N.D. Legislative Session Ends

May 11, 2015 Elizabeth Alford

When the North Dakota Legislative Assembly convened in January, lawmakers faced an uncertain climate caused by falling oil prices. By all accounts the session was a success, with one local news source saying it was a "solid performance by legislators".

Legislators basically had to start over by pulling apart Gov. Jack Dalrymple’s proposed budget. They were forced to make some difficult decisions regarding spending cuts, while finding the money to fund important projects.

The first order of business was the passage of the 'surge' bill that supplies $1.1 billion for state infrastructure projects. This money will go to improve highways, airport improvement projects, school districts, law enforcement agencies and emergency medical services.

Another huge item on the session's agenda was adjusting the state's oil tax formula. House Bill 1476 lowers the state’s 6.5 percent oil extraction tax to 5 percent effective Jan. 1, 2016, a decision that got mixed reviews from both sides of the aisle.

“I guess if you had to boil it down it would be squandered opportunities and misplaced priorities. That really is what marked the session. Cutting the oil extraction tax by 23 percent,” says Sen. Mac Schneider. But Sen. Rich Wardner (R) disagreed, saying “I think it’s going to be big for North Dakota. I think we’re going to get the industry to put more investment into the state now that they know it’s stable and steady.”

Highlights of North Dakota’s 64th Legislative Assembly:

A record $14.4 billion budget for the 2015-17 biennium, up from $13.7 billion for 2013-15
$397.2 million in tax cuts were approved
A record K-12 budget was passed including $3 million for expanding pre-K programs
Approved $3.4 million for additional staff at the Department of Mineral Resources (DMR)
Passage of House Bill 1358 that authorizes the NDIC to develop new rules involving the construction and operation of gathering pipelines

Bakken Oil Train Derails

May 7, 2015 Elizabeth Alford

The tiny town of Heimdal, North Dakota, was evacuated early Wednesday morning after a BNSF Railway train derailed and burst into flames. No one was injured and fire crews from three nearby towns were called in to handle the blaze, which was extinguished by Wednesday evening.

BNSF confirmed that 107 of the train cars carried crude oil and the eight that derailed were the unjacketed CPC-1232 models that the federal government would like phased out by 2020 due to safety concerns.

This accident came just a few days after the Department of Transportation issued an emergency order that will require certain crude by rail trains to slow down in high threat areas.

“The Federal Railroad Administration issued a statement saying, “Today’s incident is yet another reminder of why we issued a significant, comprehensive rule aimed at improving the safe transport of high hazard flammable liquids. The FRA will continue to look at all options available to us to improve safety and mitigate risks.”

In April, the NTSB sent a 10 page letter to the Pipeline and Hazardous Materials Safety Administration, urging that new regulations be adopted to improve the safety of crude by rail. Their recommendations include:

All new and existing tank cars used to transport all Class 3 flammable liquids be equipped with thermal protection systems that meet or exceed the thermal performance standards
All new and existing tank cars used to transport all Class 3 flammable liquids be equipped with appropriately sized pressure relief devices that allow the release of pressure under fire conditions and that minimizes the likelihood of energetic thermal ruptures
An aggressive, intermediate progress milestone schedule, such as a 20 percent yearly completion metric over a 5-year implementation period, for the replacement or retrofitting of legacy DOT-111 and CPC-1232 tank cars to appropriate tank car performance standards
Establishment of a publicly available reporting mechanism that reports at least annually

Since 2008, crude by rail transport has increased by 1700% and accidents have risen nearly tenfold, including these since the first of the year:

2/17/15: WV derailment carries Bakken crude in more
2/14/15 Train carrying crude oil derails in Canada more
3/6/15: Oil train carrying Bakken crude explodes in Illinois more
3/7/15 Train carrying crude oil derails in Canada more
3/8/15: Train carrying crude oil derails in northern Ontario more
5/6/15: Train carrying Bakken crude derails near Heimdal, North Dakota

Occidental Names First Female CEO

May 6, 2015 Elizabeth Alford

History was made this week as the first woman is to appointed to lead a major U.S. exploration and production company.

