Tappin' The Bakken Spring 2012

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For the eighth year the Sidney Herald’s “Tappin’ the Bakken” is the most informative and longest running oil section in the MonDak area. The 15th biannual issue Sunday, April 29, 2012 Special Supplement to the 310 2nd Ave. NE, Sidney, Montana 433-2403 • www.sidneyherald.com Tappin’ the Bakken SPRING 2012 EDITION Photos by Louisa Barber

description

A review of the MonDak oil industry.

Transcript of Tappin' The Bakken Spring 2012

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For the eighth yearthe Sidney Herald’s

“Tappin’ the Bakken” is the most informative and longest running oil section in the MonDak area.

The 15th biannual issueSunday, April 29, 2012

Special Supplement to the

310 2nd Ave. NE, Sidney, Montana 433-2403 • www.sidneyherald.com

Tappin’ the Bakken

Spring 2012 edition

Photos by Louisa Barber

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Tappin’ the Bakken2 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 3

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Three years ago, Matt King held a position with a company that was interested in doing business in the Bak-ken. He was asked to get familiar with horizontal drilling, hydraulic fracturing and the related products.

“Because techniques were so new, there was very little information in the public domain about the processes,” King said, who runs a website dedicated to the nation’s shale oil plays. So, he spent months speaking with industry officials to learn the operations and decided to write an all-inclusive book on the matter.

“I thought there would be great interest in the subject, not only for those looking to work in the field or for business opportunities, but the general public as well,” he said.

After researching for several months, the book, “Shale Oil Revolution,” was completed and has been selling quickly. In it, King, who goes by his pen name, explores how new technology unleashes unconventional oil; how it’s extracted, shipped and processed at oil and gas refineries. It also covers mineral leas-ing, well site logistics, the history of the Bakken and Three Forks formations, en-

vironmental concerns and much more. The book is geared toward those who

want to do business in the North Dakota oil fields, for those who are looking for work, and the general public which has become fascinated with the national and international publicity.

“For the first two segments, this book will give them credibility when talk-ing to others – which I believe is one of the greatest things you can have when you’re talking to potential business partners or employees,” King said. “When I was tasked to learn about this industry from scratch, it took several weeks to gain enough knowledge to sound like I knew what I was talking about. People have to trust you in order to do business or hire you, and if you can ‘talk the talk,’ it will help greatly in the business and employment arenas.

“For the public, education about oil reserves is important because of the emotional reporting that sometimes accompanies conversations about frack-ing. It is important to know the facts.”

To order a book or to check out King’s website, visit www.shaleoilresource.com.

Ebook about Bakken educates public

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By Louisa BarBerSidney Herald

What’s up with all this atten-tion from the state? In the last six months, eastern Montana has played host to a number of dignitaries from various state agencies. The Department of Transportation has held meet-ings in Sidney and Fairview, Culbertson and Glendive to address traffic issues deriving from congestion on state high-ways and in towns.

The Montana Department of Commerce paid a visit in January to learn what’s needed from the state as far as plan-ning and designating land use. An official visited a number of cities and towns, drawn to the oil and gas country by requests from local government and planners that have been af-fected by the development.

The state’s national legisla-tors have been making more frequent trips to the area,

stopping long enough for a tour and lengthy discussions with local leaders and industry of-ficials who are sharing the oft repeated tale of woes from the oil activity. The governor made a trip to Sidney for a quick tour of a hydraulic fracturing site before visiting with locals.

And, of course, there have been legislative tours where groups of legislators from Bill-ings and the central and west-ern part of the state have spent at least a day getting a feel for what communities deal with.

What’s going on? The area has been feeling stress for several years without much notice from the rest of the state for which many residents feel snubbed. So what’s the deal?

“I just personally think they really need to see it because last session they listened to us talk about it, and without a picture, they couldn’t quite follow what we were saying,” Richland County Commission-

er Shane Gorder said. Atten-tion from Montana and North Dakota newspapers as well as recent national awareness contributes to curiosity.

“I think everybody wants in on the action. I think that’s what a lot of it is,” Commis-sioner Don Steppler said. “They want to be a part of it, yet they don’t want it in their backyard. As long as it’s over here, and we’re dealing with all of the stuff, and they might be able to let go a little bit of the money to help us out as long as we don’t try to push it that way.”

Steppler speculates attention from state legislators stems from an underground move-ment; their constituents in western Montana are sharing what’s going on in this neck of the woods.

a spring tourDuring the week following

Easter, six legislators toured

eastern Montana oil country for almost a week. During their time, Steppler took four of them for a two-hour drive deep into Richland County where the rise and fall of pumping

units dot the dry, rolling prai-ries. And in the distance, oil rigs tower over the landscape.

He spoke of the infrastruc-

area receiving much attention from state officials

louiSa BarBer | Sidney Herald

Richland County Commissioner Don Steppler on a tour with state legislators.

See state, page 7

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 5

The need for risk management ser-vices in the booming Bakken formation has been needed for some time, since the Williston Basin activity has virtu-ally exploded, with thousands of new-comers arriving all the time, demands for such services have become more important than ever.

And that’s where companies like Secur Screen come in. “We’ve kind of changed what we do. We’re out there to try to keep companies compliant and help them with policies and proce-dures,” co-owner Wendy Haugen said. She and partners Margie Peterson and Mary Hines purchased the company in November 2011, setting out to offer drug and alcohol testing, but the company’s direction quickly turned from tests to background checks. All kinds of checks – background, criminal history, credit history, legal driver’s license. “Thats a huge area anymore. That’s really on the the forefront,” she said

Oil companies, of course, have been conducting these kinds of checks for years now and so have businesses all across the country. But businesses in eastern Montana and western North

Dakota have been behind the trend. That’s all changing. Local mainstream businesses in town are taking advan-tage of the Secur’s services, like banks, which need to check out prospective employees, and rental owners who want to check for sexual predators while go-ing through rent applications.

“There’s a whole new world out there, and we’re into background checking real big,” Haugen said. Risk manage-ment services takes up about 70 percent of Secur Screen’s business. But there are other services offered as well, drug and alcohol tests that screen up to three years prior to testing, to driver qualifi-cation surveys that ensure companies remain compliant with the U.S. De-partment of Transportation rules and regulations. Staff also offers supervi-sor training which teaches the tools to recognize drug and alcohol problems in employees; it’s a safety issue for compa-nies.

“I think we’re going to see a real change in background checks. We’ll see more companies doing it,” Haugen said. “Whoever just feels they’re at risk. People need to be aware.”

Young company, great experience for risk management company

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ture, how oil and gas are collected and trucked along beat-up county roads which county crews work to maintain, how there isn’t adequate infrastructure for pipelines, how water from the well is processed and disposed, and other questions posed by curious lawmakers. “Why not build a refinery up here?” asked Bob Mehlhoff, D-Great Falls. Tact-fully, Steppler told him of the refinery that’s planned near Trenton, N.D. North Dakota seems to be pushing it better, he said.

“I think enough of them are getting the idea. They’re seeing the picture. They’re seeing it’s not all gravy,” Step-pler said. “We’re getting money, but we’ve got a lot of costs involved.”

That was true enough for Rep. Rob Cook, R-Conrad, who went on April’s tour. He had heard what was going on but wanted to see for himself. “What I saw is a funding issue. You can’t solve the housing problem until you solve the infrastructure problem, especially in Sidney,” he said. “At the very bottom of the problem, it all stems from housing, and that stems from insufficient infra-structure.” The representative said he is familiar with state programs that can help address infrastructure.

Cook, an appropriations committee member, said he was surprised by the amount of “secondary structures” that go along with oil drilling and produc-tion; things like compressor stations and pipelines and the workforce that goes along with those. A mechanical engineer by trade, the legislator was fascinated by technology utilized in the industry.

“You can look at numbers and fre-quently you don’t get the same apprecia-tion for what the numbers mean until you see it on the ground. I thought it was an extraordinarily constructive trip,” Cook said. “I think given the situ-

ation in Montana being much improved everywhere else that we can get some sort of assistance back to eastern Mon-tana.”

His counterpart, Mehlhoff, called the trip “unprecedented” because of its scope, particularly discovering how a few counties have oil revenue, while others don’t but they’re feeling the impacts just the same. “That perhaps for me was the most unexpected thing I experienced while there,” he said.

Mehlhoff, who had never been to east-ern Montana except to drive through on his way to the Dakotas, dismissed the notion that western Montana “doesn’t care” about the population here. His group of both Democrats and Republicans took off at noon Easter Sunday. “The trip was important to see first hand the problems and let people know we care,” the representative said. “There’s a real concern that we have that we want to see what we can do to help the situation out.”

Focus on next sessionSchools have maintained a proactive

stance to ensure legislators know the story, leaving some wondering if maybe county government will be under the microscope this time around. They are, after all, receiving a big chunk of change. Richland County, for instance, receives about $20 million annually. Most of it goes toward maintaining roads. Most counties have yet to see any revenue.

“It’s always a concern every session,” Willie Duffield, executive director of Montana Oil, Gas and Coal Counties Association, said. “They have the power to giveth, and they have the power to taketh away…That’s just the nature of the beast.”

That’s why local leaders have been working to ensure their side gets told. Because of extra publicity, the associa-tion will reintroduce a bill next session

that modifies and allows government entities to recover federal mineral royalties. House Bill 798 was passed by the Legislature but vetoed by Gov. Brian Schweitzer during the 2005 legislative session. “The state’s got a pretty good surplus. I’m baffled why they can’t turn loose some of that money to help with infrastructure,” Duffield said, noting public attention. “I think the legisla-tors see the need for more than they did back then. I can’t believe they wouldn’t pass it. We need the infrastructure out here to continue the growth.”

While some are skeptical about positive results from visiting state enti-ties, others, like Rep. Matt Rosendale, R-Glendive, say they look forward to

the next session as an alliance forms between eastern and western Montana.

“I have been working extremely hard to raise awareness of what’s going on with every department head and legislator that I have come into contact with,” said Rosendale, who has been a key mediator between local and state officials. “I can tell you that has been my focus because I recognize the more attention we get right now, that helps me build this large coalition that we’re clearly going to need going into the 2013 session for legislation to help us miti-gate impacts.”

[email protected]

state: Montana legislators to take information into next sessionFrom page 4

BILL VANDER WEELE | SIDNEY HERALD

Legislators Steve Gibson, R-East Helena, and Rob Cook, R-Conrad, discuss an issue during a meeting in Sidney.

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Several hours into the trip to oil boom country, Ayde Rivera’s family glanced at the thermom-eter in Utah, which read “24 degrees.”

They weren’t in California anymore. “We were freaking out!” she said, recalling the 1,200-mile, five-day trip to boom town Williston, N.D., at the end of October. Just two days before, the family had packed up on short notice, leaving behind Nevada City, Calif., relatives and sluggish work in the logging industry in search of work they’d heard about through family.

