadian government has also come under fire for

failing to introduce strong environmental measures to

reduce the carbon output from the oil sands.

Alberta Premier Jim Prentice, who was elected to lead

his province only four months ago, is not helping matters

by indicating that long-promised rules to cut greenhouse

gas emissions need much more work to balance environ-

mental performance and energy-sector competitiveness.

He said the existing regulations, which feature a C$15

per metric ton levy for carbon emissions from major

industries, will remain in force through June 2015 — nine

months behind schedule.

“I can tell you there is a lot of hard work going on,”

Prentice said. “The policy isn’t yet in the condition that I

want to have it.”

That stalling undermines Alberta’s efforts to lobby the

Obama administration and Congress on the benefits of XL

and to counter those who say the existing carbon levy is

too low and does not cover all of the emitting facilities, or

impose reductions as the oil sands sector expands — fac-

tors that will weaken the message Prentice hopes to deliv-

er in Washington in January.

But Prentice is undaunted, promising that Alberta will

be in the forefront of environmental initiatives provided

other provinces join its efforts.

Amid all of this confusion and uncertainty there seems

little reason for hope that XL will be any closer to resolu-

tion a year from now, other than possibly being closer to

oblivion. l

The U.S. government has not taken final action on

mandatory tank car standards. The U.S. Department of

Transportation released details of proposed new rules

for crude-by-rail in July, but although nothing has yet

been finalized. In mid-December, Sen. Charles

Schumer, D-New York, renewed a call for phasing out

or retrofitting the older model DOT-111 tank cars.

North Dakota flaringA story on natural gas flaring ran in the Dec. 22,

2013, edition and reported that the latest data available

from DMR put flaring in the state at 28 percent, down

from the 29 percent flared in September 2013. At the

time, Hess Corp.’s Tioga gas processing plant was

undergoing expansion and was out of operation, and

construction was continuing on Oneok’s Divide

County gathering system.

One year later the Hess plant is operating (although

not yet at capacity due to a pipeline issue), Oneok’s

Divide system is nearing completion, two more Oneok

gas plants have gone online, gas gathering connections

are ongoing, and new regulations are in effect requiring

operators to have approved gas capture plans. The

result has been a decline in flaring in the state to 22 per-

cent in October (78 percent gas capture), slightly ahead

of the state’s Jan. 1, 2015, target of 77 percent gas cap-

ture (23 percent flaring). North Dakota’s goal is to fur-

ther increase gas capture throughout 2015 reaching 85

percent capture (15 percent flaring) by Jan. 1, 2016.

Land and leasingNominations for the Montana Department of

Natural Resources and Conservation’s March 2014 oil

and gas lease auction had been released in late

December and a story on those nominations ran in the

Dec. 29, 2013, edition. A total of 6,012 state acres in 11

tracts were nominated for that auction and the focus of

activity was outside of Montana’s portion of the

Williston Basin. The largest acreages were in Powder

River and Big Horn counties in southeast Montana and

in Blaine County in north-central Montana, although

there were a few nominated tracts in Richland and

Sheridan counties in northeast Montana. At the time,

the nominated acreage was the fourth lowest total in a

DNRC auction since December 2008 when just 3,333

acres were nominated.

One year later, 35,292 acres in 78 tracts were nomi-

nated for DNRC’s March 2015 auction, the largest

number of acres nominated since June 2012. And most

of those tracts lie within the Williston Basin province

(see story, page 1).

Dakota Prairie refineryThe weekly photograph in the upper left of page 1

was an aerial shot showing construction of the Dakota

Prairie refinery, the 20,000 bpd diesel topping joint

venture between MDR Resources and Calumet

Specialty Products Partners. The Dakota Prairie is con-

sidered a “greenfield” refinery because it was built on

undeveloped property and is the first such refinery built

in the U.S. since 1976.

One year later that refinery is nearing completion as

units are being commissioned with production ramping

up in early 2015.

And there are oil pricesA brief ran on the front page of the Dec. 22, 2013,

edition under the headline “North Dakota Light Sweet

still in a Midcontinent price slump.” The importance of

that story depends on what one considers “price

slump.”

