The recent crude oil production decline in the Bakken has given some cause to worry that the “Good Times” are ending.  The failure to hit oil production targets in October and November 2012, have caused some initial concern.  This decrease in production, the first in 19 months, was blamed on weather conditions, as well as efficiency measures of many producers.

We understand that Minot now has over 3,400 hotel rooms, with occupancy rates around 50%.  Some hoteliers are concerned.  The Bank of North Dakota is no longer making loans on hospitality properties.  The rig count is down from a record high of 218 rigs in May 2012.  In December 2012, the rig count was 184 rigs in the Baaken.

What does this mean to you and your business?  Well………….. go slow, the end of the world is not in sight!  That is the first thing that you must know.  Remember, for everything that goes up, it also must come back down—a simple law of physics.  OK, now, my business—what am I to do to address these concerns?

The first consideration is not to panic. Carefully look at where you are and where you are going.  Perhaps you may need to get out of some long term contracts.  Reducing inventory that is not selling and “trimming” lines that are no longer profitable are ways to reduce costs.  Look at employee expenses—if everyone is not busy, consider either realigning skill and tasks, or reducing staff.

Now is the time that when professional business consultation really makes money.  Yes, there are fees involved, however, those fees will normally save you many times the value of the fee with the results attained by the consultants’ recommendations.  Remember, do not panic, however, carefully review where you are in your business cycle and make prudent adjustments to continue forward.

In fact, the oil and natural gas industry in Illinois supports what would be the most comprehensive regulatory package for hydraulic fracturing in the nation.

Just like everyone else in Illinois, the oil and natural gas industry wants safe and responsible development. That means not only operating under incredibly high standards, but also establishing operational baselines through state regulation.

Here are a few of the key provisions that the industry supports:

* Disclosure of additives used during hydraulic fracturing.

* Pre-notification of hydraulic fracturing to affected surface owners.

* Access to trade secret information by health care providers.

* Conducting baseline water testing prior to hydraulic fracturing activities.

* Identification of existing wells in close proximity to planned hydraulic fracturing activity.

* Reporting of the type of base fluid used.

* Reporting of the volume of flowback at job completion.

* Disclosure and reporting of disposal methods of flowback.

* Notification of public of planned operations in local newspaper of record for the area.

If enacted, these provisions would establish a regulatory framework that promotes responsible development, public awareness and the opportunity for strong economic growth.

In fact, a report issued this past July by the Natural Resources Defense Council outlined policy recommendations for regulating hydraulic fracturing. What becomes evident from reading that report is that the industry’s proposal in Illinois would be the most comprehensive in the nation.

This is just one of many examples of how the industry in Illinois is engaging in a good-faith dialogue with the public, environmental organizations and government officials.

One would think that industry’s willingness to proactively address concerns would lead to swift consensus on a common sense regulatory framework proposal. Yet the NRDC wrote on its blog recently: “The oil and gas industry would recommend, well, quite frankly, that nothing be done — as demonstrated by industry representatives’ most recent actions.”

This is a classic case of moving the goalposts. Now that the industry has met (and even exceeded) the benchmarks established by environmental organizations, those same groups are trying to change the rules of the game. They even falsely suggest the industry does not support regulation at all, and that Illinois needs a moratorium on hydraulic fracturing until adequate regulations are in place.

But if the industry is proposing the same regulations that opponents said are necessary, then what’s the justification for a moratorium? How can we ever reasonably define what is “adequate”?

Exploration and production activities are capital-intensive, with costs in the millions of dollars for each project. Decisions on where to invest are often made as many as 18 months in advance. Once those investments are made, they cannot cost-effectively be uprooted and moved into Illinois if the state later decides to allow development.

A recent report from the Illinois Chamber of Commerce found that responsible shale development could create more than 47,000 jobs in Illinois and generate up to $9.5 billion in economic activity. A moratorium, however, would be a signal to the industry to take these jobs and investments somewhere else.

The oil and natural gas industry in Illinois is committed to strong regulations that provide our state with economic opportunities and environmental safeguards, a commitment we look forward to keeping well into the future.

Source:  The State Journal Register www.sj-r.com by guest contributors:  Brad Richards, Executive Vice President of the Illinois Oil & Gas Association and Dan Eichholz, Associate Director of the Illinois Petroleum Council.