They stayed overnight in Nevada, Utah, Wyoming (where they ate buffalo for the first time), Montana and finally North Dakota. They arrived Nov. 1, 2011, parked their trailer in the Wal-Mart parking lot and stayed two nights. “It was very

uncomfortable. We weren’t allowed to be there. We were afraid the police were going to come in the middle of the night and ask us to leave because we were told we couldn’t stay, but there wasn’t anywhere else to go,” Rivera said.

It just so happened she saw a newspaper ad for Bagnell’s RV Park in Sidney (behind Pizza Hut), which had an opening. They were in Sidney by Nov. 3. Rivera’s husband had found employment by then and went to work for Sidney Sugars Nov. 4. That was short lived when Mitchell’s Oil Field Service called to offer him a job as a roustabout. He’s been working there ever since – today as a carpenter, constructing shelter for pumps at oil well sites.

He had landed employment in less than two weeks, a com-mon theme in the oil fields here, and so had the other family members. One works for

Family finds new beginning in eastern Montana

louiSa BarBer | Sidney Herald

The Rivera family at home in their RV in Sidney.See FaMiLy, page 15

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 11

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Tappin’ the Bakken12 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the Bakken14 Sunday, april 29, 2012 Sidney Herald

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Montana’s U.S. Sens. Max Baucus and Jon Tester have announced a major jobs grant to expand and improve metal fabrication and oil field drilling services on the Fort Peck Indian Reservation. The Economic Development Adminis-tration will award the Fort Peck Tribes $1 million to support the Fort Peck Tech project which builds upon current ca-pabilities in metal welding, fabrication and finishing. The project is anticipated to support 18 jobs and spark more than $600,000 in private investment.

“This is a smart investment that will support Montana jobs in the short term and better position the Fort Peck Indian Reservation to maximize the opportuni-ties we’re seeing from the Bakken oil and gas boom. My hat goes off to Harold Buck Elk, CEO of Fort Peck Tech, and the Fort Peck tribes who have put to-gether a solid project, landing this very competitive grant for their community,” said Baucus. “It’s critical that we all work together to address the impacts and embrace the opportunities related to the energy boom.”

“This is a smart investment in Montana’s energy infrastructure that

will help our economy grow and create jobs,” Tester said. “It’s important to keep the Bakken booming and support responsible oil drilling, and this invest-ment will do just that.”

The news comes on the heels of Bau-cus’ Bakken Infrastructure & Energy Jobs tour throughout eastern Montana where he announced the following up-dates to his call to action in the Bakken:

• $1 million grant for Culbertson’s wastewater treatment facility to keep up with rapid development as a result of the oil and gas boom through USDA Rural Development.

• The establishment of a multi-agency “one-stop-shop” in Sidney dedicated to the infrastructure and development needs of eastern Montana

• Environmental Protection Agency Administrator Lisa Jackson has accept-ed Baucus’ invitation to visit Montana oil fields to discuss the local impacts of EPA regulations.

Fort Peck Tech Services Inc. is a trib-ally owned company, and the award was granted to the Assiniboine and Sioux Tribes of the Fort Peck Indian Reserva-tion.

Senators announce major Fort PeckTech jobs grant to support oil drilling

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 15

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a construction company, another for McDonald’s and another for Pamida. “We were very grateful,” said Rivera, a devout Christian who quickly found a church home at Faith Alliance Church in Sidney. “To me it felt like everything was falling into place. It appeared to me as a plan of God,” she said.

They came from a year of financial hardship because of the economic downturn. 2011, they said, was the “hardest year of our life.” So they were determined to make a change. Rivera packed up her family in Arizona and headed west to California to find work. “We were determined this year to find something better, to go wherever it was, even if it was across the country, to find work,” she said. The plan had been to stay through winter and return to Cali-fornia for the logging season.

But things changed in six months. “We’re so happy with Sidney that we don’t want to leave. We want to grow some roots here in Sidney and make it our hometown,” Rivera said.

It was the children’s idea. “I like the

school here. It’s really a small town. I like it,” Rivera’s son, Carlos Ortiz, 14, said, noting the difference between California and Montana. “People are really nice. There’s work everywhere, and everything that we need is here.”

His older sister Ericka Ortiz, 17, suddenly found herself the center of attention at Sidney High School when she arrived. As the “new kid” in other schools, the novelty was not so novel. Not so in Sidney. “Here, it’s, like, a big thing,” she said, noting the compliments she’s received on her “tan.” “Everyone’s really nice and outgoing.” For Ericka, she’s enjoying her last year of school in Sidney; she’ll graduate as a junior because she took online classes in Cali-fornia for a year. She participated in her first and last high school prom and post-

prom party at the fairgrounds, to which she notes, “it was little, but it was cool.”

Her parents say they’re extremely pleased with the school system; it has

higher standards than what was expected in Califor-nia.

“My son (Fausto Rivera, 6), he didn’t read, and as a first-grader you’re required to read fluently here,” she said. So he was held back in kindergar-ten after Christmas break. “To me and my husband, we really liked that more was asked of them, and we know

the more you ask of them the more they give.”

There’s a certain contentment, one can sense from the family. They live in a 30-foot RV, and haven’t had any luck yet in finding more permanent hous-ing. They survived a Montana winter,

though it was a mild one. They had “never been through that much cold be-fore.” Pipes froze. And they can’t believe how much the wind blows.

But they’re happy. “It’s our new home for now. We don’t have any plans to leave anytime soon,” Rivera said, though plans might change if they can’t find housing after the first couple of years. Rivera, through friends from work and church, gets the sense that local residents have been burned by the oil boom-and-bust cycle, the high cost of living, the stagnant wages, but, she says, “I think, overall, the work here is a blessing to everybody. I feel Sidney is blessed. There’s more good than bad. That’s what I think, and we’ve lived in a lot of different places, and this is the best.”

Born and raised in Arizona, Rivera never changed her driver’s license, but as soon as she arrived in Sidney, it was time for a change. “I feel like we became Montanans. Mexican Montanans,” she said.

[email protected]

Family: Members happy living in community, impressed with school systemFrom page 10

‘We’re so happy with Sidney

that we don’t want to leave.

We want to grow some roots

here in Sidney and make it our

hometown.’

ayde riveraFather

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Tappin’ the Bakken16 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the Bakken SIDNEY HERALD SUNDAY, APRIL 29, 2012 17

LEASE HAND/ROUSTABOUTEntry level labor position, very physi-

cal job, all weather/outdoor job, heavy lifting, usually hourly pay, can have a lot of overtime, occasionally accommo-dations and meals paid, a lot of travel, uses various vehicles to move equip-ment, pipe and waste materials, may drive extensively to pick up and trans-port various supplies and materials needed by the rig, loads/unloads trucks, digs ditches, paints and remove gar-bage, keeps the lease site tidy and haz-ard free, performs all other unskilled labor as necessary, helps other workers

as necessary and reports to driller.

FLOORHAND/ROUGHNECKMay start as fl oor hand or be pro-

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By BarB PetersonWilliSton economic development

Williston Economic De-velopment’s deputy director has the daunting task of tracking job creation in the Williston, N.D., area. Shawn Wenko says he likes to see how Williston compares to other cities in the state. And, it’s probably no big shock that Williston leads the state in job growth.

Wenko says Williams County created over 12,000 jobs from January 2010 to September 2011. “That number doesn’t surprise me. If we could have brought housing online faster it would probably be even more. The fourth quarter of 2011 will be faster.” Coming in second in job creation was Cass County with about 7,500 new jobs followed by Stark County with just over

4,000 during that same time period.

During those same seven quarters Williams County also was number one in busi-ness creation. Over 400 new businesses were created in Williams County compared to nearly 250 in Ward and 180 in Stark counties. Wenko says he doesn’t see any stoppage in the future. “It’s a reflection of the economic activity out here – we are number one in every area, and it doesn’t look to slow down anytime soon. We will probably pull away even further from the other coun-ties,” Wenko says.

The key to continued growth is more housing. “Permanent housing is detrimental to growing this community. This summer I think we will turn a corner on housing, and we will start to see a little bit of breathing

room.”Wenko adds that over 50

percent of the oil field jobs are created in Williams County and as the smaller towns get saturated that percentage could grow even more.

Williams County also led the state in personal income increases at the end of the third quarter in 2011. The average weekly wage was nearly $1,400 in Williams County, just under $71,000 a year. “That’s higher than any other city in the state,” Wenko says. Stark County was second in personal income at just under $1,000 a week followed by Cass County at just over $900.

“All of these numbers just reflect the huge amount of activity that is going on in Williams County,” Wenko says.

average annual income in Williams county nears $71,000The City of Williston, North Dakota

ND EmploymentMarch 21, 2012

Williams1.0%

McKenzie1.5%

Divide3.0%

Bowman2.5%

Hettinger3.4%

Burke2.1%

Ward3.1%

County Unemployment RatesDecember 2011Source: ndworkforceintelligence.com

Moutrail1.5%

McHenry4.5%

McLean4.7%

Williston AreaAverage 1.3

Minot AreaAverage 3.4

Bottineau3.2%

Renville3.0%

Dunn1.7%

Stark1.9%

Billings3.1%

GoldenValley2.8%

Slope1.4%

Adams3.5%

Dickinson AreaAverage 2.3

Grant4.2%

Sioux5.1%

Morton4.0%

Oliver3.8% Burleigh

2.9%

Sheridan4.0%

Emmons6.3%

Bismarck AreaAverage 3.8

Mercer7.3%

Rolette9.2%

Towner3.7%

Cavalier3.5%

Pembina7.4%

Walsh5.5%

Grand Forks3.6%

Traill3.9%

Cass 3.1%

Richland3.5%

Barnes3.5%

Steele2.3%

Stutsman3.5%

Kidder7.0%

Pierce4.4%

Benson4.9%

Ramsey4.0%

Nelson4.2%

Eddy4.2%Wells

5.0%

Ransom3.5%

McIntosh3.5%

Dickey3.1%

Sargent2.7%

Fargo AreaAverage 3.2

Grand Forks AreaAverage 3.9

Logan3.1%

Griggs3.0%

Foster3.1%

LaMoure2.6%

Jamestown AreaAverage 3.1

Page 19: Tappin' The Bakken Spring 2012

Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 19

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Page 20: Tappin' The Bakken Spring 2012

Tappin’ the Bakken20 Sunday, april 29, 2012 Sidney Herald

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By Bill Vander WeeleSidney Herald

Officials from ONEOK Partners provided an update of the crude-oil pipeline to Richland County officials April 11.

The pipeline will consist of 1,300 miles and transport light-sweet crude oil from the Williston Basin to the Cush-ing, Okla., crude oil market hub.

Steve Johnson, director of govern-ment relations for ONEOK, said 20 of those miles will be in Richland County.

The project’s pump stations in Montana are scheduled to be located in Carter and Fallon counties.

Butch Renders, director of disaster and emergency services, and Richland County Commissioner Shane Gorder each asked about training in case of a disaster.

