Bakken Oil Report | Spring 2013

SPRING

2013

Safeguarding oil security Bakken losing its sizzle – or shining even brighter?

The Bakken shale region: permitting across an international basin

Life in the Bakken: looking at the social ramifications of the oil boom Slow down and be safe!

Tractors and oil rigs don’t mix on highways Pipeline safety makes NTSB’s priority list

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Our operational expertise extends from hydraulic fracturing innovations, to state-of-the-art natural gas plants, solving transportation bottlenecks to maximizing recovery at our CO2 floods and relentless striving for improvement. Whiting’s asset portfolio provides a singular growth platform in the Bakken for years to come.

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Excellent tool face control No temperature limitation Does not interfere with MWD No fluid compatibility issues Increased sliding ROP No bit or BHA plugging

The XRV tool greatly improves sliding ROP and tool face control during steering operations. It has been specifically designed to create minimal MWD interference while producing maximum vibration in the drillstring. This tool was engineered without any elastomeric components thus eliminating temperature limitations, fluid compatibility issues and the risk of circulation loss due to plugging of the bit or other BHA components. The XRV tool string (XRV tool and TTS drilling safety joint) have been designed for maximum ruggedness and structural flexibility making this system ideal for use inside the curve on horizontal wells and in sharp radius well sections in the lateral.

Why Rainbow Ceramics®? …because every oil and gas well deserve a “Pot of Gold” !

An operator in the Bakken formation in North Dakota needed to complete eleven 9,600-ft lateral wells, and selected Rainbow’ proppant to run field trials for three wells. After the completions, three wells’ average 24-hour IP rate was 2,578 Boe/d, and 90-day daily production rate 795 Boe/d. The operator continued using Rainbow’ proppant. The average 24-hour IP rate was 2,501 Boe/d for the remaining eight wells.

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R&R ContRaCting, inC. has been around for nearly 25 years, founded by W.K. “Bill” Reimer, who, in 1988, decided it was time to bring his formidable railroad experience to the contracting side of the world. Since then R&R has grown to 6 regional facilities operating under four different divisions, including: ➧ grand Forks, nD - R&R Contracting, inc.

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these locations are responsible for servicing all construction, maintenance, inspection, and repair work that we take on. our engineering is all handled out of our corporate offices in Grand Forks, ND. Our primary market area includes states East of the Rockies and West of the appalachians - the ‘bread basket’ of the country. our teams of tenured rail construction professionals average between 5-10 members each. We are constantly expanding our forces to accommodate our growth as we become poised to respond to our customers’ needs quickly and efficiently.

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Published by: DEL Communications Inc. Suite 300, 6 Roslyn Road Winnipeg, Manitoba Canada R3L 0G5

SPRING 2013 CONTENTS

A message from the Honorable Steve Bullock, Governor of Montana 10

At CanElson Drilling (US), Inc.’s Mohall office, it’s about family 146

International Energy Agency: safeguarding oil security 14

Slow down and be safe!

Tractors and oil rigs don’t mix on highways 148

Establishing deep roots, one generation at a time: Hess Corporation 20 The trials and tribulations of the Bakken restaurant biz 26 Montana PSC Chairman Gallagher drills down on Bakken effect 30 Bakken in the backyard – MDU Resources Group 36 No crude left behind 42 Study projects electrical demand to more than triple in Williston Basin 54 TransCanada Corp.: Keystone XL needed to support energy security and jobs 58 Building strong in the Bakken 64 Crude-by-rail service brings Bakken oil to coastal markets 68 ‘Constructing confidence’: R&R builds turnkey rail-served facilities for clients 74

Huesker: the answer to reflective cracking in asphalt pavements 150 C&J Energy Services expands into the Bakken 154 MRC: providing the infrastructure in the booming Bakken shale play 157 Dakota heritage 160 Oasis Petroleum aggressively drilling the Williston Basin 162 Portability in explosion-proof lighting equipment 165 Beaver Creek walkin’ in the Bakken 168 Navigating the landscape of hydraulic fracturing 172 Solutions needed to tackle infrastructure challenges surrounding shale formations 175 PCS Brokers LLC: when to cash out 176 Tap into the future: Dakota Gasification Company 178

Evolving with North Dakota: Northland Securities serves expanding oil and gas industry 76

Shale Exploration’s philanthropy demonstrates long-term commitment to communities 180

A message from Congressman Daines 80

MVTL: services beyond the laboratory 182

Bakken losing its sizzle—or shining even brighter? 84

Allstate Peterbilt Group: the Midwest’s dealership 184

Women in the Bakken: dancing to a different drummer 86

The SWD future is now… Oilfield Integrators is ready to deliver automation, SCADA, HMI and surveillance 186

Poor workplace nutrition hits workers’ health and productivity 91 Alberta opens door on huge resources; formations on parallel with Bakken, say agencies 94 Lynden supports Bakken oil and gas customers with experience and expertise 100 In the Bakken, asking to be told 104 Black Hills region reaches out to the energy industry 106 The Bakken shale region: permitting across an international basin 112 Minnesota’s Miller Architects & Builders meets Bakken’s challenges 114 Lufkin fortifies Bakken commitment with all-inclusive service center 118 Bismarck-Mandan, North Dakota: growing metro with a diversified economy 122 Life in the Bakken: looking at the social ramifications of the oil boom 124 Lightowler Johnson Associates – designing solutions beyond the boom 128 A message from the Sidney Area Chamber of Commerce and Agriculture 130 Maximizing proceeds from the sale of your business 132 Pipeline safety makes NTSB’s priority list 134 Oilfield jobs: do you want some training to go with that? 136 Understanding the ANSI Z358.1-2009 standard 138 New technology and best practices yield dramatic improvements 142

Equipment demands rebound – Camex Sales & Equipment 188 Calfrac Well Service’s new home now open 190 The silver lining: getting prepared to prepare 192 Western Edge Aviation: the sky’s the limit! 194 Farmers Union Oil: the ‘Eighth Wonder of North Dakota’ 195 Hotsy and drilling… a partnership that runs deep 196 Servicing the oilfields: Pacific and Maine focuses on customer service 198 Rainbow Ceramics enhances production in Bakken resource play 200 Tank West: your partner in all your tank trailer needs 202 Unit Liner Company: ‘Protecting You and the Environment’ 204 GM Petroleum: southeastern Montana’s largest full-line petroleum distributor 206 Causes and prevention of edge-lifting/curling of epoxy grouts 209 ACL Manufacturing Inc. – the industry leader in combustion safety controls 210 StopSensor: innovation in transportation safety 212 Locally owned Petroleum Services offers many products and services to Bakken clients 214 Collapsible FRAC tanks better for the environment and cheaper to transport 216 Gravel Products: rock-solid for 43 years 217 Index to advertisers 218

President David Langstaff Publisher Jason Stefanik Managing Editor Katrina A.T. Senyk katrina@delcommunications.com Sales Manager Dayna Oulion Advertising Account Executives Gladwyn Nickel Mic Paterson Anthony Romeo Colin James Trakalo Production services provided by: S.G. Bennett Marketing Services www.sgbennett.com Art Director Kathy Cable Layout / Design Dana Jensen Advertising Art Julie Weaver Caitlyn Hawrysh Haier © Copyright 2013 DEL Communications Inc. All rights reserved.The contents of this pub­lica­tion may not be reproduced by any means, in whole or in part, without prior written consent of the publisher­.

While every effort has been made to ensure the accuracy of the information contained in and the reliability of the source, the publisher­in no way guarantees nor warrants the information and is not responsible for errors, omissions or statements made by advertisers. Opinions and recommendations made by contributors or advertisers are not necessarily those of the publisher, its directors, officers­or employees.

Publications mail agreement #40934510 Return undeliverable Canadian addresses to: DEL Communications Inc. Suite 300, 6 Roslyn Road Canada R3L 0G5 Email: david@delcommunications.com

DEL

Communications Inc.

COVER IMAGE Study projects electrical demand to more than triple in the Williston Basin.

Image courtesy of KLJ. Visit kljeng.com.

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BAKKEN OIL REPORT – SPRING 2013

PRINTED IN THE U.S.A. | 04/2013

Accounting Services | Audit & Financial Reporting | Estate Planning Financial Planning | Retirement Planning | Tax Planning & Compliance

New Name.

Familiar Faces.

More Services.

Rick Lee, Partner

Voller, Lee, Suess & Associates is proud to be part of Eide Bailly – one of the top 25 CPA firms in the nation. Businesses in Western North Dakota now have access to a full line of accounting and consulting services with the comfort of local, personal service from familiar faces. Eide Bailly has been doing business in North Dakota since 1917. Voller, Lee, Suess & Associates has been a proud supporter of businesses in the community and surrounding areas. Now, as Eide Bailly, our support will be stronger than ever!

Experience the Difference.

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MESSAGE

A message from the Honorable Steve Bullock, Governor of Montana Montana is famous for its pristine and picturesque landscapes. Our clean air, water and wildlife habitat are the envy of many. These lands have also blessed us with an abundance of natural resources that have allowed the state to be a net exporter of energy products for decades.

As Governor, I take great pride in utilizing Montana’s energy resources to provide good-paying jobs for Montanans and support for our schools, while safeguarding our quality of life.

The economic impacts of this development are substantial, and Montanans also expect that we will protect our outdoor heritage, communities and agricultural producers. That’s why my

administration is committed to maintaining sustainable and responsible development of our energy resources for a net benefit to the state and its citizens. The state must promote energy development to foster growth in this important economic sector and put Montanans to work, and we can do it in a way that will protect those things we love about living here.

Our natural resources have provided for our greatest resource, our children, for decades. I want my kids – and all kids in this state – to have the same opportunities that I did. We owe it to our children to make use of these resources in a manner that enhances the opportunities they have and protects the lands they call home.

Montana’s fossil fuel industries have provided over $250 million in tax collections to state and local governments every year for the last five years running.

In 2012, the portion of fossil fuel industry taxes collected and allocated to the state constituted about five percent of all state general fund revenue. This oil, gas and coal revenue is very important to maintaining Montana’s educational excellence as well as other public services.

I will work to build on the momentum

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BAKKEN OIL REPORT – SPRING 2013

• protected with the GEOWEB® system and appropriate infill elimate erosion and undercutting.

PRESTO

Presto Geosystems® • 800-548-3424 or 920-738-1328 • www.prestogeo.com

BROKERS

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Business Sales M&A Consulting

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Zac Grif n Broker/Member 406-868-9366 zac@ oilfieldbiz.com

Kathy Sturgeon OperationsManager 406-239-1494 info@ oilfieldbiz.com

John Suprock Broker/Managing Member 406-880-3697 broker@ oilfieldbiz.com Scott Lester Broker/Member

Certi ed BusinessIntermediary

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Robert Heffner Broker/Member

Certi ed BusinessIntermediary Certi ed Exit Planner

406-544-1776 bob@oilfieldbiz.com

Amy Kroon MarketingCoordinator 303-710-9742 support@oilfieldbiz.com

Williston,ND 701-651-6053 Douglas,WY 307-359-5265 Plentywood,MT 406-478-1549 Boulder,CO 303-818-2413

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MESSAGE

that these energy sectors have gained in recent years. My administration is strongly encouraging federal approval of the Keystone XL pipeline. We are also working hard to assure that regulatory processes are efficient, accurate and provide consistency and certainty for developers. That’s why we are supporting legislation that will provide more flexibility for gravel operations and improve the permitting process.

Another bright spot for Montana’s economy has been the renewable energy sector, which has grown substantially in the last half decade. Wind power has become a recognized electrical generator in the state, producing four percent of the state’s electricity in 2011. Montana is ranked number two in the nation for wind development potential and there is much more economic opportunity.

All forms of energy development must be approached with attention to protecting

Montana’s people, communities and way of life. I will actively seek resolution to any issues that hinder Montana’s responsible energy development opportunities. In Montana, we work best when we work together. That’s why I recently created a Sage Grouse Advisory Council, so we can maintain our management and control of this important game species and continue to collectively shape our energy future.

Montanans deserve and expect that energy developers will treat our resources and our people with the utmost respect.

Montana has incredible opportunities for energy development that will boost the state’s economy, provide quality employment for Montanans, and move the nation toward a more secure energy future. My administration will support and encourage responsible development of all of Montana’s energy resources. We will seek top dollar for state-owned resources,

support landowners and property rights, and protect Montana’s clean air, pristine waters and world-class wildlife.

And we will address the needs of our communities affected by booming energy development. That’s why I’ve asked the legislature to provide significant funding to jump-start efforts to upgrade infrastructure, and have asked my agencies to prepare a comprehensive review of infrastructure needs in communities affected by oil and gas development, so we can all work off the same page and plan for needs into the future.

I look forward to working with everyday Montanans, industry representatives, economic developers, and government officials and agencies to attract investment in each of Montana’s energy sectors to create jobs, increase the tax base, and keep energy affordable for Montana families. w

Thinking Big...

GOING BEYOND in the Bakken

®

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Our Roots Run Deep. In 1998, AE2S opened an office in Williston, ND. Since that time, our services and presence throughout the region have grown with additional offices in Dickinson, Watford City, and Minot.

Committed to the Region. From community planning and infrastructure development to water supply, reuse, and depot design, we are committed to helping cities and industries invest wisely and grow strategically.

Together, we will think big and go beyond - now and in the future.

Advanced Engineering and Environmental Services, Inc. (AE2S) North Dakota and Montana Offices: Bismarck | Dickinson | Grand Forks | Fargo | Minot | Williston | Watford City | Great Falls | Kalispell WATER ENGINEERING | WASTEWATER ENGINEERING | CIVIL ENGINEERING | LAND DEVELOPMENT | SURVEY/MAPPING/GIS INSTRUMENTATION & CONTROLS | ELECTRICAL ENGINEERING | STRUCTURAL ENGINEERING | FINANCIAL/ASSET MANAGEMENT

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BAKKEN OIL REPORT – SPRING 2013

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REPORT

Safeguarding

oil security

Maria van der Hoeven Executive Director, International Energy Agency

Energy security has been the primary mission of the International Energy Agency (“the Agency”) since its founding in 1974, following a major oil crisis. Indeed, the Agency was created to provide a framework in which IEA countries could defend their interests as key oil consumers. While that mission has since diversified across the fuel spectrum, oil remains the dominant energy source globally, and oil supply security remains a core responsibility of the IEA. And yet over almost 40 years, how we define and address that responsibility has developed considerably. Taking a wider view of energy and oil security is particularly important given the significant shifts that we are now seeing in the oil market – in terms of rapidly growing emerging market demand, but also in terms of new supply patterns all along the value chain.

Energy security refers to the ability of a given country to obtain uninterrupted availability of its main energy sources at an affordable price. In the short term, energy security is the ability of a given energy system to react promptly to sudden changes in supply and demand, maintaining the availability, affordability, accessibility and quality of energy. Longterm energy security is linked mainly to making timely investments to ensure that the future supply of affordable energy will support economic development and environmental goals.

