Oil & Gas Journal - September 7, 2015

WATCHING GOVERNMENT THE EDITOR’S PERSPECTIVE

Nick Snow

Washington Editor

When it comes to reporting what’s going on in US oil and gas producing states, even the dimmest Washington, DC, reporter periodically remembers to start by speaking with people who are actually there.

Take North Dakota, for example.

There are perceptions that Bakken crude increasingly leaves the state by rail because pipelines are inadequate, that plunging global oil prices in the last year have reduced the Bakken boom to a mild pop, and that gas associated with Bakken crude production continues to be flared.

Telephone conversations with state and industry officials in North Dakota revealed that the situation there is anything but static. Progress is being made.

“The impact of oil prices and the slowdown is providing a window of opportunity for infrastructure to catch up and get on the leading side of that curve instead of chasing it so hard,” North Dakota Department of Mineral Resources Director Lynn D. Helms said.

“All of the large pipeline projects are 2017 and beyond,” he told OGJ.

“We’re in a pretty good spot right now because we anticipate production staying pretty flat, between 1. 1

million and 1. 2 million b/d. Because
of oil prices and the inventory of un-
completed wells, we expect that to
go on for 1½- 2 years. After that, we
could go into a higher production
mode with new pipeline capacity.”
Rail’s share of total Williston
basin crude transportation peaked
at around 800,000 b/d toward
the end of 2014, and has been
falling ever since, North Dakota
Pipeline Authority Director Justin
J. Kringstad said. Pipelines’ 46%

share nearly equaled rail’s 47% in June, he indicted. Two projects with capacity totaling another 675,000

b/d are expected to be operating in

2017, he added.

“We’ve seen the rig count drop to 74 rigs now from 190 in 2014,” he told OGJ. “Going forward, the question will be how long these lower prices will be going on and what impacts they will have on production.”

Infrastructure progress

“Progress is being made on infrastructure,” North Dakota Petroleum Council Pres. Ron Ness reported.

“The legislature put $1.2 billion in
surge infrastructure funds in the
first 30 days of its 2015 session to
assist communities. That almost
became a jobs bill when companies
had to lay off employees because of
low crude prices.”
Reduced activity still concerns
producers, “but we’re also see-
ing substantial improvements in
efficiency that companies have
implemented,” he told OGJ.

Producers asked the state’s Industrial Commission for more time to meet Jan. 1, 2016, flaring reduction goals. Helms said the commission agreed to give them another

10 months if they committed to reaching higher goals then and subsequently by Sept. 17.

A North Dakota update

Obama touts green energy as the UK slashes subsidies

by Bob Tippee, Editor

US President Barack Obama received more news coverage in the US for his speech promoting renewable fuels than the UK government did for a new step away from green-energy ambition.

The comparison offers two lessons: 1. that of the two countries the UK is closer to an inevitable reckoning with physical and economic reality, and 2. that trendy US media won’t acknowledge problems with state-sponsored energy.

“For the first time, we can actually see what
our clean-energy future looks like,” Obama said
Aug. 25 at the National Clean Energy Summit
in Las Vegas. In his view, it’s a future in which
“consumers have freedom to choose cleaner,
cheaper, more efficient energy.”
Where politically preferred energy already
has been tried, however, results aren’t quite so
wonderful.

With costs of subsidizing wind and solar energy in the UK exceeding projections and electricity prices punishing consumers, the Department of Energy and Climate Change on Aug. 27 proposed to slash subsidies for new roof-top solar systems and small windmills.

The government earlier had announced plans to cut subsidies for onshore wind generation and large solar installations.

The DECC said its latest proposal aims “to
place policy costs on bills on a sustainable
footing, improve bill-payer value for money, and
limit the effects on consumers who ultimately
pay for renewable energy subsidies.”
Experience thus shows “what our clean-
energy future looks like.” It’s intolerably
expensive.

The ever-confident US president might argue that UK grief results from flaws of program design or implementation. But how can he say his program—based as it is not only on boosting renewable energy but also on displacing commercial energy now in place—would be superior in concept or execution?

In fact, he cannot.

State manipulation of energy markets always creates havoc in economies and administrative systems. It therefore always fails. Obama’s manipulation is extreme. Consequent problems will be extreme, too.