Johnson said training will be avail-able. “We want to be very much in-volved in the community and helpful in that way.”

According to a press release, the proposed pipeline route is expected to parallel more than 80 percent of the partnership’s existing and planned natural gas liquids pipelines. It will be designed, constructed and operated us-ing proven technology, pipeline control systems and continuous safety monitor-ing.

The partnership has previously an-nounced that it is investing $2.8 billion to $3.5 billion through 2014 in growth

projects. Of these projects, it is invest-ing $1.6 billion to $2 billion in projects related to the Bakken Shale that include the 500-mile NGL pipeline, the Bakken Pipeline; a 270-mile natural gas gather-ing system and related infrastructure in Divide County, N.D.; and three 100 MMcf/d natural gas processing facili-ties – Garden Creek plant, Stateline I plant and Stateline II plant -- and related infrastructure. The Garden Creek plant went into service in December 2011.

“As producers continue to aggressive-ly develop crude oil from wells in the Bakken Shale, more crude-oil pipeline takeaway capacity will be required,” said Terry K. Spencer, ONEOK Partners president. “This proposed pipeline will provide producers with efficient and reliable transportation of their product directly to one of the largest crude-oil market hubs in the U.S.”

OneOK Partnersrepresentatives meetwith county officials

‘as producers continue to

aggressively develop crude oil

from wells in the Bakken Shale,

more crude-oil pipeline takeaway

capacity will be required.’

Terry K. SpencerOneOK partners

Page 21: Tappin' The Bakken Spring 2012

Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 21

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Page 22: Tappin' The Bakken Spring 2012

Tappin’ the Bakken22 Sunday, april 29, 2012 Sidney Herald

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By Jon TesTeru.S. Senator

Thank you for the chance to join the Sidney Herald in saluting Montana’s oil industry.

On my recent visit to Richland Coun-ty to tour the oil rigs and see the latest developments, I witnessed the promise of responsible energy development and met the hardworking people ready to power eastern Montana’s economy for generations.

To all those who hire Montanans, and to all who contribute to eastern Mon-tana’s growing economy: Thank you.

Montanans know responsible energy production plays a key role in the re-building of America’s economy. It will remain an important part of our future. In and around Sidney, that means oil and natural gas development. It means good-paying jobs.

Responsible energy development will increase our energy security and create jobs. It will also spur small businesses, new technologies and new opportuni-ties.

That’s why I support building the Keystone XL Pipeline. Responsibly building the pipeline will help eastern Montana to reach its full economic potential. The pipeline’s on-ramp at Baker will deliver up to 100,000 barrels of Bakken oil per day to market. Today, Bakken oil is getting less than market value because of shipping constraints – Keystone XL will help fix that.

In the last four months, I have voted to approve the Keystone XL Pipeline three times. I am disappointed that Congress and the president cannot work together to support this common sense project. Built with respect for private property rights and to the highest safety standards, the pipeline will safeguard our most treasured places and increase our energy independence.

I will keep fighting for the Keystone XL pipeline. In the meantime, I’m

pushing TransCanada to begin training workers right here in Montana. Mon-tanans are ready to work and have all the skills and work experience needed to begin construction once we get the green light, and to operate the pipeline for years to come.

I am also pushing to improve in east-ern Montana’s infrastructure. Energy development is increasing demand for services across the region, and I will continue to partner with the region’s mayors and county commissioners as they work to improve roads, housing and public safety to support oil and gas development.

The people of Sidney and Richland County know the oil business and know what it takes to strengthen our econo-my. I look forward to working with you to responsibly develop our oil resources, cut our dependence on foreign oil, and create jobs that will help rebuild the entire economy of this nation.

As always, I’m interested in hearing from you. Don’t hesitate to call my of-fice anytime at 866-554-4403.

Until then, be well, take care, and thanks again for being a valuable part of Montana’s economy.

Tester salutes oil industry

Bill Vander Weele | Sidney Herald

U.S. Sen. Jon Tester during his recent trip to Richland County.

Page 23: Tappin' The Bakken Spring 2012

Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 23

Montana Energy 2012 was held April 3-4 at the MetraPark Expo Center in Bill-ings. The sellout event hosted nearly 200 exhibitors from the energy and construc-tion field and was visited by hundreds of industry leaders and new entries into the marketplace. The exhibits included a broad range of large equipment deal-ers and service companies. There were firms which focused on the production of our natural resources and those that supported all of the activities that the production rely on to operate efficiently and effectively. It was a tremendous opportunity for business to business networking as well as a perfect forum for those seeking employment in the construction and energy industries.

In addition to the exhibits, there were industry recognized speakers in the main banquet room throughout the event including U.S. Congressman Denny Rehberg and U.S. Senator Max Baucus. The speakers shared informa-tion about energy development domesti-cally and overseas. In depth presenta-tions included the foreign and domestic production, regulatory impacts, esti-mated future demand and infrastructure needs. The keynote speakers were well received drawing crowds of about 500 for

each topic.Breakout sessions were ongoing and

typically filled to capacity. Rep. Matt Rosendale (HD 38 Dawson/Wibaux coun-ties) moderated a panel discussion titled “Managing the Impacts and Opportuni-ties for Local Montana Communities” and facilitated a discussion with local leaders about the increased development and the demands it places on their com-munities. Rosendale stated, “In order to fully develop these resources in every-one’s best interest, adequate investments must be made to the infrastructure which support it. That includes water, sewer and roads for the residential and commercial development which are necessary for the labor and ancillary services, and pipelines and rails to trans-port the products to market.”

Dawson County Commissioner Jim Skillestad participated on the panel as well and gave a summary of the in-creased demands placed on the commu-nities and their budgets.

The first time event was sponsored by the Montana Contractors Associa-tion, Big Sky Economic Development, Montana Petroleum Association and Kadrmas Lee and Jackson, Engineers.

Energy conference very successful

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Page 24: Tappin' The Bakken Spring 2012

Tappin’ the Bakken24 Sunday, april 29, 2012 Sidney Herald

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By Louisa BarBerSidney Herald

Montana’s largest city may be four hours outside oil field play in the Mon-Dak region, but its leaders, realizing business opportunities, have begun to see Billings prosper but with some surprising effects.

Billings, the 100,000-resident city in the sunbelt section of southern Mon-tana, is actively recruiting new busi-nesses as it hopes to become a major hub for companies working in oil and gas (and coal) development in the Bakken and Three Forks formations. “We’ve seen a lot of businesses related to manufacturing for the Bakken and for the Alberta Tar Sands,” said Jeremy Vannatta, Big Sky Economic Develop-ment’s director of business outreach, recruitment and marketing.

Such companies manufacture stor-age tanks and refining materials, pipes and anything else that needs a welder’s touch, which is in high demand. Com-panies look to Billings, he said, over other cities in the West and Canada. Billings is near enough to the Bakken in

both the United States and its northern neighbor. And the city has some other advantages. “We’re much more busi-ness friendly in terms of taxes and labor costs,” Vannatta said, comparing the city to Canada. Some companies have already added a location, like Bay Ltd., of the U.S., Canada and Mexico, and Highland Projects of Alberta; both major manufacturing companies.

Major oil and gas players are relocat-ing regional offices or looking to estab-lish headquarters. Sanjel, the energy gi-ant specializing in hydraulic fracturing, already has an office in Miles City but is looking to open a regional training facil-ity in Billings to train employees who want to work in the Bakken. “Three or four other companies are looking at the Magic City to open regional offices to oversee field offices,” Vannatta said.

ConocoPhillips, for instance, has al-ready based its Williston Basin regional office in Billings.

surprising ramificationsBillings, a city whose residents are

used to seeing some overflow from oil development (i.e. Wyoming activity), is welcoming new residents. Because it’s extremely difficult to find housing around the oil boom (people commute from as far away as Miles City, about two hours southwest of Sidney), work-ers decide to relocate their families from across the state and out of state to Billings, where the family can enjoy the comforts of big-city living. The worker just visits home every weekend.

But because families are moving in and companies have begun to locate their management teams with their

families in Billings, there have been some surprising consequences.

Billings, it seems, is beginning to see a housing shortage. “It appears to be across all price ranges,” says veteran Billings realtor Ron Thom. “The biggest complaint I’ve heard for the past five months is the lack of homes.” Thom, who runs a website featuring high-end homes, www.ronthom.com, has agents who turn to him for listings to show clients, but find there’s little available. The realtor said he’s been working with “an oil person” who has five employees from Idaho who want to relocate. They were shown 10 homes ranging from half a million to $900,000; four of those won’t be officially on the market until this spring. He says it’s the same experi-ence with the $350,000-450,000 homes, in demand with new hospital administra-tors, major oil refineries management, GE operations and large banking firm employees who are moving in.

Since January, he’s been calling clients and telling them that if they’re thinking of selling, now is the time to

Billings now getting into the Bakken play activity

See BiLLings, page 26

Page 25: Tappin' The Bakken Spring 2012

Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 25

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Page 26: Tappin' The Bakken Spring 2012

Tappin’ the Bakken26 Sunday, april 29, 2012 Sidney Herald

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get the house on the market. “Truth-fully, I’ve put some of these on the market. Some of these homes were on the market one and a half to two years ago and didn’t sell,” Thom said. He calls it a fundamental shift in supply and demand; demand is strong and supply is dwindling. Homes stay on the market on average of 100 days across the board – slower than the 30 days or less for the Sidney market but quicker than before – and open houses draw some 20-35 people groups. And often, properties are going over the asking price. In one such case in early March, two pieces of properties had five offers and all of them flew over the asking price.

“I don’t know. It feels like Billings is just prospering,” he said.

It’s not just homes that are increas-ingly hard to come by. Commercial properties may be even scarcer. Manu-facturing companies need warehouse space, and Billings didn’t have much large space to offer in the first place, said Mike Oliver, commercial manager and broker with Prudential Floberg. So when properties appear on the market, they disappear just as quickly. Oliver

has been working with a couple of Canadian companies to secure semi-fabrication facilities, which the busi-nesses will have to make improvements to, to meet their needs. “Just finding the facilities the way they want them is getting difficult,” he said. For the first time in a while, developers are start-ing to do speculative building, though ground has become more expensive. Some potential tenants are waiting almost a year to find adequate space for their fabrication business.

friend or foe? Toward the end of 2011, Billings made

headlines of major Montana news-papers and TV stations, highlighting potential growth and impacts, leaving some locals to wonder whether the city’s legislators may try to redirect oil revenue from the city away from com-munities experiencing actual impacts from the oil activity. “They have the potential of being our friend, but they can turn around pretty fast,” Richland County Commissioner Don Steppler said. Because the state’s largest city has more legislators alone than all of east-ern Montana, “they can pretty much

offset anything that we try to do,” he said, “and if they join forces with other cities, we’re screwed.”

Billings benefits from the Bakken play; it’s a natural business hub for the region and profits from retail shoppers who make the long trek from Williston, N.D. Commissioner Shane Gorder cites the importance to make friends with Yellowstone County. “They understand the impacts. They’ve seen it, so I guess I look at them as friend, commissioner to commissioner. There’s a lot that we can learn from each other,” he said.

