Bakken Oil Transport Still Not Safe

Lac-Mégantic rail disaster

When the North Dakota Industrial Commission issued its landmark ruling last week concerning the conditioning of oil, it appeared that they were making a serious move towards improving the safety of transporting crude out of the Bakken. But according to an article in the StarTribune, the new regulations, which go into effect April 2, 2015, won’t bring the industry any closer to a solution for a serious problem that is drawing fire from legislators, concerned citizens and environmental groups.

Alan Stankevitz, an expert on the DOT 111 tanker car, explains in the StarTribune that the standards set by the commission, which includes Gov. Jack Dalrymple, are not enough to adequately address the problem. The order establishes new regulations that demand facilities to maintain an operating pressure at less than 13.7 psi. This is a much larger number than the volatility point for Bakken crude, which is between 11.5 and 11.8 psi.

“Stankevitz writes, “The bottom line is that the limit has been set so high by North Dakota that the mandate is toothless. The same volatile oil that caused the massive explosions in Casselton, N.D., and Lac-Mégantic would still have been allowed to ride the rails, according to this new mandate.”

Stankevitz goes on to charge the commission with using ‘smoke and mirror tactics’ to divert attention away from the real issue, which he believes to be the routine use of old and outdated tanker cars that are leased by the petroleum industry for transportation.

Read more in the Star Tribune.

New Regulations for Oil Transportation in the Bakken

new regulations for Bakken add strict guidelines

In an effort to improve the safety of crude production in the Bakken region, the North Dakota Industrial Commission issued an order on December 9th that will impose new regulations on oil producers.

The order (no. 25417) is the result of an investigation that began at an emotionally charged hearing in September. Over the past two months, commission members Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring considered oral and written comments from technical witnesses, manufacturers, land/royalty owners and the general public.

The new regulations will go into effect on April 1, 2015 and require that all new wells in the Bakken Petroleum System utilize equipment that controls vapor pressure in order to lessen the likelihood of explosions during transportation. This order comes as a series of troublesome events in 2014 escalated a growing national concern over the transportation methods of Bakken crude.

“The commission issued a joint statement that “The North Dakota Industrial Commission reiterates the importance of making Bakken crude oil as safe as possible for transportation. This order will bring every barrel of Bakken crude within standards to improve the safety of oil for transport.”

In order to come into compliance, producers will have to shell out millions of dollars for new equipment, updated facilities and increased personnel. The order also establishes the Commission’s jurisdiction over these matters and provides for potential criminal and civil penalties for producers that are deemed noncompliant.

Read the Commission Report here.

North Dakota's Future - The Legislature Wants to Know

Bakken population will increase ~30%

Throughout 2014, the energy market experienced unprecedented production along with wildly fluctuating prices in crude, leaving many to wonder about the long-range future of the Bakken Shale region.

The North Dakota legislature recently commissioned a massive study from KLJ, Inc. to analyze the economic forecast and possible trends for 19 counties through the year 2019. This unprecedented study concentrated on areas such as population growth, employment, housing.

The oil boom means more job opportunities in companies directly involved in oil and gas production as well as in industries that indirectly support this production. The study predicts that these jobs will spur a population increase in some North Dakota counties of more than 30%, a staggering number compared to the national average of 1.5%. This increase will add a strain on the already overtaxed housing market in the area, where a great deal of permanent housing has been depleted. In even the most modest scenario, the study anticipates that housing needs will increase by close to 30,000 units for the Minot, Dickenson and Williston regions. This may play a factor in the population projection as workers will have to make hard decisions about whether to bring family along as they move to the area for work.

“Permanent population will be largely driven by the supply of permanent housing in the region,” the study says. “Due to a lack of housing, the region will continue to have a total (service) population that is substantially larger than the permanent population measured by the U.S. Census.”

KLJ’s study was completed before oil prices began to drop sharply. Analysts will watch closely to see if falling prices affect the accuracy of this forecast.

Methane Emissions from Two Main Sources says UT Study

alt="Methane Emissions"

A new study led by researchers from The University of Texas hopes to provide clues to better understand the correlation between well technology and methane emissions during the natural gas production process.

The findings, published December 9th in Environmental Science & Technology, indicate that the overwhelming majority of methane emissions are from two types of wells; those that use pneumatic devices and those that use liquid unloading.

According to the study, 19% of Pneumatic Devices were responsible for 95% of methane emissions and were highest in the Gulf Coast Region, which was a similar result to the first part of the study conducted in 2013. As for Liquid Unloading, 20% of these devices account for 65-85% emissions. Conversely, this finding showed emissions were highest (~50%) in the Rocky Mountain Region due to the higher number of wells that utilize Unloading.

“David Allen, principal researcher and professor at Cockrell School gives some perspective on the findings by sharing that “over the past several decades, 10 percent of the cars on the road have been responsible for the majority of automotive exhaust pollution,” said Allen. “Similarly, a small group of sources within these two categories are responsible for the vast majority of pneumatic and unloading emissions at natural gas production sites.”

Hopefully this study, and others like it, will provide important data to help industry leaders as they work to create solutions to the growing concern over methane emissions in the Bakken and around the country.

To view a full research summary, visit Cockrell School of Engineering.

Falling Oil Prices: How Low is Too Low for Bakken Producers?

Falling Oil Price

In light of falling crude oil prices, there is growing speculation about how low will be too low for U.S. producers. In just a few short months, prices have plummeted from $100 a barrel to around $70 today. This has left analysts and industry leaders worried about the effects this will have on the booming shale industry, including investment and drilling interests in the Bakken play. Since extracting shale oil is currently a more expensive process than conventional production methods, Bakken producers may be more vulnerable to lower crude prices.

OPEC turned up the heat on Thanksgiving Day and sparked what some are calling an 'oil war’, by announcing that it will hold steady on current production. This has garnered worldwide attention and assured that this downward trend in price will continue. (Read more: OPEC Challenges Bakken Shale Drillers) Certainly, this ‘war’ will have its casualties, as some shale producers will not be able to keep up. One indication of this was that drilling permits declined sharply over November, anticipating a slump for the near future. However, the deafening cries of doom are probably premature.

Keeping in step with the IEA estimate that most production in the Bakken play will remain profitable at or below $42 per barrel, Exxon Mobil CEO, Rex Tillerson told Houston Business Journal on Wednesday that the energy giant can maintain profitability until crude prices hit $40 a barrel. He also maintained his confidence in their Bakken shale initiatives.

“What you do is ensure that you can invest and be successful at the bottom of the cycle,” Tillerson said. “We test across a range that’s all the way down to $40 and up to $120.”