In reporting on crude oil prices in late 2014,

Petroleum News Bakken had pointed out that the price

of North Dakota Light Sweet as posted on the Flint

Hills Resources market is typically 5 to 10 percent

below what the state of North Dakota realizes for tax

revenues. Through October 2013, NDLS pricing at

Flint Hills had generally paralleled Brent and WTI

pricing trading at a discount of approximately $9 to

WTI; however, in early November, the spread between

NDLS and WTI widened and in the last two weeks of

2013, NDLS traded at a discount of more than $20 to

WTI.

But those were relative prices. At the end of

December 2013, NDLS was trading on the Flint Hills

market in the $74 to $75 per barrel range, WTI was

trading in the $98 to $100 range and Brent was trading

$110 to $112. It’s all relative.

One year later, WTI was trading in the $53 to $55

range, Brent was trading between $57 and $59, and on

the Flint Hills market NDLS was trading in the $35 to

$37 range.

North Dakota productionPetroleum News Bakken also reported preliminary

October 2013 North Dakota production data in the Dec.

29, 2013, edition, which had increased by more than

8,000 barrels from September 2013 production averag-

ing approximately 941,000 bpd for the month (final

data put that increase at more than 11,000 barrels

between September and October 2013). At the time,

DMR Director Lynn Helms was expecting a larger

increase in production following increases of approxi-

mately 21,000, 39,000 and 51,000 bpd in each the three

previous months and referred to the approximately

8,000 bpd increase in October 2013 as “lackluster.”

That slowdown in growth was attributed to adverse

weather conditions that had been plaguing the state.

Fast-forward to October 2013 when North Dakota

saw negative production growth, down more than

4,000 bpd from September at an average of just over

1.18 million bpd. That contraction in growth was

attributed to both a depressed crude oil market and a

curtailment resulting from producers working to meet

the state’s new gas capture requirements before bring-

ing wells on production.

2014 was a rough and tumble year for the oil and

gas industry, not only in the Bakken but throughout

North America and worldwide. Where things go in

2015 remains to be seen, but whatever happens,

Petroleum News Bakken will follow events and keep

readers informed. l


A LOOK BACK


KEYSTONE XLBut Prime Minister Stephen Harper, who once

said that approving XL was a “no-brainer”and that he would not take a “no” fromObama as an answer, has quieted on the

project while facing pointed criticism at homethat he has misread Obama’s resolve.


largest acreage in a DNRC auction since June 2012

when 73,185 acres were leased in 187 tracts.

Approximately two-thirds of those 35,000-plus

acres are spread across a band of five contiguous

counties in east-central Montana beginning with

Petroleum County and extending east through

Garfield then into Prairie, Dawson and Custer coun-

ties (see map). The other approximately one-third of

the acres — 10,482 acres to be exact — is in Daniels

County in northeast Montana just below the

Saskatchewan border.

All those counties except Petroleum County are

within the Williston Basin province. Daniels County,

albeit on the fringe, also lies within the Bakken

petroleum system. In addition, the Heath formation

underlies portions of Garfield and Petroleum coun-

ties.

Daniels County sagaThe 10,482 Daniels County acres include the

9,994 acres that were twice previously nominated for

DNRC auctions. All of those acres are back on the

list along with an additional 488-acre tract. The 9,994

Daniels County acres were first nominated for

DNRC’s September auction but were pulled from the

list by the nominator prior to that auction. The acres

were again nominated for DNRC’s December auc-

tion only to be pulled by the nominator prior to the

December auction.

Daniels County saw a flurry of lease activity in

2009 and 2011 when more than 42,000 DNRC acres

were leased in each of those years, but the county has

seen little state leasing activity since. The last DNRC

acreage nominated in Daniels County was in March

2013 when seven tracts totaling 2,748 acres were

nominated, although only three of those tracts total-

ing 1,324 acres were actually leased in the auction.

One of those three tracts brought $21 per acre but the

other two brought only $1.50.

The other MT tractsBehind Daniels, the county with the next highest

nominated acreage is Garfield (see map) with 9,117

acres in 17 tracts. The last time any acres in Garfield

County were leased was in December 2013 when

240 acres in one tract were leased for $1.50 per acre.

In May 2013, three Garfield County tracts totaling

800 acres were nominated for a Montana/Dakotas

Bureau of Land Management auction but no bids

were received on those tracts.