Because the Magic City has the legis-lative numbers, local leaders have ex-pressed the need to work with the legis-lators there, a task Rep. Matt Rosendale, R-Glendive, hasn’t been taking lightly. He doesn’t see Billings as any threat, only a city that expects to see positive impacts with new businesses that want to locate satellite offices in Sidney and Glendive.

“I don’t see that as a problem. The de-velopment of the resource is going to be the primary concern,” he said. “That’s job one, and if the communities that are closest to the action are not able to meet their needs and support commercial ac-

tivity, the businesses that are absolutely necessary to support development of the resource, than what it’s going to do is put obstacles in the way, and they don’t get the additional resources as well…It wouldn’t benefit them to drain resources from the area.”

Rep. Elsie Arntzen, R-Billings, who chaired the Business and Labor and Lo-cal Government committees, was part of a legislative tour that came through Sidney, which was “amazing to see. The change is noticeable.” Arntzen, whose parents grew up in Lambert, called the activity in eastern Montana “an under-ground change.”

And its change the state remains concentrated on, not Billings. “Eastern Montana is indeed the focus. That’s where the jobs are now,” she said. People want the activity to be prolonged because it helps the state’s economy.

So, is Billings friend or foe? “Friend! Definitely a friend!” Arntzen said. “We’re talking about new money, and as a legislature, we have to make sure we do a good job budget-wise. This is about money, new money that’s come to the state, new jobs, new population growth.”

Billings: Montana’s largest city already benefits from oil industryfrom page 24

Page 27: Tappin' The Bakken Spring 2012

Tappin’ the Bakken SIDNEY HERALD SUNDAY, APRIL 29, 2012 27

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Page 28: Tappin' The Bakken Spring 2012

Tappin’ the Bakken28 Sunday, april 29, 2012 Sidney Herald

Quarterly County Distribution for Montana

2nd Quarter (end

June 30) 20103rd Quarter (end Sept. 30) 2010

2nd Quarter (end

June 30) 2011

3rd Quarter (end Sept. 30)

2011County Collections Distributions Collections Distributions Collections Distributions Collections DistributionsBig Horn $755,848 $340,510 $709,691 $319,716 $623,745 $280,997 $571,993 $257,683Blaine $989,007 $577,481 $875,808 $511,384 $1,032,850 $603,081 $675,345 $394,334Carbon $869,281 $419,602 $1,176,958 $568,118 $1,067,297 $515,184 $873,423 $421,601Carter $54,488 $27,326 $49,895 $25,022 $55,621 $27,894 $3,343 $1,676Chouteau $93,860 $54,570 $77,509 $45,064 $83,499 $48,546 $79,847 $46,423Custer $5,760 $4,005 $4,231 $3,005 $190 $132 $11,987 $8,334Daniels $9,848 $5,004 $3,899 $1,981 $9,955 $5,058 $12,932 $6,571Dawson $666,321 $318,435 $642,174 $306,895 $1,133,087 $541,502 $1,009,735 $482,553Fallon $11,208,299 $4,682,827 $10,873,902 $4,543,116 $14,791,958 $6,180,080 $12,639,911 $5,280,955Fergus $2,150 $1,487 $2,018 $1,396 $2,195 $1,518 $1,630 $1,128Garfield $24,326 $11,180 $17,012 $7,819 $9,451 $4,344 $47,559 $21,858Glacier $751,639 $442,189 $755,751 $444,569 $969,957 $570,626 $798,353 $469,671Golden Valley $6 $4 $3,153 $1,840 $29,977 $17,498 $28,172 $16,444Hill $467,030 $301,281 $417,749 $269,490 $428,887 $276,675 $414,201 $267,201Liberty $295,120 $170,992 $293,191 $169,875 $552,205 $319,948 $598,794 $346,941McCone $6,446 $3,218 $11,031 $5,507 $5,155 $2,573 $21,068 $10,517Musselshell $279,358 $135,880 $280,148 $136,264 $317,979 $154,665 $422,211 $205,363Park $0 $0 $0 $0 $0 $0 $0 $0Petroleum $32,511 $15,618 $29,513 $14,178 $58,762 $28,229 $28,589 $13,734Phillips $1,120,521 $605,306 $1,167,797 $630,844 $967,879 $522,849 $933,992 $504,543Pondera $201,738 $109,463 $185,993 $100,914 $240,892 $130,706 $273,523 $148,414Powder River $905,085 $551,197 $888,451 $541,067 $1,178,546 $717,734 $1,002,052 $610,250Prairie $119,828 $48,386 $119,339 $48,189 $134,893 $54,470 $130,482 $52,689Richland $22,181,042 $10,529,340 $22,007,129 $10,446,791 $28,264,275 $13,417,052 $23,781,186 $11,288,935Roosevelt $2,314,225 $1,057,832 $2,028,737 $927,336 $2,753,259 $1,258,515 $2,845,155 $1,300,520Rosebud $564,634 $222,071 $537,669 $211,465 $606,762 $238,640 $529,023 $208,065Sheridan $2,465,423 $1,183,156 $2,485,505 $1,192,794 $2,919,108 $1,400,880 $2,708,524 $1,299,821Stillwater $16,745 $8,960 $42,796 $22,900 $29,309 $15,683 $23,395 $12,519Sweet Grass $9,996 $6,122 $59,888 $36,676 $3,849 $2,357 $3,530 $2,162Teton $90,387 $41,668 $93,390 $43,053 $119,956 $55,300 $101,312 $46,705Toole $829,258 $477,735 $832,226 $479,446 $936,868 $539,730 $868,275 $500,213Valley $296,426 $152,452 $273,278 $140,547 $398,313 $204,852 $394,694 $202,991Wibaux $1,562,252 $768,003 $1,566,466 $770,075 $2,010,397 $988,311 $1,682,078 $826,909Yellowstone $17,784 $8,312 $24,726 $11,557 $33,768 $15,783 $26,560 $12,414Board of Oil and Gas $436,936 $0 $443,066 $0 $583,390 $0 $509,134 $0

Oil, Gas & Coal Natural Resource Account $825,085 $0 $830,927 $0 $1,102,021 $0 $961,560 $0TOTALS $50,468,663 $23,281,612 $49,811,016 $22,978,893 $63,456,255 $29,141,412 $55,013,568 $25,270,137Information provided by Richland County Treasurer

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 29

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Page 31: Tappin' The Bakken Spring 2012

Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 31

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Page 32: Tappin' The Bakken Spring 2012

Tappin’ the Bakken32 Sunday, april 29, 2012 Sidney Herald

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By Brian SchweitzerGovERNoR

Montana has more potential for diverse energy development – both existing and untapped – than any other state in the nation. Oil, as one of these re-sources, provides the state with tremendous economic oppor-tunity, creates good jobs here at home, and increases energy security for the nation.

Eastern Montana is seeing the beginnings of one of the nation’s largest energy plays – the Bakken. In Richland County, the Elm Coulee field has already been one of the most productive onshore oil fields in the lower 48 states, and could end up being the largest in history. Some 20 percent of the field is found in Montana, while the rest underlies west-ern North Dakota and southern Saskatchewan.

Knowledgeable folks in the industry tell me that, above all, drilling takes place where the shale formation is most

accessible. The formation is thicker, and is also under more natural pressure in North Dakota. So the lion’s share of wells are being drilled across the border, but as those wells drop in production, more and more activity will be moving west. Based upon the aggres-sive leasing now going on in Montana, we are starting to see that shift, with some 20 drilling rigs already present in eastern Montana.

“Landmen” have been storm-ing courthouses and buying up leases. Why? Because setting aside the geology, Montana is a great place to do business. The industry is poised to take advantage of our competi-tive tax rate. According to the conservative Tax Foundation’s state rankings, Montana has the eighth best tax climate in the nation, and much lower than that of our neighbors.

Making Montana even more attractive, we have a lower tax burden. On paper, our taxes are about 20 percent lower

than North Dakota’s – 9.75 percent to 11.5 percent. But when Montana’s 18-month tax holiday on wells is applied over the life of a productive oil well, our taxes are a full 40 percent lower than North Dakota’s. It didn’t surprise me to hear Con-tinental Resources CEO and Chairman Harold Hamm tell folks in Billings that the reason his company started drilling in Montana was because of our business-friendly regulatory and tax environment.

State regulators do a profes-sional job in a short timeframe to keep rigs operating in the field. One permit application in Montana takes about 60 days, which is under the 75 days al-lowed by law, while a permit in North Dakota takes, on aver-age, the legal limit of 365 days.

In more good news, the Keystone XL pipeline proposed to run across eastern Montana will include a $100 million on-ramp for Bakken oil producers near Baker. I insisted on this addition in order to provide

relief from the shipping bottle-neck that has restricted market access in both Montana and North Dakota; producers will no longer be forced to accept steeply discounted prices for their oil. The state of Nebraska has been a bit of a roadblock to the Keystone XL, but I am confident that once Nebraska reworks its pipeline route, fed-eral approval will follow.

All of Montana is benefitting from the recent reforms to our Workers’ Compensation Insur-ance system. Businesses now save an average of 20 percent on this expense. In addition, I signed legislation that yet again reduced the business equipment tax. Both actions should have a positive effect on job growth and business devel-opment in the state.

Rapid development often changes a community. Grow-ing pains can strain local gov-ernments’ capacity to meet new demands. Last month I met with oil patch leaders to again offer continued assistance in

the region. I have instructed several state agencies to double down on efforts to lend a hand with the impacts of oil develop-ment. From the Department of Transportation to the Depart-ment of Commerce, these agen-cies can help with roads, water treatment plants and other essential services.

We’re lucky. Our beauti-ful state lies within the most important energy corridor in the world. Our resources include wind, natural gas, coal, biofuels, solar, geothermal, hydroelectric, and, of course, oil. The future is shaping up to be a very productive one for oil and gas in Montana, and I will continue to encourage good public policy so we get it right.

If you have ideas about how we can get it right with oil pro-duction, energy development, or anything else in Montana, please do not hesitate to con-tact me. You can reach me at [email protected] or by phone at 406-444-3111.

Governor says Montana welcomes oil industry to state

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Tappin’ the Bakken34 Sunday, april 29, 2012 Sidney Herald

By Louisa BarBerSidney Herald

When Josh O’Donnell set out for col-lege in 2001, he didn’t expect that in 10 years he’d be working for the Bakken’s largest oil company, holding a position that usually takes many years to reach.

“It’s kinda hard to describe what I do all day,” the 29-year-old production foreman said, sitting at his desk in the Continental Resources Sidney office. Work had slowed that week because of windy weather. The work that was scheduled for that afternoon and for the next day had stopped. O’Donnell would have to work extra to get a workover rig (or service rig) to location two days later so orders wouldn’t fall behind. “I spend a lot of time on the phone.”