Traditionally, the IEA put a strong emphasis on mitigating the risks and effects of energy supply disruptions, particularly within oil markets. Coordina­ 14

BAKKEN OIL REPORT – SPRING 2013

ting the use of emergency oil stocks in the event of disruption is a well-known tool, but only one. Analysis to boost transparency in global oil markets, active participation in the Producer-Consumer Dialogue with OPEC and other major producers, and efforts to improve statistical openness, timeliness and accuracy through the Joint Organisations Data Initiative all help to reduce the risk of disruption. At the same time, the IEA’s tool-kit to respond to acute disruptions goes beyond emergency oil stocks, to include demand restraint and fuelswitching measures.

Another important characteristic emphasised by the IEA is resilience – the ability of energy systems to mitigate or withstand disruptions, including in the oil market. Regular emergency response reviews of IEA member countries report on systemic strengths and vulnerabilities of national energy security policies, procedures and infrastructure, and the IEA’s Model of Short-Term Energy Security (MOSES) measures both risk and resilience factors for comparison across countries and across fuels.

Yet while the traditional focus on supply disruptions remains important, major changes in the global energy economy since 1974 have required our conceptions of oil security (and energy security more broadly) to adapt. When the IEA was created, the oil market was based on longterm contracts and a stable relationship between suppliers and refiners. That has changed with the globalisation of oil markets, the importance of the spot

market, and the development of highspeed information flows. Concerns about supply security of other fuels like gas and electricity, and also the interplay between fuel markets, has broadened the focus of energy security. And indeed, we are defining energy security to include long-term concerns, like creating the conditions for sufficient investment and promoting energy access to boost living standards and economic development.

We also recognize the linkage between sustainability and energy security – they are two sides of the same coin. Not only do low-carbon technologies help reduce import dependence and diversify the fuel mix, but recent IEA discussions have highlighted the adverse impact of climate change on energy infrastructures. All of this helps to change the nature of the energy security debate.

Perhaps the most significant change is a shift in the global energy map, and specifically the global oil map. Where OECD countries accounted for more than three-quarters of oil consumption in 1974, they will soon account for less than half.

The economic rise of emerging markets like China and India have signalled a global economic rebalancing, including within energy markets. IEA analysis shows growing non-OECD demand, particularly in China, to continue over time.

Meanwhile, oil demand in Europe and the U.S. is stagnating or falling.

That reality is the driver behind IEA efforts to engage with key partner countries in many areas, but particularly with regard to oil security. For several

Power

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of the oil market reveals a medium-term

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15/03/13 2:53 PM

Bakken Oil Report

yES AS

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ART DIRECToR

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CREATIVE DIRECToR

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Enbridge delivers more than the energy you count on. We deliver on our promise to help make communities better places to live. It’s part of the reason we were named one of the Global 100 Most Sustainable Corporations in the World.

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Enbridge’s Bakken Expansion Program placed into service in March 2013 will transport 145,000 barrels of Bakken crude oil every day, so it can be refined into the products we rely on. From asphalt to jet fuel, to gasoline and plastic, the oil we transport safely and reliably helps keep North America running strong.

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particularly looking forward. Our forecast

IEA emergency response exercises (EREs),

RichEllE PEtERs studio manager D403 781 3379 F 403 262 9399 richelle@WAX.ca

those countries’ participation to regular

N/A

just mean the rise of Asian demand,

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That has included technical support,

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to build their own emergency oil stocks.

ConTACT:

response measures and in some cases

noTE:

countries outside the IEA in the event of a

pRojECT:

in their efforts to improve emergency

supply and demand changes, and the potential for technological gamechangers. That kind of volatility means a very different oil security environment, and one that requires both broad engagement and nimble response.

Despite volatility on both the supply and demand side, we have seen continued market tightness and consistently high prices thanks to contradictory forces at play. The economic recovery is stagnating.

OECD countries suffer from persistent debt concerns, notably in the euro zone, and there are signs that even China is slowing. On the supply side, continued political upheaval in the Middle East and North Africa disrupted crude exports from several countries. Also, unplanned maintenance and technical disruptions at mature fields reached record highs last year, rekindling concerns about decline rates in aging plays. These risks are not going away, and contribute to a new “reality of risk” in the oil market.

At the same time, there is also good news on the production side. Despite events in the Middle East, the region has also seen success stories. Saudi production has surged to 30-year highs, and Iraq is also breaking production records. A special IEA report released in October 2012 highlighted Iraq’s potential as a gamechanger going forward. Production is also surpassing expectations in North America, where high prices and new technologies have unlocked light, tight resources that were long thought to be impossible to tap economically. Our 2012 World Energy Outlook predicted that the U.S. could become the largest oil producer around 2017 largely thanks to light, tight oil.

Combined with increased efficiency, we expect this overall picture to yield less-tight markets over the medium term. While that is generally good for supply security, and helps to lessen the impact of disruptions, it is no reason for complacency. In the U.S., for example, any talk about prospects for 100%

develop a framework for cooperation with

SCALE:

India. Going forward, the IEA is working to

China, India, ASEAN countries, and others

pRooF SIZE

years, we have supported countries like

Mix some rail into your crude.

Pipelines aren’t the only way to transport crude oil. More and more shippers of crude oil are counting on BNSF Railway to help them maximize their profitability. Why? Because BNSF rail gives you additional flexibility to respond quickly to changes in the marketplace and move your crude to the most advantageous destination. By the end of 2014, BNSF will offer service from shale plays throughout North America to more than 45 destinations that serve inland and coastal refineries and ports. Your BNSF team can even help you set up your own rail-served facility speedily and cost-effectively.

For crude oil shippers, it makes sense to tap into the transportation resource of BNSF Railway.

To drill deeper, call 817-867-0778 or visit www.bnsf.com/shale today.

REPORT

energy independence leaving room for disengagement from global markets or certain regions must be laid bare for the fallacy that it is. First of all, we project the U.S. to continue to import more than a quarter of its oil by 2035. But in any case, the oil market is global, and no matter its provenance, oil price and availability are still intricately tied with events and availability elsewhere – emphasising the need for cooperative oil security policy. And while supply may be growing globally, both supply and demand growth are exceptionally uneven, with effects throughout the market.

Most of the new supply is expected from the Americas, and most of the new demand from Asia, the Middle East, and the former Soviet Union. These twin changes have clear consequences for the midstream and downstream sectors, those often-overlooked but critical links in the

supply chain. International crude trade volumes are forecast to dip, while product trade is expected to grow in both volume and scope amidst resurgent refining capacity expansion in Asia and the Middle East – and reducing capacity in the OECD. Those changing trade and product import patterns affect disruption risks, and also the paradigm for emergency oil stockholding when it comes to crude/product balances.

Given these new realities – increased uncertainty, volatility, and technological change – we recognise that international oil security governance and emergency response procedures need to react in a timely and decisive manner. We regularly review the assessment procedures for IEA collective action in response to a substantial physical supply disruption.

The important element in defining “substantial” is to analyse the potential

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economic impact against the backdrop of the current market. That is why there is no “one-size-fits-all” response, nor is there a specific size of disruption above which we act. It is also why the changing geographical dynamics of the oil market are so important to understand, as well as seasonal supply and demand fluctuations, refinery demand patterns, crude and product quality breakdowns, spare capacity figures, and timely commercial stock data.

For example, while the IEA used emergency stocks in 2005 in response to the U.S. disruptions caused by Hurricane Katrina against a backdrop of tight markets, it did not act at the end of 2008 when hurricanes Gustav and Ike had a similar effect against a backdrop of looser markets and a deteriorating global economic situation. When the IEA last released stocks in 2011 as a result of the crisis in Libya, the size of the disruption was comparatively small and the response was not immediate. That was because production remained shut-in as markets began to tighten seasonally thanks to rising demand in the summer. No two disruptions, and no two IEA actions, are ever the same.

The IEA’s responsibility to safeguard oil supply security has been evolving alongside major changes in the global oil economy – particularly a major and ongoing redrawing of the global oil map. As this evolution continues, so changes the nature of our mission. A broader concept of energy and even oil security means focusing on resilience and long-term challenges, as well as response. When that response is necessary, it must be quick and decisive. And critically, safeguarding oil security requires global cooperation more than ever before.

Previously published in the World Petroleum Council’s 80th Anniversary Publication, Jan./Feb. Republished with permission. w

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BAKKEN OIL REPORT – SPRING 2013

MultiStim

Multi-Stage Fracturing

with Removable Ball Seats and Shiftable Sleeves is an innovative completion technology from Logan Completion Systems that is especially designed for producers who are tackling multi-stage fracs. One-trip installation for faster completion times and frac valves with fully removable ball seats post-fracturing — without milling or drilling — reduces well costs, improves production, and maximizes your profits. The key feature of the MultiStim System is the use of the full-bore inner diameter which allows conventional tools to be run after the seats are removed. Cementing, or plugging and perforating operations are not required. MultiStim is suited to extended reach horizontal wells. Sleeves can be selectively opened and closed post-fracturing to allow customized stimulation, testing or production management of the entire wellbore for the life of the well. The MultiStim Fracture Isolation Liner System and MultiStim Cup Frac Tool System (a straddle cup system) are suitable for acid, proppant or energized fracturing operations in all types of formations. Contact us for complete details. www.logancompletionsystems.com

Ball seats successfully retrieved from a recent nine-stage frac 635 8th Avenue Southwest, Suite 850 Calgary, Canada T2P 3M3 403.930.6810 | Fax 403.930.6811

Hess corporation

Establishing deep roots, one generation at a time

Tioga Gas Plant expansion.

The oil and gas natural resources of the Bakken shale have the potential to transform how North Dakotans live and do business. Hess is committed to developing these resources in a way that makes a long-term, positive impact on North Dakota’s communities for current and future generations.

Kenny Bugbee moved his family to western North Dakota to work at Hess when the Bakken first boomed. More than 50 years later, both Hess and the Bugbee family have established deep roots in Tioga – and have forged unique connections that link a grandfather, his son and two of his grandsons to Hess.

Three generations of the Bugbee family have earned a living at the Hess Tioga Gas Plant, and built their lives in the city it supports. Tioga is the selfproclaimed oil capital of North Dakota, and Hess is a major employer in the area.

For the Bugbee family – Kenny and his wife, Donna, their six children, 14 20

BAKKEN OIL REPORT – SPRING 2013

grandchildren, 16 great-grandchildren and four dozen foster grandchildren – Hess is the best employer in town. “Hess is by far the best company operating in the area. It’s the most dependable and the one that does the most for the community,” Kenny Bugbee says.

Bugbee retired more than two decades ago, after a 36-year career at the gas plant. But even now, he says he still boasts about his association with Hess. “You feel a sense of pride when you work at Hess. Of all the companies I worked for, Hess was by far the most safety-minded and most concerned about its employees,” he states.

Bugbee was married and already had two children when he moved the family from Finley in eastern North Dakota to a trailer in Tioga in 1954. Five years later, Bugbee was working as an operator at the plant, had four more children at home, and a brand-new ranch house in the heart of the town.

“Donna was a domestic engineer or a homemaker, I guess you’d say, taking care of the kids while I worked,” Kenny Bugbee recalls. They made time to get involved with the Tioga schools, a church and enjoy some of the things that make North Dakota such a great place to live, including activities outdoors.

In time, the children grew. Four of them moved away, and a fifth died.

But the youngest, Curtis, stayed close to home. He went to Bismarck State College, graduated in 1988 and returned to Tioga with his wife, Natalie Geatz Bugbee, and three sons, eager to find work.

Kenny Bugbee knew just what to do. Hess had acquired a 100-percent interest in the gas plant by then, and Kenny Bugbee had enough confidence in the way the company conducts business that he urged Curtis to apply for a job at the plant. Curtis started

GLOBAL ENERGY. LOCAL COMMITMENT. The natural oil and gas resources of the Bakken Shale have the potential to transform how North Dakotans live and do business for many years to come. Hess is committed to developing these resources in a way that has a lasting, positive effect on North Dakota’s communities for current and future generations.

Copyright Š 2013 Hess Corporation. All rights reserved.

Hess corporation

Three generations of the Bugbee family have earned a living at the Hess Tioga plant.

The Bugbee family at Hess’s Tioga Gas Plant in Tioga, North Dakota.

Tioga Gas Plant.

working at Hess in 1990 as an operator and earned a promotion to shift supervisor four years later.

“We celebrated a 50th anniversary at the gas plant in 2004, and it was great to stand there next to my dad. Hess has shown that it’s in North Dakota for the long haul,” Curtis Bugbee says. A handful of years ago, Curtis Bugbee followed his father’s example – and urged two of his own sons to look for jobs at Hess. Ryan, 26, is now an electrician at the gas plant and Brent, 25, father of a girl himself now, works in production.

“I never thought twice about having my sons work at Hess because it is a very safety-conscious company. It was one of the industry leaders in providing fire-retardant clothing to everyone who works at the plant, and stresses the fact that safety always trumps production,” Curtis states.

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Hess corporation

The Hess connection to the Tioga gas plant dates to 1953, when Amerada Petroleum Corp. signed a contract with the Signal Oil and Gas Co. of Los Angeles to build what was then a $15-million gas plant. Hess, which merged with Amerada in 1969, maintained an interest in the plant until 1988, when it assumed full ownership.

Hess is in the process of more than doubling the capacity of its Tioga Gas Plant from 120 MMSCFD to 250 MMSCFD. The expansion will include the ability to separate ethane from the methane and from the natural gas liquids (NGL). Right now, the plant leaves the ethane with the methane, leaving both as a gas. The removal of ethane is much more difficult technically and requires much higher capital than removal of propane, butane, and natural gas.

The expansion will help the company keep up with the production demands in the state’s prolific oilpatch, which is once again reshaping the face of western North Dakota and is ensuring that North Dakota remains with the lowest unemployment rate in the country. w

Drilling operations in North Dakota.

Hess in North Dakota: • Hess is one of the largest shale producers in the region.

• Over the past two years, the company has invested $5.4 billion in its North Dakota operations and will invest a further $2.2 billion in 2013.

• Hess is running a 14-rig program on its core working acreage of 550,000 acres.

• In Q4 of 2012, the net production rate from Hess’s North Dakota operations averaged 64,000 barrels of oil equivalent per day.

• In 2012, Hess completed more than 200 wells and in 2013, Hess is continuing its expansive drilling program.

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The trials and tribulations of

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By Rebecca Colnar

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The owner of Wildcat Pizzeria saw the potential in Williston for a sit-down pizza place, so he and two buddies started the restaurant in 2011. “It’s a family place, so we get locals and kids, and it’s a little quieter than some places,” says Mellissa Tate, general manager of Wildcat Pizzeria.

Looking for a steak in Williston, a burrito in Sidney or a pizza in Culberston? It might take awhile to satisfy that hunger is the word on the street. Not only is there a shortage of housing but there is a real shortage of restaurants to fill the hungry tummies of the oilfield worker and longtime area residents. Even more than a dearth of dining establishments is the lack of waiters, waitresses, bartenders and cooks.