Ness spoke before oil industry officials and wildlife conservation representatives on Tuesday to address some of the concerns.  A spokesman for the state chapter of The Wildlife Society believes that oil development in general is damaging wildlife and its habitat.  While development of the pipeline infrastructure was high on the list of solutions, other voluntary measures included locating oil wells, related facilities and roads in “clustered configurations” outside of wildlife sensitive areas to lessen disturbance to animals and curb the amount of habitat lost to oil exploration.

It’s the director of the state Game and Fish Department, Terry Steinwand’s belief that wildlife and hunting opportunities can coexist with oil production in North Dakota; although some of the conference believed that more stringent regulations in place — that are not voluntary — need to be in place to protect the state’s wildlife and land.  According to Steinwald, “Is it a perfect scenario? No it’s not, but it is a workable scenario.”

North Dakota’s Game and Fish Department has actively been mapping sensitive wildlife habitat areas (mule deer, bighorn sheep, sage grouse, and pronghorn antelope) for over a year in the oil patch.  The North Dakota Petroleum Council, which represents over 400 companies working in te Bakken states that a majority of the employees in the energy industry are sportsmen and that most of their companies would adopt measures to protect wildlife.

Tulsa, Oklahoma based Oneok Partners LP reported this week that their proposed $1.8 billion oil pipeline from North Dakota to Oklahoma, known as the Bakken Crude Express Pipeline, has been derailed due to the company’s inability to secure enough commitments to transport Bakken crude.  While the overall outlook for crude oil supply is healthy from the Bakken Shale in western North Dakota and eastern Montana, Oneok was unable to secure enough long term commitments from producers for the 1,300 mile pipeline.  The Bakken Crude Express would have transported 200,000 barrels per day.

In spite of this, Oneok still has forward movement on $4.8 billion of announced natural gas & natural gas liquids projects; with the majority of those projects in the Bakken.

Energy & Natural Resource:

I am not ashamed to call Montana the Treasure State. With an abundance of natural resources that other states can only dream of, Montana has the potential to supply energy and natural resource commodities to our entire nation and the global economy beyond. We should be on the cutting edge of developing new technologies in wind energy, clean coal, oil and gas development. Utilizing our natural resource wealth translates directly into new jobs for Montanans and a more robust tax base.

I was the original driving force behind the push to develop the Otter Creek Coal tracks as part of the New World Mine agreement. And I’m ready to do more. There are many other opportunities for oil, gas, coal, and wind development in our state that have the potential to revolutionize our economy.

Oil & Gas:

Wyoming, with 46 rigs and North Dakota, with 150, have been able to benefit from the extensive development of their oil and gas resources, Montana’s oil and gas development has remained stagnant at a rig count of eight.

We must utilize our oil and gas resources to their full extent and work to minimize frivilous lawsuits and restrictive federal regulations that inhibit development.

The development of Montana’s oil shale is essential to the growth of the industry and to increasing the availability to high-tech, high-wage jobs for Montanans. The use of hydraulic fracturing, known as fraccing, to efficiently gain access to larger amounts of oil in Montana has opened the door to energy supplies that were formerly unavailable.

From a technical perspective, a screen-out refers to a condition where continued injection of fluid during the horizontal fracture requires pressures that exceed the safe limitations of the wellbore or wellhead equipment. Operationally, this causes a severe disruption in fracturing operations in horizontal wells and often requires cessation of pumping and cleaning of the wellbore before resumption of operations. Screen-out is an operational issue and does not necessarily mean damage to over all well productivity.   Many wells end up being robust producers after a screen-out.

The primary cause of a screen-out during the fracturing process is a blockage to the movement of proppant inside either the wellbore, perforations or the fracture itself. The details and frequency of screen-outs are largely influenced by the type of well completion.  Severity and consequences of disruptions caused by screen-outs in horizontal wells depend on the type of completion.

From a time is money concept, the rework time delays the successful completion of the well.  Because multiple crews are on site as a well is brought to production, their down time resulting from the screen out can have significant financial consequences for the well owners.

For Bakken well, horizontal fracturing is not a single event, but rather a series of successive frack stages that need to be performed according to a carefully coordinated schedule.  Any disruption in one fracturing operation jeopardizes the timely completion of all the subsequent fractures and, ultimately, the start of well production.