The Sidney native is well on his way to fulfilling his career dream, a dream that’s changed since he returned home from a year of auto body technician training at the Montana State Univer-sity-Billings College of Technology to work at 1st Choice Collision in 2002. He worked there for three years until join-ing Continental staff in 2005.

There he met friend Brent Bowlds who had worked for Mitchell’s Oil Field

Service for many years and still worked during days off. O’Donnell joined him.

“I got some pretty good learning experience doing some roustabouting as I was working here at the same time,” he said. He started working as a pumper

for Continental Resources, a position he held for two and a half years. He was promoted to production technician in which he was required to diagnose oil well problems in an effort to make the well more efficient. He did that for three and a half years. Today, as foreman, he oversees workover rig schedules, ensur-ing rigs are lined up for each day, a week in advance.

“It’s kinda tough now. When I first started doing it, it was easy, you could do it the night before, but now with the way things are, it’s so busy, you’ve got to know what you’re doing five days ahead, so you’re not waiting,” he said.

He joined the company when Conti-nental had just 28 oil wells. Today there are more than 200 in Richland County, and he’s been involved with every one of them, a feat he’s proud to say he’s been a part of.

From auto body technician to produc-tion foreman, O’Donnell’s come a long way in a relatively short period of time. It’s a career route he never thought he’d have. He had little background in oil, though his uncle worked as a roustabout and his father, Todd, owns an oil trucking business, T&S Trucking, for which he takes time on days off to

repair vehicles. And he spends a lot of time listening

to his older co-workers and his boss, Russ Atkins, each of whom have knowl-edge he can use to do his job better and eventually, hopefully, reach his fullest potential. “I try to do a much as I can around here, learn as much as I can,” O’Donnell said. Why? “I want Russ’ job some day,” he says laughing. “I tell him that all the time.”

Atkins doesn’t seem to mind. “Josh came in at an entry-level position pump-ing. He pumped for two to three years, and we bumped him up to a production tech, which is a little bit more of an analytical type of job, and he just took to it like a fish to water,” he said. “He just lapped it up and now he’s a produc-tion foreman, and he supervises service rigs. He’s doing good.”

On his way toward fulfilling a dream, O’Donnell wants to stick around Sidney for awhile, perhaps moving to another state under Continental Resources. For now, however, he’s content to learning as much as he can. “I feel very fortunate this is in my backyard, basically,” he said.

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Sidney resident Josh O’Donnell, right, is on his way in filling his career dream.

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In Montana, exploration’s taking place on the Blackfeet Indian Reserva-tion, in the northwest part of the state, as well on the Fort Peck Indian Reserva-tion in Roosevelt County.

If results come back successful, these reservations could see riches like Fort Berthold in North Dakota, home to the Three Affiliated Tribes of the Mandan, Hidatsa and Arikara Nation. The land rests in oil rich western North Dakota, and since the oil activity, the tribe has received more than $180 million in lease payments with millions more in royal-

ties and tax revenue, according to a 2010 Associated Press article.

Until recently, oil development was difficult due to federal regulations. “The process was real cumbersome,” said Bernie Fox, Arrowhead Lonestar Energy Services vice president, whose company provides oil-related services on Fort Berthold.

So three years ago, former U.S. Sen. Byron Dorgan, D-N.D., pressed for a “one-stop-shop” which rolled oversight of the federal process into one office to oversee the energy development on the

reservation and streamline the permits process. Fox said the process that once took two years can now take as little as 30-45 days, depending upon which land.

“That’s what finally got the oil devel-opment going,” Fox said.

There are three classifications of res-ervation land: Tribal Trust Land, which is owned by the tribal government; al-lottee trust land, whose tribal members own the land and is held in trust by the federal government; and fee land, which

is under the county and state’s jurisdic-tion. Various agencies are involved in the development process, including the Bureau of Land Management, the Bu-reau of Indian Affairs and the EPA.

At the beginning of April, according to the Bismarck Tribune, the reserva-tion had 28 rigs running and 414 Bakken wells with another 200 expected at year’s end and hundreds more in the next few years.

Drilling on reservation increasing in Montana, North Dakota

Motor handUsually promoted from floor hand,

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crew members, all weather/outdoor job, heavy lifting, usually hourly pay, can have a lot of overtime, occasionally accommodations and meals paid, a lot of travel, assists the driller and derrick hand as necessary and reports to driller.

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By Louisa BarBerSIDNEY HERALD

Preliminary results from the Environmental Protection Agency on the effects to drink-ing water from the controver-sial hydraulic fracturing pro-cess are expected to be released at year’s end. The final results won’t be available until 2014.

The process, known as fracking, uses a combination of water, sand and chemicals which are shot down the oil or gas well at extremely high pressures into cracks in the formation allowing the product to escape.

The technique has been around for several decades and is what has fueled development in North Dakota at a record pace. But the technique has been making headlines recent-ly in the Marcellus Shale of Pennsylvania where fracking is utilized to recover natural gas. Environmentalists claim the process hurts the environment

and endangers drinking water. Oil and gas industry lead-

ers defy the notion. The EPA released a study in the 2000s, saying there was little threat, but the subject has come up again, and in 2011, the agency began another study.

In its study, the EPA, accord-ing to its study plan, is working to “improve our understanding of well performance during hy-draulic fracturing” by focusing on 334 well designs, construc-tion and completion practices while reviewing information from nine randomly selected companies: Clayton Williams Energy, ConocoPhillips, EQT Production, Hogback Explora-tion, Laramie Energy II, MDS Energy, Noble Energy, Sand Ridge Energy and Williams Production.

The agency also plans to learn about the fracking fluids, flowback and produced water, standard operating procedures, frequency, severity and causes of spills, and treatment and

disposal practices. Included in the study are

seven locations, including one site in Killdeer, N.D., in the heart of the Bakken Shale play. According to its February update, the EPA sampled do-mestic, industrial, production, monitoring, and municipal wells, and surface water, all of which were taken between July and November 2011.

The results are under way presently, and additional samples are expected to be taken between March and July. The next update is expected between May and June.

In a teleconference with reporters in March regard-ing fracking regulations, Kyle Isakower, American Petroleum Institute’s vice president for economics and regulatory policy, reiterated the impor-tance of hydraulic fracturing to recover shale oil, which has intensified energy production across the United States. “Shale oil and natural gas develop-

prelim study results due end of 2012

EpA | CHARt

Water cycle in hydraulic fracturing.

ment in the United States has been a clear economic suc-cess story during a time when successes have been few. Our industry has been producing energy, jobs and revenue at a strong clip. And yet we’ve only begun to realize the benefits of energy from the shale.”

Isakower said the industry worries over 10 government agencies that are looking to

study and potentially add “new and unnecessary” regulations on the technology for which 70 percent of future gas wells de-pend. “More regulation could increase costs and delays for operators, which could harm new projects, sacrificing thou-sands of new jobs and depriv-ing government of billions in revenue,” he said.

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Tappin’ the Bakken38 Sunday, april 29, 2012 Sidney Herald

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By Louisa BarBerSIDNEY HERALD

Don Schillinger, the superintendent of Baker schools, sat between the superintendents from neighboring Wibaux and Plevna schools at a late March meeting for eastern Montana school districts.

In a go-around-the-room discussion about the ef-fects from the oil activity, Schillinger took issue with the predicament his schools are in. They’re in the “lull before the storm,” he said. Pipeline projects, CO2 projects and oil drilling is picking up between Wibaux and Baker, but they’re not seeing the impacts quite as severe as northern counties.

So Baker administra-tors have been saving. They know the activity’s heading their direction; it’s just a matter of time. Now, they’re seeing their money slipping away after three quarters since Senate Bill 329 became law. That bill, passed in last year’s legislative session, allows schools to keep 130 percent of their general budget; the rest goes to the state’s general fund.

Since SB 329 took effect, six schools have lost money that would’ve been used for oil impacts – four are from Richland County (see chart page

41). By the end of the third quarter, the state had retained $7,221,098.42, according to figures from the Montana Department of Revenue.

Baker has lost the second highest amount so far, of $1.93 million, be-hind Lambert’s elemen-tary and high school dis-tricts of $4.4 million. “We would have saved it to use for immediate expenses we would have and put it in an area like build-ings or in flex funding,” Schillinger said. The district is in the process of purchasing a fourplex for employees, particu-larly for when teachers retire and new ones must be hired; scarce housing is available.

The Baker school district has 400 students, one-third less than a decade ago, so the school can handle the “early hit of people coming,” but if it becomes “fairly extreme,” Schillinger said it’s possible his high school could double.

His neighbor Jule Walker, superintendent of Plevna schools, has seen $59,087.28 disappear from her budget. It’s the smallest of the schools that have money taken, but it’s money desper-ately needed. “Basically, that’s money that we use to generally have to pay salaries and benefits to cover expenses,” she said, “because we are at about

92 percent of our general fund last year. It’s over 90 percent of the general fund, so that plays a huge part.”

It’s money that would have gone to repair buses that are on a three-year rotation cycle due to gravel roads.

She and Schillinger met with a couple of legislators from western Montana in early April for a few hours during a tour, communicating their grievances. “They need to understand how we’re trying to protect our schools and our com-munities. It’s about our students,” Walker said.

That future legislation lies in a preliminary bill drafted by Sen. Llew Jones, R-Conrad, who drafted a proposal after visiting with administra-tors and trustees from oil and gas school districts.

One of the main points of the bill is to redirect that 130 percent cap to a trust fund for oil impacted schools that may not have enough funds for projects, such as new classrooms or a new school, due to the influx of students. There remains one proposal in which monies can be split between schools within the county. For example, when Sidney High School district reaches the 130 percent cap, funds can automatically go into the elementary district,

which is starving for im-pact funds, until the 130 percent mark is reached. Then the remainder would go into the trust fund for oil-impacted schools.

“We want it to go to other schools and school districts, and that has not been the case, and so we’re coming back to that,” Walker said.

The current rule that allows for student growth beyond 6 percent in schools to ask for addi-tional funding would be lowered to 4 percent and full funding for new stu-dents would be granted. And adjustments could be made three times a school year.

When it comes to spending oil impact revenue, the flexibility to do so would depend on the school’s performance. If the school performs adequately, administra-tors would have full flexibility to spend where they choose. Those that perform below standards would have strings at-tached to those flex funds.

Jones and his counter-parts spent several hours meeting with administra-tors and trustees from several of the major oil-impacted school dis-tricts, many of whom were eager to share their thoughts about SB 329 and what they wanted to see change.

Locals wanted to be

sure the senator absorbed their message: that their student body is highly mobile, that they’re over-whelmed by the special education population, that there isn’t enough housing (or affordable housing at that) for teach-ers, that they’re losing staff to better-paying oil field jobs.

“It was an incredible vision of what rapid growth can do,” Jones said a day after returning home near Great Falls. “There certainly are tons of challenges.”