“I see one of the major problems right now in the food industry in this area is finding enough people to work,” notes Pat Hackley, a Culberston rancher who has lived the area all his life and seen the changes.

“A lot of these people are working two or three jobs to make ends meet. People who have worked at eateries here for many years are getting burned out. One reason is there aren’t many choices for dining, and the 26

BAKKEN OIL REPORT – SPRING 2013

restaurants are so busy that after awhile, the wait staff just can’t keep up.”

Places offering a grab-and-go meal are on the rise and successful. “A Sinclair station on the west side of Williston took out all of their display cases and put in a to-go counter where you can order freshly made enchiladas and burritos for $6. Those are a meal-in-one. They realized people are hungry, and it’s a good way to go,” notes Boe Gregson, project manager/ water resource specialist for Western Land Services.

Gregson mentions one restaurant has the “Bakken Sandwich” which consists of a pretzel bun, three-quarter-pound beef burger piled high with roast beef, nacho cheese, onions and jalapenos – not for the weak of stomach, but certainly filling enough to keep oilfield workers content for an afternoon.

New ideas rule. “There are some caterers delivering direct to the oilfield.

There are man-camps that are their own communities complete with a chef and laundry service. One company offers a shuttle to Wal-Mart,” he says.

Food trucks pop up in small towns and although the food might be satisfying and cheap, the trucks move about depending on the weather or where the population is located. One day you might be craving a taco from one truck and the next day, it might be gone. And as of Jan. 1st, 2013, Williston banned food trucks, wanting vendors to move into more permanent structures.

Convenience stores/gas stations have jumped into the restaurant biz serving breakfast burritos, cheeseburgers and fajitas to go. Fast-food places like McDonald’s always have lines snaking

Grocery stores are also feeling the pinch of limited employees.

“We have three grocery stores – Albertson’s, EconoMart and Wal-Mart. Even WalMart has problems stocking its grocery shelves,” Ward Koeser, mayor of Williston, notes.

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around the building. The biggest problem?

Finding help to work long hours.

“You see a lot of Eastern Europeans and service employees from different countries here,” notes Gregson.

Ward Koeser, mayor of Williston, explains that in two years the town went from having 14,000 to having 18,000 permanent residents, with 40,000 people living in the city or townships near the city in “man camps” and other temporary housing.

“All these people have to eat,” Koeser notes, explaining that one of the problems is there aren’t a bevy of teenagers to work in fast-food. “We have some restaurants that have to close for several hours each day – not because of a lack of customers but because of a lack of staff.”

Grocery stores are also feeling the pinch of limited employees. “We have three grocery stores – Albertson’s, EconoMart and Wal-Mart. Even WalMart has problems stocking its grocery shelves,” the mayor notes. “Apparently there have been times when they’ve had whole sections bare and it’s not the lack of groceries, but rather the lack of people to stock the shelves.”

Koeser says the town has gotten progressively busier since 2005, and has especially seen an increase in people and activity since 2010.

Earl Gross, a Williston radio personality, has lived in the area since 1970 and says the changes over the past few years have been significant.

“I’ve seen many changes in the food industry,” Gross notes. “There are long lines at any time of day at the drive-thrus of fast-food restaurants, and the grocery stores are always busy. If you look in the help-wanted section of the newspaper, everyone is looking for help with service jobs. I was at the Airport Inn where a sign was advertising for a bar manager, waitress and cook.”

Gross explains there are plenty of jobs in the restaurant business, but the difficult part if you’re not pulling in an oilfield salary is affordable housing. “Even if you find housing, expect to pay about $2,000 a month.” That’s an out-of-reach amount for a waiter or waitress.

BAKKEN OIL REPORT – SPRING 2013

27

“There are long lines at any time of day at the drive-thrus of fast-food restaurants, and the grocery stores are always busy,” states Earl Gross, a Williston radio personality who has lived in the area since 1970.

“Many of the service industry workers are girlfriends or wives of men in the oilpatch,” says Gross. “Their boyfriends or husbands are bringing in good money, so if they decide they don’t like their waitress job, they can quit and maybe look for something else less hectic that suits.”

Mellissa Tate, general manager of Wildcat Pizzeria, says the restaurant was opened in 2011 to serve the boomtown. “The owner had a long history of restaurant

management in Massachusetts, and moved to Montana where he owned Sun Mountain. He saw the potential in Williston for a sit-down pizza place, so he and two buddies started Wildcat Pizzeria.”

Tate agrees that help can be hard to find. One of the problems [in trying to keep] employees is insufficient housing.

Even if someone moves out here and starts working, finding a place to live is difficult and can be very expensive.

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The pizzeria can be extremely busy, but Tate says the key to having things run smoothly is to have everyone communicating. “It’s controlled chaos,” she laughs. “You try to employ and train people who can handle a big rush. Sometimes it’s hard to keep employees because there are very competitive wages at other places.

However, right now we have put together a great staff and our employees love the job.”

“For the first few weeks it opened, there were lines out the door. It’s interesting, though. Unlike other parts of the country where weekends and holidays are the busiest times, we’re slower during those times because so many people are not from the area and go home when they have time off,” Tate explains. “What’s nice about our restaurant is it’s a family place, so we get locals and kids, and it’s a little quieter than some places. The bars, on the other hand, are always packed.”

What’s the favorite pizza? “We sell a lot of the ‘meatatarian’ pizzas because guys want to fill their bellies,” Tate notes. “A big-seller is our Wildcat Special with fresh garlic on it.

It’s really, really good.”

The Brickhouse located in Dickinson, North Dakota, has been in business for five years. Co-owner Mike Riesinger says that since the oilfield development has accelerated, the restaurant has become busier.

“We hold 96 guests at one time and don’t believe in rushing anyone; we want everyone to enjoy a fine-dining experience, so it is a blessing to run at full capacity,” he explains. “We have added additional staffing, but otherwise we believe consistency and quality are all one needs to gain repeat customers. We have not changed chef Collin Wehner’s (co-owner) belief on [having the] freshest ingredients, hand-cut aged steaks, exotic seafood, and other house favorites which keep diners coming back.”

Riesinger acknowledges one challenge is finding wait staff. “Serving takes a special personality and ability to maintain customer service in a fast-paced environment,” he says. “We have been fortunate to create a ‘BrickHouse family’ of employees which has been here for multiple years.”

Owners of the Brickhouse Grille make sure their wait staff and bartenders are knowledgeable about cuisine and beverages, which keeps customers coming back.

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The difficulty of keeping chefs is the same with everyone in the service industry – the paycheck. “It is hard to compete with what oilfield jobs pay, so again, it is finding the right person who loves to prepare and cook food. Our restaurant has an added bonus.

Chef Wehner is willing to teach his culinary knowledge to his staff. The staff gets a free education, and with this, we have added many more to the “BrickHouse family.”

What meal do diners enjoy most at the BrickHouse? Hand-cut Angus steaks with a hearty 14-ounce rib-eye are the most popular.

“However, don’t be fooled,” Riesinger chuckles.

“It’s not just red meat. We sell almost the same amount of live Maine lobster and rack-oflamb as we do steak!”

Diners in Williston might be seeing some improvements. Mayor Koeser explains that several new chain restaurants are opening soon, including Buffalo Wild Wings, Fuddruckers and Famous Dave’s, which might ease the crush of diners at any given time, although getting service employees still might be tricky.

Hackley sees a possible silver lining in the dining cloud of crowds. “The sky’s the limit if you want to open a restaurant.

Do something different,” he advises the entrepreneur restaurant owner.

“We have enough pizza restaurants and fast-food type Mexican, but we could use a really good, sit-down Mexican restaurant in Sidney. We could use a sports bar, a place where you could sit down, grab a beer, meet some buddies, have some chicken wings and watch of bunch of sports on different TVs. The opportunities for starting a restaurant are endless.” w

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BAKKEN OIL REPORT – SPRING 2013

29

MESSAGE

Montana PSC Chairman Gallagher drills down on Bakken effect I like to remind environmentalists, who

On behalf of myself, my agency and

love to tout their “greenness”, that my own

my constituents, I want to extend a great

vehicles run on the ultimate “green” fuel.

big “thank you” to the men and women

I tell them that it’s former-year solar

mobilizing the huge technical, structural,

energy, captured and sequestered locally

infrastructural and human resources to

in a natural, organic and marine algae

safely and responsibly find, tap, transport

Other areas where the PSC has a less

bio-brine that’s geologically condensed

and refine the enormous energy treasure

obvious nexus to the Bakken include

by subterranean compression and now

stored beneath the Bakken.

electricity and transmission planning,

ingeniously extracted from deep storage.

Your hard work, technology,

pipeline safety and certification, railroads

This condensed solar energy is then

ingenuity, and resourcefulness have

and even renewable energy prices.

fractionally distilled, yielding numerous,

had a remarkably positive, and certainly

Abundant natural gas supplies – made

low-cost energy, fuel, and utilitarian

dramatic, impact on our work at the

possible by the correlation of technology

products, including the gasoline and

Montana Public Service Commission

and discoveries in the Bakken and

diesel that fuel my vehicles. It’s all natural

(PSC). Our duties are connected to the

other plays around the country – have

and domestic Bakken petroleum and

Bakken in several areas, including retail

had a dramatic and positive impact on

natural gas, for which I am extraordinarily

electricity and particularly natural gas

Montanans. The state’s residential natural

grateful.

prices.

gas customers have seen their delivered

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MESSAGE

As U.S. oil exploration enters a new chapter with the Bakken shale, BNSF Railway is along for more than just the ride. Photo courtesy of BNSF Railway.

Montana consumers and this chairman of the PSC are grateful for the impact of the Bakken on energy prices. natural gas rate drop by nearly half since

the two companies. At the same

the high mark of $11.52 per dkt in 2008.

time, both utilities are reaping, to some

Whether it’s the extra wiggle-room

extent, the benefit of lower-cost market

in the average Montana family’s winter

purchases pushed down in part by low

heating budget or the impacts of the

natural gas prices.

Bakken boom providing good-paying

Even the typically more expensive

jobs for Montana families, the Bakken

renewable power sources, such as wind

contribution is much appreciated.

and solar, are realizing a cost benefit

Despite the increasing demand

of the Bakken effect on energy prices.

for electricity to service the Bakken

These intermittent power resources,

region, low natural gas prices, driven

which in Montana are mandated by

by new native supplies, have had a

law upon customers of two public

positive impact in the reduction of

utilities, must be “firmed” (replaced or

market electricity rates and, to a lesser

supplemented) when the wind isn’t

extent, on the retail electricity rates

blowing or the sun isn’t shining. That

of Montana’s two regulated electricity

back-up function is typically done with

utilities, NorthWestern Energy (NWE)

single-cycle natural gas generation or

and Montana Dakota Utilities (MDU).

by purchases in organized electricity

The lower natural gas prices translate

markets. Additionally, rates paid by NWE’s

to significantly lower fuel costs for the

Montana customers for independent

limited gas-fired electrical generation of

wind generators supplying energy are

32

BAKKEN OIL REPORT – SPRING 2013

currently set by the PSC using a formula based primarily on the cost to build and operate a natural gas generation facility.

Lower natural gas prices equal lower wind energy prices for Montana consumers. Whether it’s lower fuel (natural gas) costs or lower market prices for “firming” the intermittent renewables, or lower payments to wind generators, the Montana consumer and this chairman of the PSC are grateful for the impact of the Bakken on energy prices.

The PSC also connects with the Bakken in other important ways. We provide safety inspections of, and set rates for, Montana’s intrastate natural gas and petroleum pipelines.

Also, the Montana PSC was formerly the state Railroad Commission. (It’s still an automatic loss-of-job plus a criminal misdemeanor for a PSC employee to take

MESSAGE

We at the PSC are especially proud of the fact that our agency was one of the first, and quickest, to approve the Keystone XL Pipeline as a Montana common carrier. anything free from a railroad, including rides.) Although the federal government, as it has in so many other areas, has encroached to the point of taking over the whole bed, some vestiges of our railroad authority remain. Our PSC railroad inspectors provide safety inspection of railroad rolling stock in Montana. With BNSF presently transporting an estimated one million bpd and the rising number of new Bakken wells projected, our railsafety inspectors have their work cut out for them. While rail transport offers the advantages of scalability and destination flexibility, pipelines are arguably safer, volume-efficient, and more cost-effective, which leads me to my final point about our connection at the Montana PSC with the Bakken.

The PSC has the unique authority to designate proposed pipelines as common carriers. This designation authorizes pipeline developers to utilize public rights-of-way and the power of eminent domain.

We at the PSC are especially proud of the fact that our agency was one of the first, and quickest, to approve the Keystone XL Pipeline as a Montana common carrier. The common carrier designation and PSC oversight over interconnection facilities was critical to encouraging TransCanada and potential shippers to negotiate the Bakken Marketlink on-ramp at Baker, Montana.

If the Keystone XL Pipeline ever gets federal approval, this would allow for the export of up to 100,000 bpd of oil from the Bakken via the on-ramp.

In addition to the PSC’s 2010 approval of the Keystone XL, our agency in 2011 designated the Bakken Oneok, which is an interstate natural-gas-liquids

pipeline running from just south of

Commission, I am especially excited

Sidney, Montana, through Montana and

about the direct and indirect benefits

Wyoming into northern Colorado, as a

of the concurrence of discovery and

common carrier pipeline.

technology in the Bakken and beyond

As a consumer, I love and appreciate

that puts North American energy

the many freedoms, conveniences,

independence within our grasp.

products and benefits that plentiful energy brings to our daily lives.

About the Author

As a Montanan, I am thrilled with the

Chairman Gallagher, the only attorney

abundance of natural resources in our

on the five-member Montana PSC, began

region and especially delighted about

his working career as a heavy-equipment

the contribution of natural gas and oil

operator and mine mechanic in Dillon,

resources from the eastern Montana, North

Montana. He currently lives in Helena

Dakota, and the southern Alberta Bakken.

with his wife, Jennifer. They have two

As a public servant, policy-maker and

grown children and four above-average

chairman of the Montana Public Service

grandbabies. w

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mdu resourceS

Bakken in the backyard MDU Resources Group family of companies all busy in the Bakken For more than 90 years, the group of companies that comprise MDU Resources Group have been busy in the Bakken. “We are built for the Bakken; it’s in our backyard,” says Bill Schneider, executive vice-president of the corporation’s Bakken development.

“Even though we are spread out over most of the U.S., we come home to the Bakken.”

Schneider explains that MDU Resources essentially began its operations in the region back in the 1920s and now finds itself more active than ever in its home territory.

“Our group of companies presents a solid portfolio of valuable products and services in demand in the Bakken region,” Schneider says. “We have been especially busy over the past several years considering the uptick in activity and we’re not slowing down.”

The corporation’s work in the area is built upon a strong foundation of long-held development in the region, creating momentum to push the company ahead in 2013. “We are excited about the opportunities we are pursuing and are committed to continue growing our company with a capital budget of $3.8 billion between 2013 and 2017,” says David L. Goodin, president and CEO of MDU Resources.

Company-wide capital investments in 2013 are expected to be more than $800 million, Goodin states.