Schlumberger Oil Field Glossary:  A condition that occurs when the solids carried in a treatment fluid, such as proppant in a fracture fluid, create a bridge across the perforations or similar restricted flow area. This creates a sudden and significant restriction to fluid flow that causes a rapid rise in pump pressure.

Well, not being a scientist I have to base my opinions on information I get from trusted sources, as do most of fracking’s detractors. And based on that information my conclusion is that, just like the Keystone pipeline opposition isn’t about pipelines, coal dust alarmism isn’t about coal dust, and megaload obstructionism isn’t about megaloads; most of the fuss about fracking has little to do with the actual process and more to do with getting rid of fossil fuels.

Let’s start with a simple, verifiable fact: In its 60-plus-year history, there has been no generally accepted peer-reviewed scientific study demonstrating negative impacts of fracking on water supplies. That’s zero, zip, nada. EPA administrator Lisa Jackson — hardly a fossil fuel advocate — told Congress just last year that there have been “no proven cases where the fracking process itself has affected water.”

Self-serving studies

Sure, there are plenty of studies “proving” that fracking is either essential to mankind or, alternatively, its inevitable downfall. Most of these tend to be a tad self-serving. As the old proverb says, a lie will go ’round the world while the truth pulls its boots on.

But what have those who are actually responsible for public safety said about fracking? Dimock, Penn., and Pavillion, Wyo., have been under the fracking microscope for years and are good indicators.

Residents in Dimock reported dirty water that was famously ignitable at times. But both state regulators and the EPA said claims relating those problems to fracking were unfounded, and the water posed “no immediate health concerns.”

My humble abode is also over an aquifer that gets cloudy as melted snow enters the sandstone structure. It looks awful but is perfectly drinkable. We deal with it. And I can remember stories as a kid in northeast Montana of burning stock ponds as naturally occurring methane bubbled to the surface. It should come as no shock that methane gets into water wells in areas where there are also gas wells. That’s where the gas is. Relating the two is a common but dangerous trick that tries to confuse coincidence and causation. It’s just like my being cranky on days that end in “Y” doesn’t necessarily mean the letter “Y” makes me cranky.

In the Wyoming case, the EPA came out with a 121-page draft report claiming that fracking contaminated ground water. But the report has not yet been peer reviewed and appears to leave some significant questions. It tested wells where hydrocarbons were already present, and that were far deeper than drinking water wells. Potential contamination could have come from “legacy pits,” or even the testing process itself. And it ignored the fact that organic chemicals were present in local water supplies long before fracking was employed. In short, the jury is still out on this one.

A final report on fracking’s impact on drinking water is due later this year. But it’s likely to be anticlimactic. Fracking solutions are typically over 99 percent water and sand. If you’re worried about the remaining 1 percent, you can look up individual well ingredients yourself at fracfocus.org.

Fossil fuels foes

So why all the fuss if the data is not all in, and what data there is proves no harm? It’s a fuss because for the zealots, this argument is about fossil fuels and not fracking. Just like the Keystone pipeline, coal dust, megaloads, and so many other battles, this is about shutting down the fossil fuel industry, and facts are the first casualty in what is essentially a highly coordinated, well-financed public relations campaign.

It’s also counterproductive. Cleaner, cheaper natural gas is rapidly replacing coal in the nation’s energy grid, already accounting for about 25 percent of power production. That would not be possible without fracking. If you care about global warming and affordable electricity, you should be a fracking fan.

And finally, fracking is good for Montana. It brings in jobs, prosperity, and tax revenues. The economic benefits are measurable and immediate. And the smiling faces of mothers and fathers in Eastern Montana watching their kids put on their boots and go to high paying jobs close to home are a welcome change.

*SOURCE:  Guest Opinion www.billingsgazette.com April 14,2012, Carl Graham is CEO of Montana Policy Institute, a nonprofit policy research center in Bozeman

“America is Addicted to Oil.” The phrase has been repeated so often it’s accepted as a fact, but is it? Or, is the word “addiction” simply distracting us from what should be obvious to everyone? Like it or not, oil is the lifeblood of the modern world. It spoils us in more ways than we can comprehend. Yet, we still believe oil is “bad,” “is destroying the environment” and that companies that produce oil are “greedy gougers making record profits.” That’s what we have been told, but is it true?