After hearing from educators from Baker to Williston, N.D., Jones said he had a better un-derstanding of the com-plexities surrounding oil impacts, much of it being a “border issue.” Some districts struggle for revenue (Sidney elemen-

tary district) while others have plenty (Sidney High School district).

Having talked about impacts, the task now is to draw up a bill before the legislative session begins that addresses oil and gas schools’ needs but at the same time ad-dresses “poorer” schools in the west, thereby increasing the chance for passage. “We originally set up a proposed concept that seems to be well thought of, at least at this point,” Jones said, who was joined on the tour by legislative fiscal officials. “We can start drafting legislation anytime. I’ve been from Kalispell to Sidney on what to do with education so that some-body doesn’t torpedo. Soon we’ll start drafting away, mitigating impact per all these discussions.”

schools proactively make case for oil impact funds

BILL VANDER WEELE | SIDNEY HERALD

Rep. Llew Jones, R-Conrad, talks with Sidney School Board trustee Luann Cooley.

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Tappin’ the Bakken40 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 41

By Louisa BarBerSIDNEY HERALD

Take a drive through the Wil-liston Basin anytime, and one will see thousands of wellheads flaring to be rid of the tremen-dous amount of natural gas locked deep within the shale oil formations of the Bakken and Three Forks.

There’s an opportunity there, to capture the liquids in those gases, to clean the air and generate revenue for producers and royalty owners. G2G Solu-tions, an oil and gas service company based in Billings and operating near Sidney, will install and operate mobile flare gas treatment technology for oil well sites.

“The main reason we have flaring is that gas pipelines cannot be constructed quickly enough to keep up with the cur-rent drilling and completion pace in the Basin,” co-founder Brian Cebull said.

So G2G Solutions has set a goal: to get to the well site as

soon as the completion has fin-ished. The equipment is hooked up to the gas flare line and treated utilizing G2G’s mobile equipment. The captured natu-ral gas liquids, like propane and butane, are stored in a tank on location and are turned over to the operator for marketing. G2G’s innovative technology is scalable so systems can be com-bined to treat higher flow rates and taken away as the produc-tion rates decline. The mobile systems are self-contained and can be moved and set up within one day. Recovery systems are powered by treated gas residue allowing G2G to operate at the most remote sites.

Because of the rapid pace of oil drilling and production, pipelines and meter runs can’t be constructed quickly enough to collect all natural gas associ-ated with oil production. G2G’s operation reduces flare carbon emissions, NO2 emissions and flared gas volumes. The com-pany even recycles some of the gas for itself to power its own

generators. “We’re really a standalone

service. We are self-contained, we can generate our own power,” Cebull said. G2G, a relatively new company, cur-rently has nine people on staff but has established an aggres-sive growth pattern, he said.

“We see the Bakken as a great opportunity. There are many other active shale oil plays in the nation, but the Bakken was among the most active and is located right in our backyard. We see growth potential in other areas around the Rocky Mountains and the rest of the U.S. Flaring gas is a problem in search of a solution – and we are part of the solution.”

In April, G2G conducted its first major commercial deployment, the first in what the owners hope will be a long list of commercial opportuni-ties. “This is a big problem in need of a solution, but we are confident that our business, knowledge and technology will work well,” Cebull said.

For more information, con-tact Brian Cebull by calling 406-867-6700 or emailing [email protected]. Also, visit

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 43

By Steve HamelSIDNEY HERALD

Mineral rights are valuable com-modities for landowners in the MonDak region, but a thorough understanding of the leasing process is the key to maximizing the value of those mineral rights, said Timothy Fitzgerald, assis-tant professor of agricultural econom-ics at Montana State University.

“If you don’t pay attention to the provisions of the lease, you may end up with pennies instead of Benajmins,” Fitzgerald said during an April webinar on the subject.

The leasing process begins when a mineral owner begins negotiations with a landman. Landmen, who may work for developers or as independent contrac-tors, are paid to obtain signed mineral leases from mineral owners. They are usually very familiar with the details of mineral leases and recent trends. “You want to try to understand your options beforehand and minimize any informa-tional advantage the landman may have over you in the process,” Fitzgerald said.

Before beginning negotiations, Fitzgerald said it is important for mineral owners to consider both their short-term and long-term priorities

since mineral leases may last 40 or more years. There is no standard lease form and everything in an oil and gas lease is negotiable, so consulting with an attor-ney may be advisable, Fitzgerald said.

Typically, a lease includes an up-front payment, usually on a per acre basis, and a royalty clause, which specifies the percentage of the production value entitled to the min-eral owner. A lease may also include a rental agree-ment in which an annual payment is received by the mineral owner be-tween signing and production if the lessee waits to develop the minerals.

The main provisions of a lease mineral owners should be aware of are the granting clause, duration, royalty, surface damage and assignment clause, Fitzgerald said. When negotiating the granting clause, which specifies what is being leased, the mineral owner needs to be specific about what rights the les-see does and does not have. For exam-ple, a landman may want a landowner

to include water rights in the lease, which would allow the developer to use the mineral owner’s water for hydraulic fracturing. Fitzgerald advised against including water rights in a mineral lease. “Hydraulic fracturing takes a lot of water, so if you want to lease water,

you might want to lease it separate-ly,” he said.

The duration clause specifies the primary and secondary terms of the lease. The primary term is the amount of time the lease is set in stone, while the secondary term may include an option for ad-

ditional years. One provision Fitzgerald recommends mineral owners include in the duration clause is a “shut-in” payment, which the developer would pay the mineral owner in the absence of royalties if the developer choses not to market the oil produced by the well. “You want to make sure you have a shut-in payment, so you receive a little income for having those minerals, even if the producer chooses not to market

it,” Fitzgerald said.When negotiating the royalty clause,

Fitzgerald said the most important thing is to know the amount of the royalty interest. “You should not be shy about asking for more if that’s what you want,” he said. Fitzgerald said develop-ers may try to reduce royalties to cover their post-production costs, but this can be avoided if the landowner includes an overriding royalty in the lease, which keeps the landowner from being held responsible for post-production costs in-curred by the developer. “The landman is trying to get you to sign, so you can try to ask for stuff (to be included in the lease),” Fitzgerald said.

When negotiating the surface damage terms of the lease, the mineral owner has the ability to specify the terms of suface use, which could include weed control, fences, roads and water devel-opment among other things, and the terms for compensation should the de-veloper violate the terms of surface use.

The final provision mineral owners should pay attention to is the assign-ment clause, which requires the les-see to give the mineral owner written notification if the lease is transferred to someone else. “You want to know who is holding the lease at any given time,” Fitzgerald said.

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Page 44: Tappin' The Bakken Spring 2012

Tappin’ the Bakken44 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 45

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By Bill Vander WeeleSIDNEY HERALD

During his energy jobs tour in eastern Montana April 4, U.S. Sen. Max Bau-cus, D-Mont., announced that former Montana Department of Commerce director Tony Preite will serve as the coordinator to help oil-impacted areas find possible federal assistance.

Baucus said, during a conference in Sidney, that Preite’s focus will be helping communities unlock federal resources to address oil impacts.

Glendive Mayor Jerry Jimison said he feels Preite is qualified but questioned if that position is too much for one person to undertake, “Is this similar to having one guy put his finger in a dike?”

Baucus answered that Preite under-stands what federal programs will work in eastern Montana.

State Rep. Walt McNutt, R-Sidney, described Preite as creative, innova-tive and hard working. “They couldn’t have picked a better guy for the job. I’m really encouraged that Tony will head this up.”

Baucus mentioned establishing an Eastern Montana Development website which will feature information about

the various federal programs available.“If I were in your shoes, the first thing

I would want to know is what’s available in my area,” the senator said.

After hearing oil-impacted issues faced by the city from Sidney Mayor Bret Smelser and by the school from Superintendent of Schools Daniel Farr, Baucus offered a few suggestions.

The senator said since the state has a surplus, it seems to him that the areas should be receiving a larger share of oil monies. He noted legislators are employees, and people should act like employers and get organized.

“Don’t let yourselves get divided and conquered,” Baucus said.

As chairman of the subcommittee on transportation and infrastructure, Baucus hinted that he might be able to secure additional funds for the oil-impacted areas. “I’m not guaranteeing, but I’m saying there’s an opportunity there.”

He also said if he has specific fund-ing needs, he could talk to large oil company’s CEOs about providing some relief. “But I need you to help put some meat to the bones, not talk in abstracts. We love them (oil companies), but they have to share.”

Baucus was accompanied by rep-resentatives from the USDA Rural Development, Economic Development Administration and U.S. Small Business Administration.

Programs mentioned that might help the area included housing loans and the community facilities program.

Earlier in the day, Baucus announced a $1 million grant to assist with the wastewater treatment facility overhaul in Culbertson. The senator has also announced that EPA administrator Lisa

Jackson has accepted his invitation to visit Montana’s oil fields this year.

During the meeting in Sidney, Rich-land County Commissioner Don Step-pler said the county has found the area isn’t eligible for many grants because of too high of income.

“Everybody seems to think drilling has just started. The drilling started 12 years ago,” Steppler said. “We were really behind the eight ball for the first two years when we were receiving no income.”

Steppler said one of the biggest chal-lenges has been dealing with the state of Montana. Examples included taking money away from area schools and be-ing obstacles with roads.

“We ban together, but we still have 15 voters out of 100 in the state House,” Steppler said. “One or two towns can beat us.”

McNutt urged groups, such as schools, to get organized and coordinated when dealing with legislators. One goal could be to have some of the oil revenue not go into the general fund but rather into an oil-impact fund.

[email protected]

Baucus holds conference to help find oil-related solutions

BILL VANDER WEELE | SIDNEY HERALD

U.S. Sen. Max Baucus, D-Mont., comments during a conference held in Sidney.

Page 46: Tappin' The Bakken Spring 2012

Tappin’ the Bakken46 Sunday, april 29, 2012 Sidney Herald

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By Louisa BarBerSIDNEY HERALD

Since the oil fields in the MonDak region exploded a number of years ago, so have the number of truck driving jobs. Without an ade-quate pipeline system to get the sweet light crude out of the ground, out of the region and into oil refineries, oil producers must rely on other trans-portation.

Rail facilities are on the rise but so are truck drivers, which haul oil to loading facilities to await shipping through massive pipelines from the Bakken. Truck driv-ers make good money, and with the stench of an economic downturn still lingering, people are flocking for trucking jobs, including the state’s Department of Trans-portation, which has lost about 20 employees with CDLs for the riches oil field jobs. Miles Com-munity College in Miles City just added its first CDL course in January.

At Sage Trucking School in Billings, ad-ministrators are about to add summer CDL courses at Dawson Com-munity College in Glen-dive, which are set for late May through June.

“We have been dou-bling enrollments for

almost a year, producing 25-30 drivers a month, and we’re not even touching it,” said Car-mela Companion, school director of 22 years. The classes have been in the works for a while but because of a housing shortage, staff postponed plans. Staff will stay at the dorms for the term.