Leading the way in the company’s Bakken development is the construction of a 20,000 barrel-per-day diesel topping plant in southwestern North Dakota near Dickinson. The facility, to be jointly 36

BAKKEN OIL REPORT – SPRING 2013

MDU Resources Group has created a unique website spotlighting the specific infrastructure services available in the Bakken region. To view the site, go to www.mdubakken.com. owned by MDU Resources subsidiary WBI Energy and Calumet Specialty Products Partners, L.P., would process Bakken crude and market the diesel within the Bakken region. Construction is expected to begin this spring with a projected in-service date in late 2014.

WBI Energy continues to pursue facility expansion in the Bakken region, where it owns an extensive natural gas pipeline system. This unit offers the region natural gas transmission pipeline services, along with natural gas gathering and processing.

The company’s oil and natural gas production operations are part of Fidelity Exploration & Production Company. With approximately

127,000 net acres of leaseholds in the Mountrail, Stark and Richland counties, oil production is benefitting from improving drilling efficiencies. At yearend, Fidelity was operating five rigs in the Bakken.

The entry of the corporation into the Bakken region so many years ago was a function of the demand for residential and commercial electric and natural gas service. And in western North Dakota, electric and natural gas service is much more than a mere convenience; it’s a life-sustaining necessity and a buttress against the region’s bitterly cold winters.

Montana-Dakota Utilities Co. is a familiar brand to area residents and sits high atop the name-recognition scale

MDU

RESOURCES FOR THE BAKKEN

Upstream - Fidelity Exploration & Production Company Exploration and production.

Midstream - WBI Energy, Inc. Pipeline construction, natural gas transmission, storage and processing.

Cathodic protection, gathering pipelines and full spectrum of energy services.

Construction - Knife River Corporation / Electrical Distribution Co. Complete heavy-construction services; aggregate and ready-mix supplier.

Electrical construction services, from inside wiring to transmission lines.

Utilities - Montana-Dakota Utilities Co. Natural gas and electric service.

We have served the Bakken for more than 85 years and are always here when you need us.

See how we can work for you: Call our Bakken development office at (701) 530-1410.

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mdu resourceS

since the company’s signs have hung from main street offices in several cities and towns in western North Dakota for decades.

In recent years, the tremendous growth of western North Dakota cities has enhanced the corporation’s utility operations, where they now serve more than 60,000 customers.

Rounding out the portfolio of energy services is the construction services segment. MDU Construction Services Group has 17 operating companies authorized to work in 44 states. Three of its companies – Hamlin Electric, Rocky Mountain Contractors and Energy Electrical Distribution – are currently busy in the Bakken.

Services offered include electric power-line construction, substation construction, and wiring services for industrial and commercial facilities.

38

BAKKEN OIL REPORT – SPRING 2013

New CEO at MDU Resources With the New Year came a new president and CEO for MDU Resources. David L. Goodin, a 30year company veteran and previous CEO of the corporation’s utility division, took over for retiring Terry D. Hildestad on Jan. 4. Hildestad announced retirement plans in August 2012 after a 38-year career with the company.

Goodin, 51, also was selected to a position on the corporation’s board of directors. Goodin served as president and chief executive officer of MDU Resources’ four utility businesses that collectively serve nearly one million customers – MontanaDakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation and Intermountain Gas Company.

Goodin is no stranger to western North Dakota. He began his career with the company in 1983 as an electrical engineer in the company’s Dickinson, N.D. office.

He also worked for the company in Glendive, Mont., and Williston, N.D. Goodin served in several positions of increasing responsibility before being named president of Cascade Natural Gas in 2007. He became president of MontanaDakota Utilities, Great Plains Natural Gas and Intermountain Gas in 2008.

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WBI Energy, the natural gas transmission pipeline unit of MDU Resources, recently exceeded the one-billion-cubic-foot level of capacity thanks, in part, to agreements to build and operate takeaway pipelines serving new natural gas processing facilities in North Dakota.

Electrical supplies and power-line construction equipment also are available.

But the corporation provides more than just energy services. Knife River Corporation, the company’s aggregate and construction materials company,

has been part of the business family since 1945. Starting as a lignite coal mining company near Beulah, N.D., Knife River is now a broad-based aggregate and construction materials company working in 17 states.

To respond to growing demand for aggregates for road-building, ready-mix concrete and asphalt in western North Dakota, Knife River opened operation centers in Williston, Minot, and Tioga.

These locations compliment existing Knife River operations in Beulah, Washburn, and Bismarck.

“We know the Bakken,” Schneider says. “It’s our backyard. We have developed the resources and relationships that come from 90-plus years of business. Our full-service energy, construction and utility company provides a single storefront for a wide variety of Bakken-area needs.

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BAKKEN OIL REPORT – SPRING 2013

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No crude left behind Pipeline, rail, barge... any way out!

Prior to the shale and tight oil boom in the U.S. and significant expansion of oilsands in Canada, the U.S. and Canadian system for delivering crude oil to market was stable and relatively predictable.

In general, the U.S. and Canadian crude oil pipeline networks were originally designed for taking crude oil into the U.S. Midwest. Then matters started to change as production started to rise, and pricing for WTI at the Cushing, Oklahoma hub, which had always run in close parity with Brent, started to disconnect. Discounts deepened, affecting essentially all inland lower-48 crude grades, as well as Canadian crude oils (since these are also priced off WTI). Since January 2011, these discounts have been steep and have been considered “structural” (see Figure 1). This article will delve into the issues that are behind this soaring discount.

West Coast or the Gulf Coast The North American crude pipeline system was caught off-guard by

Figure 1: Daily WTI and Brent Prices Source: EIA, CERI. 42

BAKKEN OIL REPORT – SPRING 2013

expanding production in Western Canada, as well as the Bakken and other shale plays in the U.S. As a result, pipelines are operating at near full capacity and delivering crudes to hubs where lack of capacity leads to congestion, as seen at Cushing, which continues to persist today.

It has become a race between expanding supply and attempts to put adequate capacity in place in order to move crude oil to markets beyond the U.S. interior and inland Western Canada.

Two such pipeline projects are currently being reviewed. However, no one would have anticipated that these projects would become the focus of “political heat” at the highest levels. The TransCanada Keystone XL project, originally intended as a 700,000 to 900,000 barrels per day (bpd) line to mainly carry oilsands streams from Hardisty, Alberta, to the Gulf Coast via Cushing, has become a focal point of the political and environmental pro- and antioilsands debate in the U.S. Likewise, the Enbridge Northern Gateway project that

would initially take 525,000 bpd of heavy oilsands streams west to British Columbia’s port of Kitimat – and then to markets mainly in Asia – has become the centre of heated support and intense resistance in Canada.

Since then, the Keystone XL project has been split into two parts: a southern leg project from Cushing to the Gulf that has received all the permissions necessary to proceed, and which is expected to start operations by late 2013; and a northern segment from Hardisty to Steele City, Nebraska (where there is an existing line onward to Cushing), which hasn’t yet received the U.S. presidential permit.

Start-up would likely be no earlier than 2015. For the Northern Gateway project, Enbridge has filed an application with the Canadian National Energy Board (NEB), but a review will take at least until the end of 2013. The expected start-up for this is around 2017, but some delays are likely.

The response to the delays on these two headline projects from the midstream industry has been an almost ever-changing array of new developments and proposals. There are already several project proposals related to modifying existing pipelines and/or taking advantage of existing rights-ofway to construct new parallel pipelines.

A leading example is the 300,000 bpd Trans Mountain pipeline from Edmonton to Vancouver, which has recently been heavily over-subscribed. Currently a spur pipeline carries the bulk of the crude to U.S. refineries in Washington State and another 50,000 bpd has consistently gone to a refinery at Burnaby near Vancouver.

As a result, historically, less than 50,000 bpd of crude has been exported over the one and only export dock that currently exists for Western Canadian crudes.

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Operator Kinder Morgan has obtained

which there is an onward pipeline to

System. These southern legs are

sufficient shipper commitments to

Sarnia in Ontario. After recent expansions,

capable of transporting 1.3 MMbpd, but

support expanding the Trans Mountain

which include the base Keystone system

also have accommodated increasing

capacity by 400,000 bpd. Much of the

and Alberta Clipper, there is more than

amounts of Bakken production at the

increased throughput would be moved

3.5 MMbpd of cross-border capacity from

Clearbrook connection point, northwest

over the Vancouver (Westridge) dock, with

Alberta into the U.S. interior. There are,

of Superior. Enbridge’s Southern

destinations mainly in Asia. The expansion

however, bottlenecks in moving Canadian

Access project added 400,000 bpd

has a start-up date of 2016, although this

crudes through and out of the Midwest.

of capacity south of Superior when it

could slip because of concerns over the

We have identified such pinch-points

came online in 2009, and the addition

resulting increase in tanker movements

along these crucial oilsands export routes.

of further pumping stations is planned

in the already-busy Port Metro Vancouver

They are:

that will raise the line’s throughput.

harbour.

• Enbridge Lakehead System south

Nevertheless, growing oilsands and

of Clearbrook/Superior – Enbridge’s

Bakken volumes will keep this route

Glitches in the System

Mainline moves a variety of crude

near its stated capacity. Beyond the

The Northern Gateway and the Trans

types from Edmonton and Hardisty

Lakehead System, Enbridge’s Spearhead

Mountain expansion represent the only

to Superior, Wisconsin. From Superior,

System transports crude from Flanagan,

pipeline projects that would take Western

crude is delivered to the Pine Bend

Illinois to Cushing, Oklahoma.

Canadian crude west to the Pacific. All

refinery and Line 5 moves product

Spearhead’s capacity is 193,300 bpd.

other pipeline capacity moves Western

farther east to Sarnia, but the bulk of the

Enbridge is moving ahead with the

Canadian crudes south into the U.S. Rocky

throughput is moved south to refineries

Flanagan South project, which would

Mountain and Midwest regions, from

in the Chicago area via the Lakehead

add an initial 585,000 bpd of capacity

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(expandable to 800,000 bpd) along the route of Enbridge’s existing Spearhead Pipeline between the Flanagan, Illinois Terminal, southwest of Chicago, to Enbridge’s Cushing, Oklahoma Terminal.1 Other company proposals, such as the reversal of the existing 1.2 MMbpd Capline pipeline to Louisiana, would also help transport oversupplied Midwest markets south.

• TransCanada Keystone XL – TransCanada operates the Keystone base pipeline, which began operations in June 2010 after converting a gas pipeline from Hardisty, Alberta west to Manitoba and constructing a new pipeline from Manitoba south to Steele City, Nebraska and then east to Patoka, Illinois. In 2011, the line’s capacity was expanded to 591,000 bpd, and the pipeline’s southern path from Steele

City to Cushing was extended. The proposed Keystone XL project would establish a direct route from Hardisty to its existing Steele City connection point, but U.S. government approval is needed. Keystone XL also includes plans to construct a new pipeline from Cushing to the Nederland, Texas terminal, allowing access to the Gulf Coast market. Approval for the Gulf Coast portion has been granted.

• Kinder Morgan Express/Platte2 – Kinder Morgan’s Express Pipeline, with a stated capacity of 280,000 bpd, feeds into Casper, Wyoming where the Platte system moves the crude south and east to Wood River, Illinois. Platte capacity shrinks to 145,000 bpd past Guernsey, Wyoming while also adding volumes from the Rocky Mountain region, including Bakken oil. The constrained

capacity on this leg of the pipeline limits the amount of volumes capable of moving south on the Express line.

Kinder Morgan’s Pony Express, which will be converted from the existing gas to an oil line, has secured sufficient project support in earlier open seasons to transport up to 230,000 bpd from Guernsey, Wyoming to Ponca City and Cushing, Oklahoma starting in the third quarter of 2014.

These potential pinch-points are in addition to the current and wellpublicized shortfall in capacity to move crude out of Cushing. Increasing supplies from Western Canada, the Bakken, the Permian Basin region (West Texas), as well as from Oklahoma and Kansas, are all creating pressure to move crudes mainly from the north into Cushing and out in multiple directions, but especially south

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to the large refining centres on the Gulf Coast. As well, the lack of capacity to move oil supply directly to the U.S. Gulf Coast is leading to increased volumes arriving at Cushing and adding to the oversupply problem there.

Continental Inland Expansions, Extensions, and Conversions Until recently, there was only one pipeline that flowed south to the Gulf Coast – the Pegasus line (up to 93,000 bpd) – which runs from the Chicago area to the Gulf and carries mostly Western Canadian crude. This pipeline was reversed in 2006 and expanded to its current capacity in 2009. The Seaway line used to flow north to Cushing, but this has recently been reversed with current capacity of 150,000 bpd. It will be expanded to a capacity of 400,000 bpd from Cushing to the Gulf Coast by early 2013 and to 600,000 bpd by mid-2014.3 Associated with these expansions is a new Flanagan South line that will use the right-of-way of the existing Spearhead line to add nearly 585,000 bpd of initial capacity4 from Chicago to Cushing with an in-service date of mid-2014. This will help relieve the bottleneck in the Chicago area and will enable Canadian and Bakken crudes to flow via Seaway to the Gulf Coast. A Seaway reversal and expansion, with the Keystone XL southern leg, will add over 1.65 MMbpd of capacity out of Cushing to the Gulf by 2014. This will substantially alleviate the “Cushing congestion” and should, consequently, narrow the WTI-Brent spread, as well as Western Canadian-WTI differentials, at least in the short term.

Growing Western Canadian and Bakken supplies have also led Enbridge to propose modifying its existing pipeline through Eastern Canada. The system already carries western crudes east as far as the refining complex at Sarnia. Another line (Line 9) originally used to run east 48

BAKKEN OIL REPORT – SPRING 2013

Pipeline takeaway capacity is also expanding rapidly, but what is new here is that rail is becoming established as an important mode for moving crude oil, at scale, to multiple destinations. from Sarnia to Montreal, but was reversed; is now bringing imported crudes west via Montreal and a connecting Portland, Maine to Montreal Pipeline (PMPL) into Sarnia. Enbridge has now proposed to re-reverse Line 9 with a stated capacity of 240,000 bpd so that it runs east to Montreal, where there is access to two refineries in Montreal and Quebec City.

This could also tie-in with a possible reversal of the PMPL to take Western Canadian and Bakken crudes out to the Atlantic, from where they could reach refineries in the Canadian Maritimes, the U.S. East Coast and potentially beyond.

Enbridge has already reversed a short section of the line and has applied for permits that would allow full reversal.

This project, like Northern Gateway and Keystone XL, is meeting some resistance on the environmental basis, and so its timing is uncertain. TransCanada is also considering switching one or more existing gas pipelines that run from Alberta to Quebec into crude service.

The concept is attracting interest and a possible capacity range of 400,000 to 900,000 bpd is being discussed.5 The main objective would be to carry Western Canadian crudes, including oilsands, synthetic crude and/or diluted bitumen, through to Quebec and then to the 300,000 bpd Irving refinery in

New Brunswick. At the moment, this is only an idea and has not been taken to the formal “open season” stage to test the level of commercial commitment.