With few people willing to take a realistic, sobering look at our oil use, the idea of “spOILed” was born. After years of study and analysis, filmmaker Mark Mathis became alarmed at the deception taking place in the U.S. and around the world. Much of the deception was/is intentional and systematic. Varied groups, all pursing their own individual interests, have misled us. The end result is that most people are not only deceived about their oil use, but also completely unaware of what is likely to be the biggest problem ever faced by humanity. Where are our “leaders” on this issue? Instead of giving people the truth about limited options in lessening our oil consumption and paving the way toward real solutions, politicians have actually made the problem worse.

Prepare to be shocked, angered and more than a little concerned. The road sign for our future: “Rough Road Ahead.” Visit spoiledthemovie.com to learn more.

Quicklink to Screening locations & times.

Can’t make a viewing ?  Order the DVD ! 

With the rapid industrialization and expanding populations of emerging nations like China and India, the world is now experiencing its greatest ever need for coal, oil and natural gas. All of this  places an increasing burden not only on on global energy resources but on the environment as well.  In a May 2009 report from the US Energy Information Administration (EIA), a governmental source providing official energy statistics, the total world consumption of marketed energy will increase by 44% over the 25 year period evaluated (2006 to 2030).

China and India will most likely continue to be the fastest-growing global economies based on their burgeoning populations.  As a result, they will be the largest consumers of energy for several generations. Since 1990, energy consumption as a share of total world energy use has increased significantly in both countries. In 1990, China and India together accounted for about 10% of the world’s total energy consumption.  By 2006 their combined share was 19%.  With continued robust economic growth, their combined energy consumption is projected to grow to 28% of the world’s energy consumption in 2030. In contrast, the United States’ share of total world energy consumption will drop from 21% (2006) to @ 17%  by 2030, according to the EIA.

While the US is often viewed as the BIG PIG when it comes to energy consumption, robust growth in Asia will increase its energy demand by 104% from 2006 to 2030. Part of this increased demand will be met by China through its ten year energy development plan which includes the construction of a new coal fired power plant every week.  In reality the nation has little choice as it continues in its quest to satisfy the demand for energy as a direct result of its population urbanization and societal industrialization.  Other global regions projected to substantially increase their industrial capacities and  thereby their demand for energy include  the Middle East, Central and South America (by 60%) and Africa (by 50%).

Although oil is and will continue to be the predominate fuel, natural gas will come to play a more significant role in the generation of electricity worldwide. This energy source is more efficient, cost effective and emits less carbon in the consumption cycle than other fossil fuels. The EIA sees total natural gas consumption increasing by an average of 1.6% per year which will mean growing from a usage total 104 trillion cubic feet in 2006 to 153 trillion cubic feet in 2030. This increase will be further fueled by continued up swing in world oil prices.  To bring this all a little closer to home here in Billings, MT….It’s estimated that 20 new power generation plants fueled by natural gas, are slated to be built in eastern Montana and eastern North Dakota over the next few years. these plants will be powered by the natural gas currently being burned off on Bakken wells in the Williston Basin area.

According to the EIA, the combination of natural gas and coal account for just over 60% of total world electricity generation. These two fuel sources will continue to be the world’s most important components of electrical generation with an increase to 64% of global supply by the year 2030, according to the EIA.  While Asia and parts of Europe have substantial coal reserves (primarily in Mongolia and Russia), there is a general lack of infrastructure to support the harvest of these vast natural resources. Thus China and Japan are beginning to turn the power of their purse strings towards coal sourced from Montana and Wyoming with a  tremendous willingness to pay premium prices for this Treasure State fuel source.

1. Know what you own!

While it may seem simplistic, this is an obvious issue that many overlook. Mineral title can often become complex and convoluted over multiple generations.  Knowing your mineral ownership and having the documentation to prove it is your primary defense against potential problems related to getting paid properly for any mineral production that may occur.

2. Stay on top of taxes

A common mistake mineral rights owners make is failing to account for taxes. In many states, producing minerals are taxed at the county level with an ad valorem (property) tax. Be sure to know your tax liability and keep current on your obligations. In some areas of the country, government entities have been known to foreclose on mineral owners as a result of delinquent taxes. Also, don’t forget the income taxes that will be due at the federal and possibly state levels. Additional information can be found in this article on Royalty Taxes.