The driving school trains drivers for not only straight truck driv-ing but for specifics, like carriers, such as Sanjel, Halliburton and Slum-berger. Several students are not just drivers but work for these compa-nies which require their employees to have CDLs.

Companion began noticing the shortage in truck drivers for two years. “There’s always been a shortage for commercial drivers. An increase in the West has really been notable for over 18 months. The driving school has been getting more calls for drivers than the school has graduates, she said. Every month, there are more jobs being listed for truck driving, particu-larly in the tri-state area of Montana, Wyoming and the Dakotas.

Sage, which has a full campus in Missoula, em-ploys a traveling train-ing team; one will go to Dawson Community

College. Of the students, some 70-80 percent of them are looking to get into the oil field in some capacity, hoping a CDL will give them a leg up, but getting hired on the spot isn’t always the case, though many find work shortly after finish-ing schooling.

Duane Mitchell, Mitch-ell’s Oil Field Service, says the company is unlikely to hire a brand new driver because they’re probably unfa-miliar with the oil field roads. While an over-the-road driver loads, transports and unloads a truck and repeats the process, “in the oil field, you got mud, you got narrow roads, you got soft shoulders right now because of the spring, and you’ve got to know how to get on and off location causing a prob-lem,” Mitchell said.

Instead, Mitchell sug-gests new drivers learn to be water haulers because they drive the roads but “don’t have to worry about loads.”

Candidates for posi-tions who have CDLs have priority nonethe-less. A CDL gives an employee more skills and is therefore more versa-tile, as are the various endorsements.

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Need for CDLs on rise

Page 48: Tappin' The Bakken Spring 2012

Tappin’ the Bakken48 Sunday, april 29, 2012 Sidney Herald

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The “bad guy” at renewable energy conferences, Dr. Michael Economides wears that badge proudly. “The future of energy is oil and gas,” said unapolo-getically at the Montana Energy 2012 conference in Billings.

Economides, a respected energy ex-pert and chemical petroleum engineer at the University of Houston, calls the “oil crisis” notion “trite,” since it’s been used ever since the American Civil War ended when “experts” said the country was running out of oil.

The Bakken formation, he said, makes the “peak oil” idea “in shambles.”

Some 87 percent of the world’s energy comes from oil, gas and coal. Thirty years down the road, fossil fuels will still make up 87 percent, he speculates. The world is changing, and Montana fits squarely in the international arena. It is, after all, more stable than Nigeria or Iraq, and has the natural resources highly coveted by other nations, like China.

“There has never been a country in

the history of human kind that has increased oil consumption by 20 percent a year. It is something to behold,” Economides said. Oil is going to be around for a long time.

There’s a 40-year tran-sition that takes place from one energy source

to another. From fire to coal of the 19th century, oil, the premier of the 20th, to natural gas and eventually to hydrogen. Natural gas, he insists, will take over a huge share of the world energy, but “it won’t happen overnight.”

The U.S. must not worry, however, he said. Blessed or cursed, depending on one’s viewpoint, the infrastructure in this country is geared toward fossil fuels (pipelines, gas stations, etc.), so an-other country will take the lead. China, Economides proposed. The country is bringing its people into the 21st century and has the capability to take the lead in directing new energy, particularly in

expert says nation’s energyfuture lies in fossil fuels

economides

See expert, page 49

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 49

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ethanol and methanol vehicles. China has far fewer cars per capita than the U.S., making it easier for them to turn to other fuels.

Alas, the country has a problem. “Energy will be China’s chokehold because they don’t have enough indig-enous energy,” he said. In 30 years, the country of 1.4 billion people has seen its population change from 20 percent of people living in urban cities to 50 percent. The other half, of course, liv-ing in rural areas. That’s 700 million people who made the trek from rural land to cities as the country industri-alizes itself with an emerging world power economy.

“Is it any wonder why China has an insatiable appetite for energy? And not just any energy. Natural gas.” Because the country needs more energy to feed its historic growth, and because it doesn’t have the cheap fossil fuel resources in its own borders, it must search abroad. Three Chinese compa-nies have spent more than $200 billion on energy across the world.

This is a chance for the U.S. to become an exporter of natural gas

liquids; the Panama Canal, a major port thoroughfare for global trade, has already been made wider so exports can be shipped out of the Gulf of Mexico to countries like China and to Europe who will be “very interested to welcome gas from the United States,” Economides speculated.

There are, however, obstacles to using the nation’s natural resources. Somehow, somewhere down the line, Americans have lost their aggressive ingenuity that made the country a world power, and has instead shifted to China.

Splitting the audience in half, one side Americans and one side Chinese, Economides proposed a scenario illus-trating the two countries. Both want to build an energy facility.

In two years, Americans would still be thinking about how to build the facility while the Chinese would have had it already finished.

“That’s the difference right now,” he said. “The can-do attitude that has somehow migrated from this country to China. We have lost in many ways.”

[email protected]

Expert: Obstacles for using nation’s natural resourcesFrom pagE 48

SuBmIttED

Dr. Michael Economides, an expert on energy geopolitics, shared his thoughts on how Montana fits into the global energy picture to a crowd of almost 600 attendees.

Page 50: Tappin' The Bakken Spring 2012

Tappin’ the Bakken50 Sunday, april 29, 2012 Sidney Herald

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 51

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By Louisa BarBerSIDNEY HERALD

The future of energy develop-ment could lie in new tech-nology locked inside carbon sequestration and enhanced oil recovery methods.

That’s according to Dr. Ger-ald Groenewold, director of the Energy and Environmental Research Center, a non-profit organization under the Uni-versity of North Dakota in a speech during the Montana Energy 2012 conference in Bill-ings. “The simple bottom line is enhanced oil recovery,” he said, calling the opportunities for its use “tremendous.” The method gives “amazing long-term” enhancement to extract oil and gas, extending oil fields’ lives by some 25 years.

Research is already being explored in capturing carbon and recycling it as an energy source. Oil fields of the Bakken Formation could have potential as thousands of flares emit natural gas; there isn’t any

infrastructure to capture and pipe the gas to facilities for use. Groenewold said enhanced oil recovery technology is ex-pected to extend oil play in the Williston Basin for 50-60 years.

Within the EERC’s region covering Alberta to Manitoba, Canada, eastern Montana to Wisconsin and south to Mis-souri, researchers conclude it holds 927 stationary sources emitting CO2 ranging from 15,000 tons annually to as much as 20 million, resulting in about 562 million tons a year in car-bon dioxide emissions.

While scientists work toward a way to capture the gas, there comes challenges. Current “proven” technology takes up to 30 percent of existing facilities’ power to capture the carbon dioxide, so the research center is working with indus-try leaders to find a more cost-effective way to capture it.

EERC is evaluating more than 6,000 fields in its region using two methodologies, enhanced oil recovery and

volumetric. The EOR looks for possible use on 160 fields with sequestration capacity of about 1 billion tons; another 3 billion barrels of incremental oil production. The volumetric approach, which determines the physical size of the reser-voir, pore volume within the rock and fluid content within a void space, was implemented on thousands of fields, result-ing in potential storage capac-ity of more than 10 billion tons of recoverable oil. “We found some very promising opportu-nities there,” Groenewold said. “EOR really looks like the most promising activity right now.”

Montana’s potentiaLIn an eastern Montana study

for enhanced oil recovery pos-sibilities, 10 eastern Montana fields outside the Bakken were found to hold 425 million stock tank barrels of oil, more than any other selected areas except in oil and gas rich Alberta. To recover that oil using CO2, an estimated 3,400 billion cubic

feet of the gas is needed, Groe-newold said.

Outside of the Bakken in North Dakota, the 28 fields selected for study have an esti-mated 262 million stb with 2,095 Bcf carbon dioxide needed for enhanced recovery.

“We think there’s enormous opportunity in Montana,”

Groenewold said.

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SEE Changes, pAgE 52

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Tappin’ the Bakken52 Sunday, april 29, 2012 Sidney Herald

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and limited. Today, with oil prices hovering around $100 a barrel, CO2 capture is ubiquitous, and there are revenue streams for both oil pro-duction and CO2 storage. “CO2 is really getting attention and investment and many, many more reservoirs are profitable,” Groenewold said.

The scientist said he wasn’t “the least bit wor-ried” about running out of oil.

“They’re (geologists) always wrong, and the simple reason is they’ve never understood what the price of oil does. Folks we are not out of oil. We are not short on molecules,” Groenewold, said. “We are short on rate and what determines rate is price and price incentivises expensive research, which facili-tates going after harder-to-get oil. So as the price of oil goes up, I applaud

because that means we’re getting closer and closer

to energy security in this country.”

from page 51

Change: revenue streams available for storage

Page 53: Tappin' The Bakken Spring 2012

Tappin’ the Bakken SIDNEY HERALD SUNDAY, APRIL 29, 2012 53

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The Bakken has long been known to contain vast oil reserves, but recovering those reserves was not possible before horizontal drilling technology.

That technology has gone a step further with multi-stage fracturing, which has helped oil developers get more productivity out of their Bakken wells and has extended the boundaries of the formation. “This stage fracking is more precise,” Continental Resources area production manager Russ Atkins said. “You’re just placing the sand more precisely in the rock at pre-measured intervals, and the smaller that is, the better we seem to be getting as far as response. So you’re getting more of the rock opened up and cracked, and those small fractures connect.”

With hydaulic fracturing, a gel made of pressurized water, sand, an organic material called guar and small amounts of chemicals are pumped into the ground. Guar, a thickening agent also found in ice cream, thickens the water so it is capable of carrying sand. The water pressure creates fi ssures in the rock, which are held open by the sand, allowing oil and gas to escape and fl ow up the well.

Multi-stage fracturing divides the hor-izontal well into a number of stages by inserting swell packers, which seal off sections of the well, allowing engineers to deliver sand and water to specifi c sections. “Part of it is we’ve gone from a fairly simple big, long, open hole and just pumped sand and water into that open hole, and sand and water goes to whatever fracture was there,” Atkins said. “Now we’re confi ning that stream we’re using to very small intervals. The fl uid is the same, the sand is the same, the equipment we use to do it is

the same. It’s how we complete the well. Those swell packers at small intervals, that seems to be the real key.”

When Continental Resources began using multi-stage fracturing, it sepa-rated its wells into 10 stages of about 1,000 feet. Now it uses 30 stages with a swell packer approximately every 300 feet, something Atkins said he didn’t envision when the company began us-ing multi-stage technology. “When I was told about it, I was like, I don’t know how you’re going to run a piece of pipe with rubber on it and swell it up to hold tight enough to divert thousands of pounds of pressure,” Atkins said. “I just said I can’t see it. I’ve never forgot that, so if somebody comes up with a new idea now I’m like, remember the swell packer Russ, because you were wrong there.”