Part of the impetus behind this possible gas line conversion and the Enbridge Line 9 project is uncertainty over the major projects that would move Western Canadian crudes to the west, and south to the Gulf Coast. To the extent that either the TransCanada or Line 9 projects go ahead, they will enable light-sweet and medium-sour crude oils to move to Eastern Canada and possibly also to refineries on the U.S. East Coast and free up some room on the pipelines heading south to the U.S. Rail, Rail and More Rail Uncertainties over key pipeline projects, and steep discounts in U.S. lower-48 and Western Canadian crude prices, have spurred the above-mentioned proposals to modify and expand existing pipeline infrastructure, but they have also led to a growing role for rail. This is especially visible in the Bakken. There has been marked growth in Bakken “takeaway” capacity via rail. Faced with a lack of existing infrastructure in North Dakota, mainly smaller producers and transport companies began a rapid expansion of rail terminals in 2009. These use “unit train” technology (load dedicated 60,000 to 75,000 barrel trains, often one or more per day) that then move crude to corresponding receiving terminals with no stops along the route. Williston Basin rail takeaway capacity went from 30,000 bpd in 2008 to 275,000 bpd by 2011 and was anticipated to reach nearly 730,000 b/d by the end of 2012 (see Figure 2).6 Pipeline takeaway capacity is also expanding rapidly, but what is new here is that rail is becoming established as an important mode for moving crude oil, at scale, to multiple destinations. Most delivery terminals for Bakken crude

REPORT

Figure 2: Williston Basin Oil Production and Export Capacity Source: North Dakota Pipeline Authority. “Great Plains and EmPower ND Energy Expo”. November 2012. are in the Gulf Coast, but movements are expanding to both the West Coast and, especially, the East Coast. These movements are taking Bakken production – which recently passed the 640,000 bpd mark and is expected to go much higher – into coastal U.S. markets.

The year 2012 may also be the point in time when crude movement via rail starts to catch on as a means to move Western Canadian crudes. Small volumes of Western Canadian crudes have recently moved to the Western U.S., the Gulf Coast and the East Coast, as well as Ontario via rail. What is new is that longer-term commitments and unit train developments are starting to surface – for instance, for the movement of Bakken crudes at scale to the Irving refinery in New Brunswick.

Rail movement via “manifest” train can be three times the cost of pipeline.

50

BAKKEN OIL REPORT – SPRING 2013

However, unit trains narrow the gap and shorten the delivery time. Moving oilsands bitumen by rail can come even closer to pipeline costs as less diluent is needed; even bitumen with no diluent can be carried if the rail cars are heated.

Given the severe price discounts on heavy Canadian crudes, rail looks to be an attractive option. Both pipeline and rail are also tying in with barge movements, notably from the Midwest to the Gulf Coast, using rail or pipeline for part of the way and then barges down the Mississippi River for the last leg. Within the Gulf Coast, midstream companies are also expanding their options to move crudes along the coast (for example, Eagle Ford crude east along the Gulf and also via tanker up to the East Coast) and to move crude west to rail terminals in St. James, Louisiana.

The end result is that the combination of pipeline expansion, and rail and barge

transportation options will enable U.S. lower-48 and Western Canadian crudes to flow in an increasingly less restricted way to coastal markets. Data showed that as of the third quarter of 2012, U.S. and Canadian oil movements by rail had already increased by 650,000 bpd, compared to their historical level.7 This is consistent with the surge in rail loading and offloading capacity that, by the end of 2012, was anticipated to see over 700,000 bpd of receiving capacity in operation: with over 200,000 bpd on the Eastern coast (U.S. and Canada), 450,000 bpd on the Gulf Coast and 50,000 bpd on the West Coast.

By the end of 2013 and into 2014, this rail capacity will have essentially doubled to over 1.4 MMbpd, with nearly 600,000 bpd of receiving terminals on the Eastern Seaboard, close to 750,000 bpd on the Gulf Coast and around 110,000 bpd on the West Coast. By 2015-2016, this new

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capacity may well have grown further and will have been joined by 1.65 MMbpd of new pipeline capacity to the Gulf Coast from Cushing. Hence, a total of over three MMbpd of capacity will exist to take U.S. and Western Canadian crudes to coastal markets in the U.S. and Canada. This capacity growth is well-underway; it is developing rapidly and is substantial.

The Bottom Line The net effect of all these developments is that the U.S. and Canadian crude oil logistics system is changing rapidly as it seeks to adapt to a new reality of steadily growing oil production, both north and south of the border. There is appreciable uncertainty, however, over how the system will evolve in the longer term. It will depend in part on whether (and when) a few major pipeline projects are brought online, as well

as on how much Western Canadian crude ends up moving west and to Asia versus south into the U.S. and east into Eastern Canada. By 2014, WTI discounts could be partially alleviated, but we are witnessing a race between production growth and infrastructure restructuring. Crude oil discounts could persist to 2020 – and even beyond – if U.S. shale production rises at optimistic rates. The emergence of rail is an important new factor. Although rail car availability is a constraint in the shortterm, terminals are low-cost compared to pipelines, can be put online within 12 to 18 months, and offer shorter payback times.

Express-Platte Pipeline System for $1.25 billion in cash; the deal is set to close in the first half of 2013.

Enbridge. Investment Community

3

presentation. December 2012.

Expandable to 800,000 bpd.

4

OPEC. “World Oil Outlook”, 2012.

5

North Dakota Pipeline Authority. “Great

6

Plains and EmPower ND Energy Expo”.

November 2012.

EIA. The estimate might include some

7

volumes of NGLs. Originally published in the November 2012 issue of CERI Commodity Report –

Endnotes http://www.enbridge.com/~/media/ www/Site%20Documents/Investor%20 Relations/2012/2012_ENB_Investment_ Community_Booklet.ashx

1

Spectra Energy Corp. bought the

2

Crude Oil. Reprinted with permission. w

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Study projects electrical demand to more than triple

in Williston Basin

Small-town living has changed signifi– cantly for residents in western North Dakota. An area once with little traffic, and homes for sale for months at a time, is now experiencing traffic compared to many of the nation’s largest cities and homes are selling before they even reach the market.

It is no secret the dramatic migration is a direct result of development in the oil and gas industry, which has provided communities in western North Dakota, specifically in the Williston Basin, both benefits and hardships.

The increased activity has generated numerous opportunities and a thriving economy. “With the area’s population nearly tripling in the last decade, precise planning is essential,” says Mike Wamboldt, KLJ’s director of power. Williston Basin production is expected to remain active for at least the next 20 years and development is projected to continue at a fast pace. “The region will not only need to find solutions for the congested roadways 54

BAKKEN OIL REPORT – SPRING 2013

and lack of housing but also the electrical need to accommodate residents, as well as run new and current well pumps, pipelines, processing facilities, oil booster pumps, compressor stations, heaters and transfer pumps, all of which is needed to fuel the Williston Basin’s robust economy,” Wamboldt states.

Electrical utilities are in the process of developing plans to address increased demands. In 2012, the North Dakota Transmission Authority requested KLJ, a multidisciplinary engineering and planning firm, to facilitate the Williston Basin Oil and Gas Related Electrical Load Growth Forecast (PF 12). PF 12 is a 20-year power forecast study encompassing 43 counties in three states: North Dakota, South Dakota and Montana. The study projects electrical demand to more than triple current demand in the region.

The study indicates that, by the end of the study period, 2032: there will be a 208-percent increase in electrical demand

associated with the development in the Williston Basin. “The 43 counties associated with the study will require an additional 2,515 megawatts of electrical demand, which is directly related to the oil and gas development. Understanding the electrical demand increase is essential for the future and will facilitate community planning and development to a greater extent,” says Wamboldt.

KLJ began the study through a combination of industry stakeholder interviews, industry validation of basic assumptions and intense population and oil reservoir forecasting. To display electrical load growth geographically, KLJ utilized GIS-based spatial load growth forecasting, which combines power system data with regulatory, population, land use and development data. The study’s model process utilized GIS software to spatially distribute the location of electric loads across the study region. The model combines present

demand, electrical loads associated with population growth, loads associated with wells and the associated oil and gas infrastructure, and basic assumptions validated by industry to create a spatial forecasting model to facilitate forecast results.

“The process ensured accurate results indicative of what the industry was experiencing in the field, in addition to confirming prior forecasted results,” says Wamboldt.

The 20-year oilfield development projections provided in the study were used to develop future employment, population growth and housing demand year-by-year. “PF 12 results have the potential to help each of the three states support and approve significant investments in electrical generation, transmission and distribution infrastructure. Specifically, the study shows where power will be needed, and when, allowing communities to sustain future development,” Wamboldt explains.

“Information obtained in PF 12 is crucial to plan for electrical utilities future development,” he says. The

The relative electrical load forecast for 2032.

study validates and supports growth

tool utilized by cities, towns, legislators

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development within the Williston Basin.

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BAKKEN OIL REPORT – SPRING 2013

Phone: 780.614.2113 Fax: 780.614.2115 Luc Cell: 780.210.0635 email: nlwelding@mcsnet.ca Box 1789, St. Paul, AB T0A 3A0 DIV. OF 894382 ALBERTA LTD.

Northern Lights Welding was founded in the year 2000. It had a simple beginning as a portable rig in the Wabasca region of Northern Alberta, but over the years it grew along with the oilfield. And it continues to grow to meet the ever changing demands of the oilfield.

Now based in the town of St. Paul, we are constantly adding new products and services, which enables us to better serve our customers. In the last seven years as a fabrication shop, we have grown quickly and with much determination, this small business has grown into a first class oilfield fabrication company. With new equipment and hardworking staff, we are able to provide many services for our customers.

Northern Lights Welding takes pride in the local people it serves. We are equipped for portable rig service, b-pressure welding, aluminum welding, trucking, sandblasting, painting internal tank coating and steel sales.

In October of 2012 we started an expansion of our current facilities that consists of 10 welding bays with 4 overhead cranes. It has a state of the art air exhaust system to provide a clean and safe working environment for our staff. This expansion has enabled us to double our production and once again better serve our customers.

With the new shop running the old shop is set up to house our brake, shear, iron worker, saws and our new hi definition 8x24 plasma cutting table & ½�x10 plate roll.

We have thoroughly enjoyed serving our customers over the past twelve years and look forward to providing first class service in the future.

www.northernlights.com

Transcanada corporation

Keystone XL needed to support energy security and jobs Key supporters join TransCanada in Washington, D.C.

On the far right is Alex Pourbaix, TransCanada’s president of energy and oil pipelines.

Pourbaix spoke on TransCanada’s behalf at the news conference along with the various supporters quoted in this article.

TransCanada Corporation (TSX, NYSE: TRP) (TransCanada) and key supporters of the Keystone XL pipeline gathered in Washington, D.C. in February 2013 to reiterate the facts that the pipeline remains vital to the national interest of the United States, increasing energy security, advancing energy independence, creating jobs and fuelling economic recovery.

Joining TransCanada were representatives from the National Association of Manufacturers, Veterans in Piping, the United Association, API, the U.S. Chamber of Commerce and Michels – the primary contractor responsible for the current construction of the Gulf Coast Project.

“The quality and commitment of those standing with me today demonstrates how vital this project is to U.S. national energy security, the economy and the average American worker,” said Alex Pourbaix, TransCanada’s president of energy and oil 58

BAKKEN OIL REPORT – SPRING 2013

pipelines, at the gathering. “Approval of Keystone XL hinges on one fundamental fact: does the U.S. want its oil from a friendly neighbor in Canada and domestic sources like the Bakken play, or does it want to continue to import higher-priced foreign oil from nations that do not support U.S. values – it is that simple.”

The U.S. consumes 15 million barrels of oil each day and imports eight to nine million barrels. Both the U.S. Energy Information Administration and the International Energy Agency have forecast imports will remain in the 3.5 to 7.5 million barrels per day range well into 2035 – the need for oil remains strong. Keystone XL and the Gulf Coast Project have the capacity to displace 830,000 barrels per day (bbl/d) of unstable foreign crude oil. TransCanada has dedicated 250,000 bbl/d of capacity to U.S. production – a critical need for states such as Montana and North Dakota.

Transcanada corporation

Besides supporting long-term U.S. energy security, Pourbaix points out the many benefits of TransCanada’s multibillion-dollar oil pipeline system, the main benefit being jobs.

The company is currently employing 4,000 American workers building the Gulf Coast Project in Texas and Oklahoma – welders, mechanics, electricians, laborers, safety coordinators, heavy equipment operators – the list goes on.

One of those workers who is benefitting from the construction of this project is Billy Rogers.

“Working on the Gulf Coast Project has afforded me a good income that allows me to support my family,” says Rogers, a Michels employee and member of the Operating Engineers Local 139. “In addition, the construction of this project has had a significant impact in the local communities in which we work as the hundreds of crew members spend their money locally in restaurants, grocery stores, shops – everyone is benefiting.

“Contrary to what people may see or read, as a front line worker on the Gulf Coast Project, I have personally witnessed the support from the local residents we deal with daily during construction. They are happy to see us.”

The United Association agrees with Rogers, saying Keystone XL is a lifeline for their thousands of members.

“With over 50 percent unemployment in our pipeline construction sector, the Keystone XL Pipeline Project stands as the largest single private investment opportunity for a path back to a paycheck for our members,” says UA special representative David Barnett.

“As a veteran, I know first-hand the anxiety of returning to my family and community after serving in combat, and uncertain how I will make ends meet,” states Mike Hazard, training specialist, Veterans in Piping (VIP). “The UA’s Veterans in Piping initiative is training veterans returning from Afghanistan and other far-off places for jobs on the Keystone XL pipeline project.

If Keystone XL isn’t approved, the U.S. will continue to rely on oil from unstable regimes instead of strengthening our relationship with Canada. Continuing to rely on oil from unstable political regimes would be counter-intuitive to the values and ideals that inspire the volunteer spirit of the American military.”

The U.S.$5.3 billion Keystone XL pipeline would put another 9,000 Americans to work constructing the line. Besides the construction jobs, the steel pipe, thousands of fittings,

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BAKKEN OIL REPORT – SPRING 2013

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Transcanada corporation

Standing up for pipeline jobs. TransCanada’s Gulf Coast Pipeline Project is providing jobs for 4,000 Americans during construction in Texas and Oklahoma. hundreds of valves, fabrication of piping assemblies and structural steel for supports, and thousands of other pieces of equipment used to build such things as transformers for pumping stations, large electric motors, electrical equipment to connect the vast pipeline monitoring systems are also needed.

TransCanada, alone, has contracts with over 50 suppliers across the U.S. Manufacturing locations for TransCanada’s equipment includes: Texas, Missouri, Pennsylvania, Michigan, Oklahoma, South Carolina, Indiana, Georgia, Maryland, New York, Louisiana, Oklahoma, Minnesota, Ohio, Arkansas, Kansas, California and Pennsylvania.