3. Understand the oil and gas production process

Too many owners lack a basic understanding of what it takes to develop oil and gas. Take time to become familiar with the production and marketing processes. Oil and Gas Production in Nontechnical Language provides a good overview of the process.  Knowing some of the lingo and understanding the basics of the industry can go a long way in negotiating a lease. Visit the MineralWeb oil and gas glossary for definitions of common terms.

4. Negotiate a quality (and reasonable) lease

If you’re fortunate to be approached about leasing your minerals, it only makes sense to negotiate the best deal possible. Often mineral owners focus too much on the lease bonus amount, missing other important elements of a well rounded lease. The key to maximizing your mineral assets is focusing on the terms of the oil and gas lease, the royalty percentages, and the lease bonus. Remember, there are no “standard” leases. See the short article on Common Oil & Gas Lease Mistakes for help with this key part of mineral ownership.

5. Use the Internet as a resource

The Internet is full of useful sites specifically designed for oil and gas mineral owners. For instance, you can find out about individual well production by visiting How to Verify Your Oil and Gas Production Volumes. Another great resource for in-depth coverage of mineral rights related issues is Geology.com.  MineralRightsForum.com is a leading national forum for oil and gas mineral rights owners. The site features a lively forum where you can ask questions about anything related to mineral rights.

 6. Keep past records of your royalty statements

Once you receive royalty checks from production, it’s a good idea to save these records. This will help you when filing taxes, recording past production, and will even help you value the property should you desire to sell your mineral rights.  If you have substantial interests, using a spreadsheet or online management software may be for you.

 7. Stay informed of current activity in your area

Mineral owners will benefit from maintaining knowledge of drilling operations.  Timely information is key when negotiating lease terms. The websites of the various state oil and gas regulatory agencies often provide data on drilling permits, along with other informative data.

 8. Plan for the next generation

Preserve the value of your mineral rights by minimizing further fragmentation of interests to multiple heirs. Seek to pass along whole mineral tracts instead of sub-dividing them further.  One alternative is to pass the mineral rights on to a child who is financially savvy or has a background in real estate, while passing other children different assets.

9. Be “findable”

More often than not, oil companies seeking mineral owners will know who to contact through their search of the county property records. Make sure you are reasonably locatable. Are their differing variations of your name in the public record? Has there been divorce or marriage that affects your name? Are you known everywhere as Bill, but in the record as William? Have you married several times? You get the point. Consider whether a reasonably diligent person could locate you through the public record.

10. Visit MineralWeb.com for further details on mineral rights

MineralWeb.com brings news and information on mineral rights. Our site is regularly updated to bring you insight into the world of oil and gas leasing and mineral rights news. Call us at 713-893-4476 during normal business hours or email us at admin@mineralweb.com

 ****************************************************************************************

Get a Cash Payment for Your Royalty

If you own a producing royalty you can receive a no obligation cash offer for your producing royalties, from the MineralWeb experts.

About the Author

Kenneth DuBose is the past President of Cheyenne Minerals Inc., an independent oil and gas company operating in Texas, Oklahoma, and Mississippi. He began his energy industry career with ARCO Oil & Gas Company, performing oil & gas reservoir studies.  As natural gas deregulation approached the industry in the late 80’s, Mr. DuBose directed development of natural gas storage projects along the U.S. Gulf Coast with Tejas Power Corp. He was a founding member of U.S. Minerals, (acquired by Novistar, a unit of Torch Energy in 1999) a provider of internet based education for America’s oil & gas royalty owners.  Mr. DuBose holds a Bachelor of Science in Petroleum Engineering from Mississippi State University, later pursuing graduate studies in business at Baylor University. Mr. DuBose has served on various industry steering committees, nonprofit boards, and is an active member of the Society of Petroleum Engineers, the National Association of Royalty Owners, the American Association of Professional Landmen, as well as being a Registered Investment Advisor. He is currently the principal of http://www.mineralweb.com/ a website that offers insight for mineral rights owners.