Occidental Petroleum announced on Tuesday that their board approved the promotion of Vicki A. Hollub to Senior Executive Vice President of Occidental and President – Oxy Oil and Gas, responsible for operations in the United States, Middle East region and Latin America. Hollub will succeed CEO Stephen Chazen when he retires in 2016 and will continue to serve as president of Occidental's oil and gas operations during the transition period.

Ms. Hollub has nearly 35 years of experience in the oil and gas industry with over 33 of those years spent at Occidental. She had been involved in a variety of technical and leadership roles, both domestic and international.

“The board and I congratulate Vicki on her well-deserved promotion. After a thoughtful succession review, the board selected Vicki based on her strong track record of successfully growing our domestic oil and gas business profitably and efficiently,” said Mr. Chazen, President and Chief Executive Officer. “I look forward to working with her to prepare her for the CEO role and to stepping aside when she is ready to take it on.”

One day after the announcement, Occidental released its Q1 numbers showing production is up 13%. The total company average daily oil and gas production volumes increased by 72,000 barrels of oil equivalent (BOE) to 645,000 BOE from 573,000 BOE in the first quarter of 2014.

Occidental’s North Dakota assets encompass approximately 303,000 net acres of oil producing and unconventional properties in the Williston Basin's Bakken, Pronghorn and Three Forks formations.

New Bakken Refinery Begins Operations

May 5, 2015 Elizabeth Alford

Refinery Construction | Copyright ©2010 MDU Resources Group, Inc.

The first U.S. refinery built in over 30 years began operations this week.

The Dakota Prairie refinery is located on 375 acres in Stark County, four miles west of Dickinson, N.D. and is in a prime location to access critical infrastructure such as rail, highway, natural gas, electricity, water and sewer.

Construction on the facility began in 2013 as a joint project of MDU Resources Group Inc. and Calumet Specialty Products Partners LP, with a price tag of $400 million.

The refinery will process 20,000 barrels of crude oil per day of locally sourced Bakken crude oil. Diesel sales are expected to begin this month with almost all of the fuel staying within a 50-mile radius of Dickinson.

“We need to invest in our nation’s energy infrastructure,” Sen. John Hoeven, R-N.D., said in a statement. “The Dakota Prairie Diesel Refinery is a good example of the kind of infrastructure investments that will help ensure a bright energy future for North Dakota and our nation. We are pleased to see production underway at the refinery. This facility is creating jobs and helping to grow our domestic energy production, which in turn will help to make our nation more energy secure.”

Abraxas Buys 210 Bakken Acres

May 4, 2015 Elizabeth Alford

In a show of optimism, Abraxas Petroleum announced that it has purchased additional land in the Bakken region and plans to increase drilling by later in 2015.

The San Antonio-based company recently bought an interest in 210 acres of property in the Bakken Shale in North Dakota and will be seeking regulatory approval from the NDIC to control the acreage. This will pave the way for the Abraxas to add another 15 Bakken and Three Forks wells to the company’s inventory. Abraxas’ activity in the Williston Basin includes the Jore 5H, Jore 6H, Jore 7H and Jore 8H wells in McKenzie County, where the company hopes to begin fracturing in late May.

“Bob Watson, President and CEO of Abraxas, commented“The acquisition of additional Bakken interests directly plays into our strategy of acquiring interests at a reasonable cost that will provide future development in our core areas. Each operated unit we are able to successfully acquire adds approximately two years of inventory for our Company owned drilling rig and substantial potential reserves. We will continue to search for similar opportunities that will allow us to further consolidate our interests in our core regions in the currently distressed environment.”

Abraxas released 2015 first quarter production numbers showing an average of approximately 6,590 boepd (4,475 barrels of oil per day, 8,871 mcf of natural gas per day, 637 barrels of NGLs per day). The company reports that gas processing constraints in the Bakken negatively impacted production volumes.

Crude prices increased to $67 a barrel today, reaching a 2015 high after prices plummetted in the fall.