TransCanada’s Gulf Coast Project, which is currently being constructed to deliver U.S. crude oil to U.S. refineries, is over 45 percent complete. To date, workers have completed more than 1.25 million hours of the over four million hours needed to construct this U.S.$2.3-billion project. That doesn’t include the millions of hours worked by those producing all the components needed to build such a large piece of energy infrastructure. Close to $1.2 billion worth of goods for the pipeline have been sourced from U.S. manufacturers.

“If you want to know why Americans are frustrated with Washington, you only need to look at Keystone project and the inexcusable bureaucracy and red tape,” says Jay Timmons, NAM president and CEO. “In the State of the Union address and on the campaign trail, President Obama spoke a great deal about economic recovery and an ‘all-of-the-above’ energy policy. It’s beyond time for those words to be met with action. In a struggling economy, we must not pass up clear opportunities to create jobs and jumpstart growth. The Keystone XL pipeline will create thousands of manufacturing jobs while providing a supply of affordable energy to enhance manufacturers’ competitiveness.

Keystone XL has been held up for far too long – we need approval immediately,” Timmons asserts.

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BAKKEN OIL REPORT – SPRING 2013

“There is strong public support for Keystone XL,” says Marty Durbin, API executive vice-president. “A recent poll we conducted reports that 69 percent – more than two-thirds – of registered voters support building the pipeline. There’s also strong support among elected officials. A bipartisan majority of U.S. senators and a bipartisan group of 146 House members have recently written to the president calling on him to approve the project. Labor groups are also on board. The Keystone XL pipeline project just makes sense and should be approved without further delay.”

Finally, Keystone XL would have minimal impact on the environment: this was the conclusion of both the U.S. Department of State’s Final Environmental Impact Statement and the Nebraska Re-route Evaluation Report. Also, the environmental impacts of the crude oil it would carry have been extremely exaggerated.

“We agree with President Obama when he said last week we need to transition toward more sustainable sources of energy and greater energy independence. That’s why TransCanada has invested over $5 billion in emission-free energy. But a complete transition to renewable energy will take decades,” concluded Pourbaix at the February gathering in Washington, D.C. “The oilsands and their greenhouse gas emissions impact have been overstated. As the respected Nature Science Journal stated the other week, Keystone XL will not determine whether or not the oilsands will be developed. Nor is oil from the oilsands as ‘dirty’ as many believe. Nature Science Journal concluded heavy oil from California is actually worse.”

Even if oilsands production doubled in the coming years as the resource continues to be developed, total global GHG emissions remain extremely low, at two-tenths of one percent. Through continuous technological improvements, oilsands producers have reduced per-barrel emissions by 26 percent since 1990.

Alberta, where the oilsands are located, is the only jurisdiction in North America that has a carbon tax and the Canadian federal government has committed to phasing out all coal-fired power facilities.

On March 1st, 2013, TransCanada welcomed the U.S. Department of State’s (DOS) release of the Draft Supplemental Environmental Impact Statement (DSEIS) on Keystone XL. The company remains strongly committed to obtaining approval to safely build and operate the pipeline, and will continue to be engaged in the process as the DOS enters its final stages of reviewing the project.

While TransCanada is still reviewing the DSEIS, it builds on more than 10,000 pages of review already completed for Keystone XL. The DSEIS reaffirmed that “there would be no significant impacts to most resources along the proposed Project route.” It noted that Keystone XL would result in no substantive change in global GHG emissions” and it is “unlikely to have a substantial impact on the rate

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Transcanada corporation

of development in the oilsands, or on the amount of heavy crude oil refined in the Gulf Coast area.” Finally, it also noted that “the denial of a Presidential Permit would likely result in actions by other firms in the United States (and global) petroleum market, such as use of alternative modes to transport WCSB and Bakken crude.”

“Completing the Draft Supplemental Environmental Impact Statement for Keystone XL is an important step towards receiving a Presidential Permit for this critical energy infrastructure project,” says Russ Girling, TransCanada’s president and chief executive officer. “No one has a stronger interest than TransCanada does in making sure that Keystone XL operates safely, and more than four years of exhaustive study and environmental review show the care and attention we have placed on ensuring this is the safest oil pipeline built to date in the United States.”

Keystone XL is the most studied cross-border pipeline ever proposed, and it remains in America’s national interests to approve a pipeline that will have a minimal impact on the environment.

With more than 60 years’ experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure, including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada operates a

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BAKKEN OIL REPORT – SPRING 2013

network of natural gas pipelines that extends more than 42,500 miles, tapping into virtually all major gas supply basins in North America.

TransCanada is one of the continent’s largest providers of gas storage and related services, with more than 400 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns or has interests in over 11,800 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America’s largest oil delivery systems. TransCanada’s common shares trade on the Toronto and New York stock exchanges under the symbol TRP. For more information visit: www.transcanada.com or check us out on Twitter @TransCanada or http://blog.transcanada.com.

TransCanada Media Enquiries: Shawn Howard/Grady Semmens 403-920-7859 or 800-608-7859 TransCanada Investor & Analyst Enquiries: David Moneta/Lee Evans 403-920-7911 or 800-361-6522 w

wanZek construction

Building strong in the Bakken

Hess natural gas plant expansion near Tioga.

64

Wanzek Construction is all over the Williston Basin in western

and Houston for the last three years to better serve customers

North Dakota, moving equipment and materials and

in western North Dakota. Wanzek also was the first company to

completing industrial and civil projects for regional and global

build, equip and furnish a camp for its own and subcontractors’

customers.

workers.

Wanzek’s commitment to work in the Bakken goes well

“Activity in the Bakken provides an excellent opportunity

beyond the norm for a construction firm, says Frank Rusich,

for Wanzek to put more than four decades of heavy industrial

senior vice-president of the Industrial, Power, Oil & Gas Group.

and civil construction experience to work in developing much-

Rusich notes that Wanzek has maintained offices in Minot, N.D.

needed oil and gas for the nation,” Rusich states. “We have all

BAKKEN OIL REPORT – SPRING 2013

NABORS COMPLETION & PRODUCTION SERVICES

Meeting All Your Servicing Needs Nabors provides wellsite manufacturing from construction to completion, offering unparalleled service throughout the life of your well. Our commitment to safety, efficiency, versatility, and environmentally friendly quality is what you have come to expect.

Our completion services include pressure pumping equipment for hydraulic fracturing, acidizing, and cementing; mobile coiled tubing for well intervention; wireline formation evaluation and logging; and tubing-conveyed perforating.

Our production services include manufacturing, hauling, transport, transfer, storage, and disposal of various completion fluids. Our workover and well servicing rigs provide for routine repair and maintenance, recompletion, redrilling, and plugging and abandonment.

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waNZek constRuction

Wanzek Projects Ross transloading facility.

Gas Plant Expansion – Hess Corporation, New York, N.Y. Wanzek has completed the early civil and outside boundary limits work for the expansion of Hess’s natural gas plant near Tioga. The work included civil earthwork and construction/erection of pilings and foundations. The expansion will increase the plant’s daily capacity from 100 million cubic feet of natural gas to 250 million. Plans call for the entire expansion project to be completed in mid-2013.

Bullet Tank Foundations and Piping – Saddle Butte Pipeline, LLC, Watford City, N.D. For the expansion of Saddle Butte’s Little Missouri Plant near Watford City, Wanzek constructed foundations for six new natural gas liquid storage bullet tanks and completed all site work. Following completion of the initial project in November 2011, Saddle Butte awarded Wanzek an additional contract. That included installation of a new access road and setting skids and fabricating piping and supports for the plant expansion.

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BAKKEN OIL REPORT – SPRING 2013

waNZek constRuction

Saddle Butte.

Wanzek Projects Transloading Facility – Plains LPG Services, Washougal, Wash.

Wanzek performed the civil/concrete, structural steel, equipment setting, process piping, electrical/instrumentation and commissioning for a truck-to-rail loadout facility near Ross, N.D. They also subcontracted and supervised work on the facility’s control system. The facility, which they began construction in July 2011and finished in November 2011, includes six truck unloading skids with the capability to load 12 rail cars at one time.

Bakken Meadows Housing Facility – Wanzek Construction, Fargo, N.D. People are Wanzek’s real assets. All told, Wanzek has more than 200 direct-hire craft and staff people working on projects in the Williston Basin. To help retain those employees and attract the additional qualified workers, Wanzek constructed the basin’s first housing camp for employees and subcontractors’ employees. The camp, near Tioga, comprises 179 lots, each with a three-bedroom mobile home, yard and parking space. In addition, there is a movie room, exercise and weight facilities and an on-site store for use by all the complex’s residents.

the expertise that regional and global companies need to put themselves in a position to extract the resources, and with our local connections and dedication to safety, we can put our customers in a stronger position to succeed.”

“We’re an energy construction company that is building stronger capabilities and capacities for all

energy-development sectors,” Rusich says. “With the crossindustry experience of our people, an exemplary record for on-time delivery and an intense focus on safety, we’ve really been able to set Wanzek apart as a premier energy construction company and go-to partner.” w

Project Management | Abstracting & Title Curative | Due Diligence | Oil & Gas Leasing | Right-Of-Way GIS Data & Mapping | Lease Take-Off | Digital Lease Records | Seismic Permitting

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www.jblsmontana.com BAKKEN OIL REPORT – SPRING 2013

67

Crude-by-rail service brings Bakken oil to coastal markets Aerial view of the entire Berthold, North Dakota facility including storage tanks, rail loop and loading building, pumps and equipment.

Image courtesy of Enbridge.

By Lisa Fattori

With oil production reaching record levels in the Bakken, oil producers, logistics specialists, railway companies and pipeline companies are all looking to increase capacity to get product to market. Crude-by-rail service has been quick to respond to the Bakken boom and is an essential transportation solution – not just in the interim, but long-term. Even with the ongoing rollout of pipeline infrastructure, rail service offers flexibility and access to markets unreachable by pipeline and is a proven transportation option that is here to stay.

By the end of 2012, North Dakota Bakken oil production was close to 770,000 barrels per day (bpd) of crude.

According to the North Dakota Pipeline Authority, in December 2012, oil transportation by rail in the Williston Basin was 64 percent, while pipeline export accounted for only 27 percent of oil produced. As production increases to $1 million bpd in the next few years, by some estimations, rail’s takeaway capacity is expected to keep pace with the growth.

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BAKKEN OIL REPORT – SPRING 2013

BNSF Railway Company connects to 16 of the top 19 oil-producing counties in North Dakota, and five of the top six in Montana, with 1,000 miles of rail line in the Williston Basin. In December 2009, the first 100-car unit-train of crude oil traveled from North Dakota to Oklahoma and today, Berthold Rail Facility in Berthold, North Dakota. Image of the Phase 2 rail BNSF handles approximately loading building which will deliver crude directly from pipeline to rail. seven unit-trains per day out Image courtesy of Enbridge. of the Bakken. Recently, the next to Class 1 rail lines, particularly company announced a 2013 in North Dakota. While infrastructure investment program of $4.1 billion to be continues to expand, demand for used for upgrades to the company’s core Bakken crude by East and West Coast network; locomotion, freight car and other refineries has shifted attention to the equipment acquisitions; and expansion development of transportation routes and efficiency projects to accommodate to these new markets. Interest in the growth in Bakken oil production. BNSF is Cushing, Oklahoma and St. James, currently moving over 500,000 bpd and Louisiana destinations is waning, in favor has the capacity to accommodate one of refineries that have been reliant on million barrels out of the Williston Basin. foreign crude and are eager to capture In the past few years, Bakken oil better pricing per barrel by purchasing stakeholders have focused on the buildBakken oil. out of terminals and transload facilities

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Photos courtesy of BNSF Railway Company.

“What’s changing for us so quickly and so dramatically right now is where this oil wants to go,” says Dave Garin, GVP of industrial products for BNSF. “Now the oil wants to go to refineries in the East and West, including northern California.

The origin infrastructure in the Bakken is close to what’s needed. Now we need infrastructure at destination terminals in each of these markets. BNSF goes as far east as Chicago, so we’ve partnered with Norfolk Southern and CSX, to offer seamless service to New York and Philadelphia.”

Rail infrastructure expansion includes the addition of sidings to accommodate passing trains of 100 to 104 cars.

“Our customers have built so much infrastructure to take in and release these large unit-trains,” Garin says. “We’re making sure that we’ve got the necessary sidings and passing tracks to accommodate the increase in rail traffic. Some of these crude trains are turning three times a month, and spend very little time in the terminals.”

New entrants to the crude-by-rail market include pipeline companies that, historically, have used their railway businesses to transport NGL. The expansion into crude oil transportation not only capitalizes on the opportunities in the Bakken, the investment also confirms the confidence by industry that rail service has a complementary and long-term role in the efficient transportation of crude. In 2010, Plains All American (PAA) initiated crude oil rail activities, which included the construction of loading terminals in the Bakken, and BAKKEN REPORT – SPRING 2013 70 Alutiiq OilfieldOIL Solutions, LLC Bakken Oil Report - Half Page - Color

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securing more than 2,000 crude oil rail cars under long-term lease. In December 2012, the company acquired five rail terminals from U.S. Development Group (USDG), including four operational terminals and an uploading facility under development near Bakersfield, California. By the end of 2013, PAA expects to have approximately 6,700 railcars under lease, split equally between NGL and crude.

In 2010, Enbridge Energy Partners L.P. began its Bakken Expansion Program to accommodate growing production from the Bakken and Three Forks oil plays.

As part of that expansion, in December 2011, the company announced an investment of $160 million to develop a rail facility near the Berthold, North Dakota Station. The project includes the construction of a double-loop unit train facility, crude oil tankage and other terminal facilities, which will offer full export capacity of 80,000 bpd. Phase 1 of the project was complete in July 2012 with an initial export capacity of 10,000 bpd, and full capacity will be in service by April.

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BAKKEN OIL REPORT – SPRING 2013

“The Berthold Facility is the first-of-itskind for Enbridge and will accommodate the incoming, outgoing and storage of three unit trains,” says Katie Haarsager, community relations advisor for Enbridge North Dakota. “Berthold can now move oil north or east by pipeline, and another 80,000 bpd by rail.

Delivering oil directly by pipeline to rail cars significantly reduces the number of trucks on our roads, which is much better for the environment.”

The 80,000 bpd of crude by rail, combined with Enbridge’s current pipeline capacity of 355,000 bpd, provides the company with a potential takeaway capacity of approximately 62 percent of the oil produced in the Bakken in 2013. A second rail project is a joint venture between Enbridge Rail (Philadelphia) L.L.C. and Canopy Prospecting Inc. to develop a unit train facility and related pipeline infrastructure near Philadelphia, to deliver Bakken oil to Philadelphia area refineries. By third-quarter 2013, the facility is expected to handle 80,000

bpd, and will be expanded to receive double that by mid 2014.

For 50 years, Enbridge has been active in the Bakken, and has invested more than $1.2 billion in North Dakota alone.

Crude-by-rail service complements the company’s expansions in North Dakota and ultimately benefits Enbridge customers.