In neighboring Custer County (see map) a total of

5,132 acres in 10 tracts were nominated. Those are

the first nominations in Custer County since

September 2006 and only the third time Custer

County tracts have been nominated over the Trust

Land Management Division’s online database going

back through 2004. In September 2006, 20,732 acres

were leased in 36 tracts in Custer County for an aver-

age of $9.36 per acre. And in the previous auction in

June 2006, 63 tracts totaling 37,005 acres were

leased with each tract bringing $1.50 per acre.

A total of 4,640 acres were nominated in both

Dawson and Prairie counties, although the tract size

is larger in Prairie County with the acreage spread

over eight tracts compared to the 12 tracts in Dawson

County. The last time Dawson County acreage was

leased in a DNRC auction was in December 2013

when 640 acres in one tract leased for $96 per acre.

In June 2013, three tracts totaling 1,275 acres

brought from $76 to $270 per acre with an average of

$168.62. And in March of that year, 3,194 acres in

five tracts were leased for an average of $22.65 per

acre. No acreage has been leased in Prairie County

since March 2012 when 4,240 acres in eight tracts

leased for an average of $3.20 per acre.

The remaining two tracts nominated for the March

auction are in Petroleum County and each is 640

acres. The last DNRC acreage leased in Petroleum

County was in September 2011 when one 640-acre

tract leased for $10 per acre.

The DNRC auction is scheduled for 9 a.m.

Mountain Standard Time on March 3. It will be held

in the auditorium of the Montana Department of

Transportation building in Helena. More information

on the nominations and the auction are available on

the DNRC Minerals Management Bureau’s website

under “Oil and Gas Leasing Information” at

http://dnrc.mt.gov/trust/mmb. l

and range in size from 2.12 to 960 acres.

Two of the tracts, one at 62.85 and the other at 233.30

acres, are in the Lost Bridge field in northwest Dunn

County just west of the Fort Berthold Indian Reservation.

Another 3.91-acre tract is in the Lone Butte field near the

McKenzie County line in eastern Dunn County.

Three tracts are in McKenzie County. One is a 2.12-

acre tract under the Yellowstone River in the Hay Creek

field in west-central McKenzie County. Two large tracts,

one at 320 acres and the other at 960 acres, are in the Hay

Draw field in central McKenzie County.

The seventh tract is a 160-acre parcel in the Ellisville

field in north-central Williams County.

BLM auction perspectiveBLM’s Montana/Dakotas office rotates the states

included in its quarterly lease auctions, and over the last

five years the January auction has been limited to North

Dakota acreage only. In January 2014, 2,261 acres were

offered in 45 tracts and brought $17.5 million for an aver-

age of $7,742 per acre and set a record high bid of

$34,000 per acre for a 53.05-acre parcel consisting of 36

lots along and under Sanish Bay in the Big Bend field in

southwest Mountrail County.

In the last BLM Montana/Dakotas lease auction in

October 2014, 14,988 acres in 28 tracts were nominated

in Montana and North Dakota, but only 12 tracts totaling

6,390 acres were leased, seven in Montana and five in

North Dakota. All five leased tracts in North Dakota were

in Golden Valley County. The seven Montana tracts were

in Yellowstone (two), Roosevelt (one) and Powder River

(four) counties. The 23 tracts not leased in the October

auction were scattered from Beaverhead County in far

southwest Montana to Prairie County in east-central

Montana. Eight state tracts in Prairie County have been

nominated for the March DNRC auction (see story, page

1).

Detailed information on the tracts nominated for the

January BLM auction is available at the

Montana/Dakotas office’s website at www.blm.gov/mt

under “Oil and Gas Info | Sales.” The auction is sched-

uled to begin at 9 a.m. Mountain Standard Time on Jan.

27 at the Montana/Dakotas office in Billings.

Registration begins at 8 a.m.

—MIKE ELLERD


LEASE INTEREST continued from page 1

BLM AUCTIONThe 10,482 Daniels County acres includethe 9,994 Daniels County acres that were

twice previously nominated for DNRCauctions.

Behind Daniels, the county with the nexthighest nominated acreage is Garfield with

9,117 acres in 17 tracts.

BIG

HO

RN

EN

GIN

EER

ING

l HISTORY One year ago · and 93.3 million bpd in 2015. OPEC’s estimated 2015 oil demand growth...

Documents

Transcript of l HISTORY One year ago · and 93.3 million bpd in 2015. OPEC’s estimated 2015 oil demand growth...