Legal

The material contained herein is not legal advice and is provided “as is” and without warranties of any kind either express or implied. The author does not warrant or make any representations regarding the use or the results of the use of the content in terms of their correctness, accuracy, reliability, or otherwise. No content or other material presented herein is intended as legal advice. Nothing contained herein should be construed as legal advice. We recommend that you seek qualified legal counsel on matters which you consider important to you. To the fullest extent permissible pursuant to applicable law, the author disclaims all warranties, express or implied, including, but not limited to implied warranties of merchantability, fitness for a particular purpose and non-infringement. The author does not warrant the accuracy, completeness or usefulness of any information contained herein. Under no circumstances, including, but not limited to, negligence, shall the author be liable for any special or consequential damages that result from the use of any material contained herein, even if the author or its representative has been advised of the possibility of such damages.

* This articles was licensed under the Creative Commons and the author, Kenneth DuBose is the inspiration and creation for the above work product solely.

So what the heck is frac’ing anyway? For more than half a century America’s energy producers have relied upon hydraulic fracturing as a way to enhance well performance, minimize drilling, and recover otherwise inaccessible resources in domestic oil and natural gas production. The first commercial “frac job” occurred in 1948. By 1988, this innovative technique had been utilized nearly a million times and it’s estimated that roughly 90% of domestic wells in operation today have been frac’d. America’s oil & gas producers continue to applied this proven technique in innovative ways to unconventional formations, such as “tight” gas sands, shale deposits and coalbeds.

According to the American Petroleum Institute hydraulic fracturing now accounts for 30% of our domestic oil and natural gas. This technique has facilitated the extraction of more than 600 trillion cubic feet of natural gas and seven billion barrels of oil. The National Petroleum Council projects that 60% to 80% of all wells drilled domestically over the next 10 year will require fracturing to remain viable

So hydraulic fracturing is not new – it is simply (via horizontal drilling) being applied in a new way. Despite widespread application and a longstanding record of safety – few are aware of the basic facts. In a series of upcoming blogs Synergy Station will reflect on the history of hydraulic fracturing, discuss the economic benefits, look at the overall safety record of the process, and discuss the current regulatory environment.

Wow, who would have (could have) guessed that the words of this song would be arguably more true today than they were, when they were first written. There is a slow train coming and is being driven on by an ever increasing worldwide demand for energy. But before we claim the sky is falling (due to more carbon being released into the atmosphere) let’s look at the facts. Let’s also keep in mind that here at ‘the station’ we present the issues and let the facts speak for themselves. That said the first two questions that must be asked are these; if there really is a slow train coming what is it, and why is it coming now?

The frightening reality is that Dylan had it right there is a train coming and its name is “energy”. What is even more frightening is that we are at a place in history where for the foreseeable future this train is not about to stop. The final part of this chilling truth is that without some major worldwide catastrophe we are not even able to slow it down. There are two simple factors that make this truth an irrefutable certainty. Both of these factors have been in operation since man’s first steps on this planet. They were true then they have held true throughout history even through today and will probably remain so into perpetuity. Simply put they are factors of growth.

The first of these factors is the growth of humanity it’s self. One fire could warm three or four men, while ten fires, were required to warm thirty or forty. Two horses could move a wagon; ten thousand horses a large city. All throughout history as the population of this planet increased so has the demand for energy. In essence the two variables of population growth and energy growth are positively and directly related. An increase in one will ‘fuel’ an increase in the other.

The second factor that most directly impacts the demand for energy is the growth in technology. There was a time when a single horse could be used to harvest enough food to supply both its own needs as well as those of its owner and the owner’s family.  Now machines capable of providing the workforce of hundreds of horse power are being used to do the same job. Yet these machines and all others remotely like them require fuel of a different kind. Whether it is powered by steam, wind, the sun, water, electricity, coal, or diesel fuel it really does not matter technology requires energy. It requires energy to produce it, use it, and even dispose of it. If it falls into the realm of technology it requires energy at some point (or most points) in its life cycle. Regardless of our desires to make it otherwise we cannot escape this truth. Technology needs energy even when what is being produced is energy efficient technology. The simple fact is; the more of it we produce the more energy will be required.  As the demand for technology increase so will the demand for energy as direct result of that technology.

As previously stated shy of a worldwide catastrophe that leads to the rapid and concurrent decrease in both of these factors there is a train coming, its name is ‘energy’, and it cannot and will not slow down. Though it cannot slow down it will inevitably speed up. Just this month it was announced that the world’s population had exceeded seven billion people; there is a slow train coming, coming just around the bend.