“Pipeline infrastructure takes more time to plan, permit and construct,” Haarsager says. “Rail allows producers to be more creative in accessing markets, and to send oil to refineries that are more difficult to reach by pipeline. By providing both pipeline and rail services, Enbridge is offering customers increased capacity and a lot more flexibility.” w

R&R contracting

‘Constructing confidence’ R&R builds turnkey rail-served facilities for clients looking for improved business results by maximizing their transportation infrastructure

At R&R Contracting, Inc., it’s not “business as usual”. That’s because today’s industries are realizing the vital need to move commodities more quickly and efficiently, and rail is often the best solution. The company’s turnkey focus takes transload facilities and other railroad infrastructure from concept to reality in the most cost-efficient manner possible.

With the expansion of oil drilling and energy operations, North Dakota has seen tremendous growth in the Bakken shale area. The 200,000-square-mile formation covers parts of Montana, North Dakota and Saskatchewan and contains large oil reserves that have been made accessible using fracking techniques.

The introduction of fracking not only made the extraction of oil and gas viable, but it also gave railroads an important role in the area. The trains serve to bring in all the materials needed for fracking, including sand, pipes and drilling materials. The trains are also a faster and less expensive way to get oil to key port locations. This growth has helped to fuel the expansion of the company to other key markets in North America and abroad, applying our expertise to help clients maximize their investment dollars.

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BAKKEN OIL REPORT – SPRING 2013

R&R has worked hard to keep up with the urgency of development and makes sure its clients are served as efficiently as possible. The company has invested heavily in new equipment and technologies that enable the workforce to accomplish tasks in less time and with more efficiency, delivering a superior project to the client.

2013 marks the 25-year anniversary for the company.

Founded by Bill Reimer in 1988, R&R Contracting remains a family business. Reimer’s sons Cody and Reed Reimer both work at the company, his wife Rhonda takes care of the human resources department and his brother Mark is in sales. Reimer’s commitment to building a good reputation based on great customer service has paid off.

“We have a reputation of taking care of our customers, so we’ve achieved a lot of our growth from word-to-mouth recommendation,” Reimer states. w

R&R Contracting • www.rrcontracting.net Headquarters: Grand Forks, N.D. • Employees: 139 Specialty: Railroad design, construction, inspection/ maintenance, and bridge work.

Farmer’s Union Oil We now offer the Carhart Brand of work apparel including their FR line at our new Tioga Travel Plaza.

You can find all your work clothing needs at our Stanley & Tioga locations, which offers a full line of Flame Resistant (FR) work apparel, including Bulwark & Key, also Georgia, John Deere, Baffin and Muck work boots. In our electronics section you can find GPS units, cell phone accessories and headsets, antennas, small flat screen TVs with DVDs, computer notebooks and much more.

We are truly your one-stop shop.

northland securities inc.

Evolving with North Dakota: Northland Securities, Inc. Upper Midwest investment bank serves the expanding oil and gas industry in the Dakotas and Montana

Financing roads, schools and infrastructure in North Dakota was always an important business for Minneapolis-based investment bank Northland Securities, Inc. The company was organized in 2002 by a group of municipal bond industry veterans and later, with additional financing from outside investors including Minnesota Timberwolves’ owner Glen Taylor, the firm was able to ramp up their equity capital markets strength at the same time that North Dakota exploded with opportunity related to oil and gas. As the securities broker dealer expanded into equity capital markets, its Northland Capital Markets division was well-positioned to grow with North Dakota’s oil boom.

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BAKKEN OIL REPORT – SPRING 2013

As one of the only Upper Midwestbased investment banks having a significant focus on the development of the Williston Basin, Northland Securities, Inc. is unique. Northland Capital Markets is Northland’s full-service equity capital markets group focused on public and private growth companies, institutional investors, government agencies, nonprofit organizations and high-net-worth individuals. Northland Capital Markets provides sales, trading, research and investment banking services to a variety of small- and mid-cap growth companies, with extensive E&P research coverage and E&P-related experience in public and private financings of equity and debt securities, fairness opinions and M&A. Over the past three years,

Northland Capital Markets acted in a financing or financial advisory capacity in 96 transactions totaling over $8.4 billion in value, over $1 billion of which involved oil and gas and related service companies.

Northland Capital Markets has been consistently successful in advising and identifying financing for a variety of North Dakota-based E&Ps and related service companies, raising capital for, or advising many of the major companies operating in the Williston Basin such as Northern Oil & Gas, Emerald Oil (formerly Voyager Petroleum), Magnum Hunter Resources, Credo Petroleum, American Standard Energy Corp., Dakota Plains, and others. Northland has also expanded its expertise across various

northland securities inc.

basins, with financing clients such as Synergy Resources in the Niobrara and Vanguard Energy Corporation in East Texas. Northland’s Equity Research arm provides industry expertise and coverage on key public players in the Williston Basin, including some of the names above, as well as Kodiak Oil & Gas, Oasis Petroleum and Triangle Petroleum. Currently, Northland Capital Markets provides research coverage on seven E&P companies across three major basins, and is committed to growing its research universe.

“We believe that development of the Williston Basin and the Bakken and Three Forks plays is still in the early innings and we are fully committed to expanding our presence in the region,” states Shawn Messner, director of energy investment banking at Northland.

Northland Capital Markets continues to evolve in step with the region as it begins to broaden its focus to midstream E&Prelated services. For example, in December 2012, Northland launched research coverage on Dakota Plains (DAKP), perhaps the only North Dakota-based pure-play public company focused on the crude-byrail business. With North Dakota’s monthly oil production approaching 800,000 barrels per day and pipeline capacity limited, rail has become the preferred method to transport oil to refineries – during December, 64 percent of oil in the Williston Basin was moved via rail. Additionally, Northland has experience in the watermanagement industry, participating in financings for Green Hunter Energy, a multi-basin company focused on water management for the E&P industry with operations in the Williston Basin.

NORTHLAND Growing with the Bakken through finance and investments Northland provides these services: Project Finance Tax Exempt Bonds Corporate Bonds & Preferreds Commercial Loans Equity Private Placements Equity Initial Public Offerings Follow On Offerings

45 South 7th St., Suite 2000, Minneapolis, MN 55402 • 800-851-2920 www.northlandsecurities.com

Northland has the relationships and experience necessary to help its clients and investors achieve their strategic goals through a carefully orchestrated, professionally run process.

“Our clients get the professionalism and quality of service that comes with a bulge bracket bank, while receiving the type of considerate, personal service and attention that can only come from a firm built on our Upper Midwest values and principles,” says Jeff Peterson, director of investment banking.

As previously mentioned, Northland Securities was built on municipal bond financing, and for over a decade, unique challenges in North Dakota have been met by creative Northland financing solutions. Since 2002, Northland Securities has participated in over $300 million in tax-exempt financing in the region. Rising

Shawn D. Messner Director Investment Banking 612-851-4989

Frederick L. Morris Senior Vice President Energy and Environment Finance 612-851-4980 John C. Bradley (Omar) Senior Vice President Commercial FinanceNorthland Networks 309 517-1047 Reed Anderson Director of Equity Research 612-851-4967

Northland Capital Holdings is the parent for Northland Networks, Inc. and Northland Securities, Inc. (member FINRA/SIPC)

BAKKEN OIL REPORT – SPRING 2013

77

northland securities inc.

Northland has the relationships and experience necessary to help its clients and investors achieve their strategic goals through a carefully orchestrated, professionally run process.

Shawn Messner.

Jeff Peterson.

Fred Morris.

waters in Devil’s Lake required development, and Northland was ready with approaches that linked government and private capital.

Four housing projects in Devil’s Lake were completed for senior citizens, low income, and market rate housing, which included two townhouse-style developments. Ramsey County funded utilities through Northland for a single-family housing development outside the city near the lake.

As the rising waters of Devil’s Lake washed out the old wastewater treatment facility and were threatening the school,

Northland financed a new treatment facility for the City of Minnewaukan. Working with the Minnewaukan School District (Benson and Ramsey Counties), Northland was able to finance a new school for the community with two different sources of revenues – general obligation bonds and taxable bonds paid from Federal Impact Aid. In Bismarck, the firm recently financed a new skilled-care and assisted-living facility, with financing through Rural Development Loans and Northland client banks. Northland worked with the City of Kenmare on their Water Revenue Bonds, and also with the regional Water District in the Kenmare area. These water utilities provide service to the oil industry and both utilities receive a portion of their water from the Western Area Water Supply

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MESSAGE

A message from Congressman Daines As a fifth-generation Montanan, I know our state’s natural resources are central to our way of life and an engine to our economy that provides good-paying jobs for Montana families. Our pristine glacial peaks and rivers, vibrant forests, wideopen spaces, and rich mineral and energy deposits earn Montana its name – the Treasure State.

One of these treasures is the Bakken formation, which spreads across eastern Montana and western North Dakota.

Production in the Bakken has accounted for thousands of new jobs and has injected millions of dollars into eastern Montana and western North Dakota communities. Recent reports show that Bakken oil production currently accounts for 11 percent of total U.S. oil production and represents 40 percent of increased oil production nationwide.

In the past four years, new businesses in the Bakken have grown by almost

50 percent – compared to only three percent growth across the United States as a whole. Construction and land development in the Bakken area have also increased more than 60 percent over the past year, and workers in the Bakken continue to make more than the average wage for the United States.

One of the most exciting things that production in the Bakken has enabled is allowing more young Montanans to put their training and education to work here at home. For so long, Montana’s schools have trained students that went off to other states or other countries to develop resources and new technology. Now, we have the opportunity to put those ideas and those Montanans to work developing Montana’s resources and growing our state’s energy production.

But this growth doesn’t come without challenges. One of the major barriers facing our state is our infrastructure. We need to encourage investment in energy

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infrastructure to transport our resources as well as the infrastructure necessary to sustain the unprecedented economic growth we have experienced.

This is one of the many reasons why building the Keystone XL pipeline remains paramount. President Obama has taken four-and-a-half years to make a decision on this job-creating project. It’s time to act.

In March, the U.S. State Department issued its Supplemental Environmental Impact Statement for the Keystone XL Presidential Permit application, which confirmed what we already knew.

The Keystone XL Pipeline will have no significant impacts on the environment.

In fact, this is the fourth environmental review of the Keystone Pipeline – with a final report still to come – even though report after report has stated that the pipeline will not have significant environmental impacts.

This report also comes after Nebraska Governor Dave Heineman approved a new route through his state for the Keystone XL pipeline project. In January, I joined 150 other House members in calling on President Obama to quickly approve the permits for Keystone, in light of this new route. That was two months ago. And we have yet to hear anything from the President.

The American people have been waiting four-and-a-half years for President Obama to make a decision on the Keystone XL pipeline. As a member of the House Energy Action Team, I

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MESSAGE

understand how important this project

independence. The Keystone XL would be

is to our nation – and to my home state,

able to move up to 830,000 barrels of oil

Montana.

per day. That’s about half the amount that

This project means millions of

the U.S. presently imports from the Middle

dollars injected into the economy and

East. And of the oil moved each day to U.S.

hundreds of good-paying jobs created

refineries, 100,000 barrels will come from

for Montanans. It also means coming one

our own Bakken formation.

step closer to North American energy

That’s why in March, I joined a

bipartisan group of House members in introducing legislation to expeditiously move forward the construction of the Keystone XL pipeline by taking the approval out of President Obama’s hands.

The Northern Route Approval Act, which I co-sponsored alongside Representative Lee Terry (R-NE), removes the need for a presidential permit for the northern portion of the Keystone XL pipeline, which is planned to run from the Canadian border to Steele City, Nebraska. This legislation will make it possible for the pipeline to be constructed in its entirety.

This isn’t about politics – Republicans and Democrats alike support the pipeline.

This is about our nation’s security. This is about lowering energy costs for American families. This is about American jobs.

We must continue working toward common-sense solutions, like the Keystone XL pipeline, that will help grow the economy, create jobs, and help us move toward North American energy independence. The production we’re seeing on the Bakken today will remain a critical component in achieving those goals.

Montana is setting an example of how domestic energy development can be done in a responsible manner to reduce our dependence on foreign energy while sustaining our resources for generations to come. And through the construction of the Keystone XL pipeline and continued exploration and development of the Bakken, I am confident that Montana will continue to lead the way.

About the Author Montana Congressman Steve Daines is serving his first term in the U.S. House of Representatives. A member of the House Natural Resources Committee and House Energy Action Team, Daines is a leading advocate of advancing pro-growth, proenergy policies in the House. Daines and his wife, Cindy, reside in Bozeman, Mont. and are parents to four children. w

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BAKKEN OIL REPORT – SPRING 2013

breitling oil & gas

Bakken losing its sizzle – or shining even brighter?

By Chris Faulkner, President and CEO, Breitling Oil & Gas

Maybe it’s a tendency toward pessimism, maybe just the media’s

rig sites. Bakken pioneer Continental, for example, drilled an

delight in “schadenfreude”, but the buzz about Bakken was

average of 11 wells per rig in 2012, compared to an average

decidedly gloomy at the end of 2012. Was the Bakken boom

of seven wells per rig in 2011. Continental has said that it

fizzling? Had it run its course?

expects 262 wells in 2013; the company drilled 175 in 2011 and

Of course not. Bakken will continue to be the biggest oil-

projected a total of 235 wells in 2012.

producing play in the United States, right ahead of the Eagleford

Evidence of an optimistic outlook on Bakken among oil

shale, and it will be instrumental in putting America ahead of

producers: according to North Dakota’s Department of Mineral

Saudi Arabia oil production by 2017.

Resources (DMR), in September there were 190 active rigs in the state, down from 209 in April 2012 – but the DMR reported 262

It’s the Wells, Stupid!

new wells, 32 more than in April. Also in September, the DMR

So, why the doom and gloom at the close of 2012? For some

received 273 new well-permit applications, up from 167 in April.

reason, analysts were focusing on rig counts while forgetting well

84

counts (among other things). Rig counts fell around 10 percent

Back to Bakken’s Beginnings

in North Dakota. At first glance, that’s a scary statistic, especially

Montana is where the Bakken boom first started, with

combined with the fact that Bakken wells generate their highest

production on Montana’s Upper and Lower Bakken layers

production at the outset. Translation: Bakken was on the decline.

peaking out at 313 wells in 2005 and the focus then shifting to

But the Bakken is the gift that keeps on giving. True, rig counts

North Dakota’s more productive Middle Bakken reserves.

fell, but well counts were actually on the rise. Operators have

But don’t count Montana out. The Montana Department

improved efficiencies by drilling multiple wells through single-

of Natural Resources and Conservation issued a record 356

BAKKEN OIL REPORT – SPRING 2013

breitling oil & gas

oil drilling permits by October of 2012 after receiving new geological data that shows more promise in the Upper Bakken layers. Several recent explorations of Montana’s Upper Bakken resulted in lower initial flow rates but also slower declines in production than the Middle Bakken.

Even more tantalizing: Montana’s Upper Bakken produced a better oil-to-gas ratio – 98 percent – than is typical of even the Middle Bakken’s 90 percent ratio.