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Page 54: Tappin' The Bakken Spring 2012

Tappin’ the Bakken54 Sunday, april 29, 2012 Sidney Herald

By Louisa BarBerSidney Herald

William Kovacs warned the 200-plus audience members at the Montana Energy 2012 Conference in Billings that proposed regulations by the Environ-mental Protection Agency will hit the state hard.

The federal rules for carbon emis-sions limits how much CO2 companies can emit as the country works toward producing cleaner air. “You are go-ing to be hit harder as a state by these regulations because of the energy,” said Kovacs, senior vice president of the En-vironment, Technology and Regulatory Affairs division of the U.S. Department of Commerce.

Not only does the state produce oil, gas and coal, it has businesses in manu-facturing that build materials used to support the state’s energy industry, particularly in the booming Bakken.

The cost of such regulations and oth-ers at the federal level are strangling American businesses, Kovacs said, costing them hundreds of millions of dollars. In 2010, he noted, 30 more rules were added under President Barack

Obama, which have cost the business community at least $100 million. The cost of over regula-tions, meanwhile, is at a staggering $1 trillion annually.

He blamed environ-mentalists behind the push for federal regula-tory policies aimed at

cleaning the environment. It’s not just clean air but clean water. “We have a problem here. The regulations are not very sensitive to economics,” he said, an issue the Department of Commerce has fought over since the 1970s when water quality issues arose.

The regulatory process, Kovacs said, can be manipulated when environmen-tal groups sue agencies, like the EPA, and go after any front. “Don’t think that coal’s being picked on, or gas is being picked on, everything’s being picked on,” he said. “It’s an attack on energy development and industry.”

The commerce official argued that the billion-dollar stimulus package wasn’t necessary if only the permitting pro-cess for energy projects like coal-fired

power plants and pipeline projects like the Keystone XL would provide thou-sands if not millions of jobs. “We can’t have environmentalists trumping every economic policy,” Kovacs said.

In addition to problems in the United States, there stands a global stumbling block. Other countries are not as con-cerned about the environment as those in the U.S. Pointing to China, the federal

official, said it is futile to have environ-mental regulations, which stifle eco-nomic growth and at the same time are thwarted by phenomenal development.

“While we’re cleaning our air up, they’re dumping more on there,” Kovacs said. “We’re trying to compete with them, they’re taking jobs, and now they’re sending the pollution back. This is a circle we have to break.”

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Page 55: Tappin' The Bakken Spring 2012

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By Louisa BarBerSIDNEY HERALD

Here in the oil patch, natural resourc-es are a precious commodity. Water is the new gold. But so are gravel and sco-ria, two mineral types that have become highly valuable.

“This is very important to the whole Bakken Formation. How are they going to get in and out of these drill sites?” says John Twedt, Century Companies’ regional manager for the Williston Basin Group. The business based out of Lewistown has been doing work in eastern Montana since 1976, taking its portable hot plants to cities and towns to take care of asphalt and concrete needs. Twedt’s been in the gravel busi-ness long enough to know how big of a demand the resource has become.

For years the Yellowstone River Basin was ripe with gravel sources, so much so that no one could fathom they could be exhausted. What no one anticipated was how much of a force the Bakken would come into play and the Williston

Basin oil boom. Twedt grew up in Glendive. He recalls

the 1950s when scoria was the material of choice for oil well sites and the roads leading to those sites. It was more eco-nomical than gravel, being suited to the abundance of clay soils synonymous with oil wells. Scoria was so ample, it was almost free. One could easily find “big knobs” of the baked ceramic clay, but as a result of the activity, scoria’s become more scarce, and people are taking a hard look at gravel, a more expensive material but better long-term product.

As a result, the resource seems to be on the way to drying up. Because North Dakota has poorer quality and limited gravel resources, operators look to Richland County for quality gravel and scoria. Montana aggregates, which have been crushed and processed for road construction projects, are trucked 75-100 miles into the North Dakota oil patch. The materials are the basis for most road construction.

Needs of oil industry putgravel, scoria in high demand

SEE MateriaLs, pAgE 58

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Tappin’ the Bakken56 Sunday, april 29, 2012 Sidney Herald

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Materials: Counties compete with oil companies, others for gravel It turns out that Richland

County isn’t just rich with agri-culture or oil or even wildlife, it’s also rich with gravel sourc-es. The ideal aggregates have shown to be prevalent along the Yellowstone River and to some 10 miles west into the county. Traveling any farther, gravel becomes scarce and in poorer quality.

“It’s just blossomed, and huge quantities of gravel are just go-ing out,” Twedt said. Fairview has become a hot spot. Three years ago there may have been just one gravel pit, but travel along Montana Highway 201, and traveling can spot about a half-dozen. Those in the gravel business say it’s unheard of to be that concentrated.

But demand is there, and companies are struggling to keep up. One company, accord-ing to reports, had anticipated a gravel pit between Sidney and Fairview would produce years of gravel, but in a year, the company’s gravel crusher

didn’t move, churning out thousands of tons of gravel and exhausted the pit in that year.

Century Construction pro-duces somewhere under 500,000 tons of hot mix every year. Up until 2012, employees bought all of its gravel products from companies like Sidney’s Franz Construction or Fisher Sand and Gravel in Glendive, whoev-er was nearby, and focused on producing asphalt and concrete with its portable hot plant. However, Century recently bought its own crusher that it can use when it doesn’t have access to the materials that it used to.

“It’s really wild,” Twedt said.

CoMpetitionThe area’s appetite for ag-

gregate is fueled by intense oil production. So much so that counties struggle to keep up with maintaining abused roads, while at the same time picking up arterials in newly developed areas. To do that, counties must buy gravel to

crush and make their own con-crete or alternative road base, something Richland County has been experimenting with for a number of years.

But there’s a problem. Coun-ties must compete with oil companies and other busi-nesses for the gravel. Richland County pays roughly $1 per yard, though it varies from contract to contract; oil com-panies, however, can shell out $3-9 a yard, leaving gravel pit owners wanting more from the county. “You can’t really blame the landowner,” Steppler said. “They may own the gravel but not the minerals so this is their only way of getting a piece of the oil revenue.”

While the county’s gravel numbers have doubled, pres-sure from owners grows. Even-tually it will have to bow to pressure and pay much more, adding to strain already felt by oil impacts. “We’re already be-ing asked from landowners to pay more,” Steppler said.

DeQ frustrationSome in the gravel industry

say they’re irritated by vexa-tious regulations enacted by the Montana Department of Environmental Quality, which regulates gravel and scoria permitting by issuance of the Opencut Mining Act.

Under the law, operators must first apply for a mining permit with the department by filling out an application with all required information

such as the location of the pit, estimated volume of materials being removed and a statement containing the applicant’s legal right to mine the land. The application must then be accompanied by a number of materials, including written documentation that the land-owner was consulted, a bond to cover reclamation that meets its own requirements and a

froM page 56

See DeQ, page 59

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Tappin’ the BakkenSIDNEY HERALD SuNDAY, ApRIL 29, 2012 59

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statement from a local gov-erning body that certifies the operation complies with the applicable local zoning regula-tions. There are several more requirements, all of which can be found online.

Travis Peterson, dispatcher for Sidney Red-E-Mix in Sidney, says company officials are irri-tated because of the time-heavy process to complete the 50-60 pages of application data only to have it rejected two to three times.

He says he’s frustrated by DEQ officials who are allowed 45 days for the first response, (known as a “complete letter”) and then send another letter (known as a “deficiency letter”) later to inform the company the application was drawn up incorrectly. And most of the time, the mistakes are minor technicalities that don’t change the intent of the plan but each review is allowed 30 days, Peterson said. “The problem is the DEQ won’t respond to questions verifying the cor-

rect procedure. In fact, it states on the DEQ website not to call with questions regarding permit applications. They just tell you to fill it out, and if it is wrong they will send it back. As public officials, paid with mining royalties, they should strive to work with the public not against them.” Without any informal feedback it usually requires three submittals for approval, which wastes both time and money, not only for operators but also the state.

While Montana’s regulations become more intensified and the paperwork more strenu-ous, it seems North Dakota is making things easier; operators notify the state about a loca-tion, fill out a set of forms for permitting and it’s finished. “They’re allowing development and encouraging business. Anybody can look at Watford City, Dickinson or Williston and see way more activity than there is in Montana, partly due to the DEQ” Peterson said.

Sidney Red-E-Mix expressed frustration to the DEQ recently regarding the permitting time frame and was told, “You should plan better.” Peterson reflected “that it is hard to plan

for a gravel volume demand that quadruples in a time span of one year, and the arduous permit process leaves little flex-ibility to respond to demand quickly. We hired a retired DEQ employee as a consultant for our last couple of permits, and even he was exasperated by the process and lack of DEQ coordination.”

A responseIn an interview with the

DEQ, Chris Cronin, DEQ Open-cut Mining Program supervi-sor, defended the state agency, noting the administrators only follow the law passed by legisla-tors and signed by the governor.

In 2008, during a legislative audit of the program to provide direction on how to better oper-ate, about a half-dozen law suits were filed against the DEQ, with an eventual ruling that the agency must meet application time frames in the Opencut Mining Act.

So in 2009, the act was changed; operators must submit a public notice for any residents within a half mile of the proposed gravel pit, and it shortened the time frames to review applications. “They

want their permits in a timely manner, and the tradeoff is we have less time to do it,” Cronin said, “and the only way that can work is if the operators shoulder greater responsibility for doing their applications.”

Cronin said changes in regu-lations haven’t occurred since 2009, but the way the depart-ment operates has. Its website, he said, has tools, forms and tips to provide guidance. In ad-dition, operators can submit a one-page form requesting a pre-application meeting in which the DEQ sends a scientist to meet with the operator and of-fer site-specific advice.

During 2010, DEQ received roughly 20 applications a month. That number rose to 25 a month for 2011 and has since grown to more than 30 a month. Demand for pit approval has risen, but the agency has less time to get work completed. “We have less time to do our work. We can’t hold every-body’s hand the way it was done in the past. So it’s a new world,” Cronin said.

He argues the time before it’s approved depends on the opera-tor. The agency has five busi-ness days to determine whether

an application is complete. If not, it sends an incomplete letter identifying what’s wrong; if so, it issues a complete letter and advises whether to do a public notice.

The agency has 30 days to inspect a site with a scientist and administrator reviewer, notifying the operator where the permit application doesn’t meet requirements of the Opencut Mining Act. “When we send a deficiency letter, some get on it or some wait,” Cronin said. Once the DEQ is provided a revised application, it has 10 working days to review and ap-prove and issue a permit within another 10 working days, otherwise the operator is given another deficiency notice with a note that “strongly advises” to use a check list.

Cronin said the agency fre-quently receives applications that haven’t been thoroughly reviewed and filled out prop-erly, because operators are in too much of a hurry to keep up with gravel demands.

The agency encourages op-erators to do their own internal review of the permit applica-tion before turning it in.

DeQ: response madeFrom pAge 58

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Tappin’ the Bakken60 SUNDAY, APRIL 29, 2012 SIDNEY HERALD

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