The International Energy Agency (IEA) already has

The News Keeps Getting Better After accessing deeper reserves of sweet, light crude in the Three Forks Zone of Bakken, Continental raised its own estimate of Bakken’s reserves to 903 billion barrels of oil in place, with a potential for 27 billion to 45 billion recoverable barrels. This 57 percent increase over the previous estimate may actually be low, given the ever-advancing improvements in drill technology and recovery.

This isn’t the first time the Bakken has outperformed the estimates and projections. In 1995, the USGS estimated 151 million barrels of recoverable oil, but adjusted its estimate in 2008, putting the figure at 3.65 billion barrels of oil. And now the USGS is coming back to revise its numbers again in 2013, something it typically does only if there’s good reason to believe that there may be a significant change from previous estimates.

Analysts expect to see 5,000 new wells in the Bakken by 2015, and another 28,000 by 2035.

Chris Faulkner is the founder and CEO of Dallas-based

Bakken May Rival Top Oilfields While we wait to hear the latest projections from the USGS, it’s interesting to note the considerable speculation about the Bakken possibly topping a million barrels a day of oil production, which would make it one of the top seven oil-producing fields in the world.

predicted that the U.S. will surpass Saudi Arabia as the world’s largest oil producer by 2017 and become self-sufficient by 2035. The Bakken reserves have been integral to that target, and now may play an even more pivotal role in helping us get there.

About the Author Breitling Energy Companies, the holding company of Breitling Oil and Gas and Breitling Royalties, which he also founded and serves as CEO. The companies are in the oil and natural gas exploration, production and investment business. Faulkner’s diverse and extensive background in the oil and gas industry in North America, Europe and the Middle East covers all aspects of oil and gas operations, including project management, production, facilities, drilling and business development.

Faulkner serves as an advisor to the ECF Asia Shale Committee and sits on the North Texas Commission Board of Directors. w

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85

Women in the Bakken:

Dancing to a

different drummer

By Melanie Franner

The Bakken oilfields offer the allure of steady, good-paying jobs. And this in itself is enough to attract a fair number of working men. It also appeals to husbands and wives and/or families, many of whom who view it as a way to start over. And, as with life in any city or town, some of these people find the success they’re looking for and some don’t.

Running Scared The Matthew House is a non-profit homeless shelter located in Sidney, Montana. It was founded 22 years ago as a shelter for anyone who needed it. Today, it offers shelter to men and women from all walks of life, some of whom are women who can’t afford the high cost of rent. Others are coming out of prison, drug and alcohol programs or domestic abuse situations.

“We typically allow people to stay for three months free-of-charge until they can get back on their feet,” explains Elaine Hutton, a long-term board member, who adds that the organization has five fully furnished apartments. Food, blankets and other supplies are provided as needed.

“We’ve seen a real increase in demand for our services since the influx of people.

There has been a direct correlation between more people and more violence and abuse.”

Another organization dedicated to helping women in domestic violence situations is the Richland County Coalition Against Domestic Violence.

Program director Helen Schmitt speaks first-hand of the increase in the number 86

BAKKEN OIL REPORT – SPRING 2013

of people in need of the coalition’s services.

“A few years ago when things were just starting here, people were going out and getting good jobs,” she explains. “It took a lot of stress off of our families because the women were able to stay at home with the kids.”

The recent influx of people has brought with it an influx of problems.

“Our DUIs have gone up,” adds Schmitt.

“The number of sexual assaults has gone up. We’ve already had five sexual assaults

immediately try to arrange for a way back home.”

Of course, an abundance of drugs, alcohol and a shortage of affordable housing all contribute to the growing problem of violence and abuse. And a predominance of male bodies doesn’t help the situation.

“You can go to any grocery store or restaurant and see for yourself that the number of males far outnumber the number of females,” states Schmitt. “From what I hear, if you are a woman, you

“I know what crime is. It’s definitely frustrating here but it is certainly not uninhabitable. Most of them are decent guys who are working hard to make a living.

I feel that if anything were to happen, there would be a 100 of them jumping in to defend me.” since January. I think a lot of people come up here thinking that this is going to be a new start but guess what, they still have the same issues as they had before they came up here.”

The Richmond County Coalition Against Domestic Violence also includes a shelter facility for women.

“During this past year alone, we have tripled the number of shelter nights,” explains Schmitt, who adds that the visitors don’t usually stay that long. “The women usually realize that things aren’t going to be any different up here from what they were back home and they

don’t want to go out to any bars or social events. It’s probably not safe to go.”

Despite the harsh living environment, some women are making a success of their time in the Bakken oilfields.

Making the Most of it Robin Arias is a married woman of 10 years who moved with her husband to a small town near Williston, North Dakota, last August. An online person from way back, Arias did some research into what to expect.

“As a woman coming up here with a teenage daughter, what I saw online

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Robin Arias and her husband moved to a small town near Williston, North Dakota, last August.

seemed very frightening,” she says. “Most

certainly not uninhabitable.”

of what I read advised women against

That being said, Arias pretty much

coming up here at all.”

stays focused on her family and her

The truth, however, proved to be

online activities (including a blog about

slightly different.

life in the oilfields: lifeinwilliston.com).

“I am a big city girl and have lived in

“I don’t have a big network of friends,”

places like Las Vegas, Orlando and New

she says. “And yes, I wouldn’t go down

York,” explains Arias. “I know what crime

a dark alleyway at night but the truth

is. It’s definitely frustrating here but it is

is, I feel safer with all of the men here.

Most of them are decent guys who are working hard to make a living. I feel that if anything were to happen, there would be a 100 of them jumping in to defend me.”

Still, Arias feels anxious about her teenaged daughter. And she wouldn’t necessarily recommend life in the oilfields to all of her friends.

“If I were single, I would not want to live here,” she states. “It isn’t a good place for dating and trying to find a significant other. I don’t want my daughter staying here when she gets older. I’d rather she be with family in a more balanced place.

It’s hard to explain what things are like here but it is similar to living in a vacuum.”

Another issue that is proving to be a hardship for Arias and her family is the cost of housing. Currently, she is “lucky” enough to be renting a four-bedroom house without having to share it with anyone. But the cost is high. If they were to put down roots for a few years, they would have to enter the real estate market. And that would be pricey.

“The market here consists of pre-

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Melissa Anderson is another married woman who moved to the oilfields with her husband and family. A mother of five (ranging from a year-old to a 16-year-old), Anderson has lived in Bismarck, North Dakota, for the last five years. manufactured, modular housing that would cost $50,000 anywhere else but carries a price tag of between $300,000 and $450,000 here,” she says. “My husband loves his job here and would like to stay but we can’t afford to unless we can cut our exorbitant rent in half.”

Melissa Anderson is another married woman who moved to the oilfields with her husband and family. A mother of five (ranging from a year-old to a 16-year-old), Anderson has lived in

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BAKKEN OIL REPORT – SPRING 2013

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Bismarck, North Dakota, for the last five years.

“It’s not quite the boom town as some of the places in western North Dakota,” she explains. “But of course, I take precautions when I am out, like carrying pepper spray in my purse. I also have a handgun in the house.”

Anderson’s husband is gone for two weeks at a time. During these absences, she is constantly on the run with the children, going from activity to activity. She also heads out of town a lot to visit family, friends and her husband.

“With five kids, I wouldn’t have much of a social life anyway,” she jokes.

Like Arias, Anderson started a blog about living in the oilfields (realoilfieldwives.com). She works with her partner, Christy Mensi, who lives in Texas. The blog posts typically garner around 2,000 hits.

“It started out as a support group,” says Anderson, who adds that it can get pretty lonely at times. The site offers mostly tips and advice on marriage and life in general.

“We’ve had responses from several women who are having a hard time,” adds Anderson. “People who are having to cope without having their husbands around for half of the year.”

One Life to Live Whether it’s family life in the oilfields or just a relationship, the women of the Bakken are experiencing life in a different way from their male counterparts. Charitable organizations can go a long way to helping ease the burden of the harsh lifestyle, as can support groups and blogs, but in the end, it’s up to each individual woman to make of it what she will.

“A lot of women up here don’t have the same financial resources of their male counterparts,” states Tim Anderson, clinical director for the Sidney, Montana-based District II Alcohol and Drug Clinic. “A lot of them are coming out of relationships with people working in the oilfields. It’s a tough situation to be in.” w

target logistics

Poor workplace nutrition hits workers’ health and productivity

Target Logistics Stanley Complex, North Dakota.

Workers at remote oil, gas and mining sites face multiple challenges. Fatigue in the forms of exhaustion, weakness or sleepiness, for example, is the leading cause of workerinitiated accidents. As such, quality food and rest are necessary solutions to workforce health and productivity.

One wrong switch, one loose bolt, one missed safety check, and the entire system can blow. Workers’ lives are at stake.

And, depending on the severity of the accident, the life of the entire community is threatened, too, as well as the very life of the company and the broader business climate for years to come. Years of marketing, branding and social responsibility can evaporate overnight.

You can’t blame the weather or bad luck. Approximately 90 percent of workplace accidents are caused by human error, whether originating in poor managerial decisions – months and miles away from the site of the accident, or worker errors that have immediate and devastating effects. And the number-one cause of worker-initiated accidents is fatigue in its various forms, such as exhaustion, weakness or sleepiness.

Consider, for instance, that obese workers are twice as likely to miss work and that low iron levels are associated with weakness, sluggishness and lack of coordination. It’s best to mitigate these problems at work.

Poor diet can result in less productivity and amplify workplace issues like low morale, high stress and lack of trust.

For these reasons, health and science writer Christopher Wanjek – working with Target Logistics – wrote a white paper titled, “Workforce Housing and Feeding Solutions for Health, Safety, Productivity and Morale.” It can be downloaded for free from the Target Logistics website, www.targetlogistics.net, under the News section.

“Securing food daily quickly becomes a problem. Even if these workers have access to a stove and know how to cook, they will have difficulty obtaining fresh foods, and their meals likely will be basic and nutritionally inadequate for optimal health,” Wanjek explains. “Those living in motels often are forced to eat at the same fast-food restaurant, convenience store or gas station for the duration of their employment.

Imagine such an existence, all the while working 12-plus-hour days.”

Comforts can vary but, at the heart of the matter, is the feeling of hominess. Every comfortable bed, soft pillow, warm shower, lively pool room, exercise facility, clean laundry facility, and so on will engender loyalty and good morale and reduce the risk of fatigue through the five- to 10-day rotation of 10- to 12-hour shifts often expected from workers.

The choice between living out of a motel, living in a trailer (or car), or living in high-quality all-inclusive temporary housing is an easy choice to make. And among all the remote operations that do offer food and shelter, the choice BAKKEN OIL REPORT – SPRING 2013

91

target logistics

between a “one-star” and “four-star” accommodation also is easy to make.

Workers talk, and word will spread about which companies offer the best working conditions.

“Investments in feeding and wellness programs routinely yield profits in terms of higher productivity, fewer accidents, reduced absenteeism and less turnover,” Wanjek writes.

“Consider that Husky Injection Molding Systems, Ltd., in Bolton, Ontario, has reported U.S.$6.8-million in yearly savings from a U.S.$2.5million investment in wellness. Coors Brewing Company has reported a $6.15-million productivity gain for every $1 invested in food and fitness.”

Likewise, Travelers reports a $3.40 gain for $1 invested in nutrition and recreation and DuPont reports a $2.05 gain for $1 invested in nutrition and recreation.

“Target Logistics has always believed strongly in the powerful link between proper nutrition and the improved productivity of a workforce. Indeed, the Target Logistics Economics of Comfort® platform proves that,” says spokesman Randy Pruett. “Ultimately, it is ironic that industries so focused on producing high-quality fuel can overlook the high-quality fuel needed to power workers.” w 92

BAKKEN OIL REPORT – SPRING 2013

Bear Paw Lodge, North Dakota.

What your crew gets done today has a lot to do with where they slept last night.

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REPORT

Alberta opens door on huge resources; formations on parallel with Bakken, say agencies

By Gary Park

Alberta’s emerging shale and/or siltstone formations could ultimately yield 423.6 billion barrels of oil, 58.6 billion barrels of liquids and 3.3 trillion cubic feet of natural gas, said a longawaited report by the Alberta Energy Resources Conservation Board and the Alberta Geological Survey.

The report is designed to provide baseline data, information and understanding of the geology, distribution, reservoir characteristics and hydrocarbon resource potential of Alberta shales.

The calculations for the formations, including the Duvernay, Montney and Muskwa, put the deposits in the same league as some of the major U.S. shale plays as part of the radical industry shift from conventional operations to horizontal drilling and hydraulic fracturing.

Andrew Beaton, one of the report’s authors, said the numbers fall roughly into line with the Eagle Ford and Marcellus shales and approximate numbers reported so far by companies exploring the shale prospects in Alberta.

Potential Beyond Oilsands The findings bolster the view that Alberta has immense hydrocarbon potential beyond its oil sands, rated as the world’s third-largest deposit at 170 billion barrels of proven reserves and an ultimate potential of 1.7 trillion barrels.

The Duvernay and Montney have already attracted strong investments from Encana, Chevron and Talisman Energy, with ExxonMobil joining the scramble in October by negotiating a C$2.6 billion takeover of Celtic Exploration, while a host of mostly state-owned Asian companies have stakes out minority positions.

The study says the Duvernay formation, which cuts across much of north-central Alberta, contains 61.7 billion barrels of oil, 11.3 billion barrels of liquids and 443 tcf of gas, while the Muskwa in northwestern Alberta has 115.1 billion barrels of oil, 14.8 billion barrels of liquids and 419 tcf of gas.

Western Alberta’s Montney – which also extends into a major exploration area in northeastern British Columbia – has estimated resources of 136.3 billion barrels of oil, 28.9 billion barrels of liquids and 2,211 tcf of gas. However, the Montney 94

BAKKEN OIL REPORT – SPRING 2013

is not strictly rated as a shale target because it is dominated by siltstone and has been included because it is a target for unconventional resources.

The findings also cover a preliminary assessment of the Colorado, Wilrich and Rierdon units as well as a summary of the Bantry shale unit.

Technical Snapshot of Exshaw Findings The basal Banff/Exshaw resource assessment was limited to southern Alberta “due to data availability and current industry focus”, the report said.

In addition to sourcing conventional reservoirs, the Exshaw shale is recognized as a major source rock for heavy oil and bitumen deposits in northern Alberta. The combined interval of the Exshaw formation and the basal shale of the Banff formation is stratigraphically equivalent to the Bakken formation in the Williston Basin, the study said.

The combined interval of the Exshaw formation and the basal shale of the Banff formation is stratigraphically equivalent to the Bakken formation in the Williston Basin, the study said.

Extending into northern and northwestern Montana, the play is often referred to as the southern Alberta Bakken or the southern Alberta Bakken basin by industry.

“For this project,” the findings noted, “the terms lower shale, middle unit, and upper shale correspond to the Exshaw shale (lower Bakken), the upper Exshaw (middle Bakken), and the lower Banff basal black shale (upper Bakken), respectively.”

The basal Banff/Exshaw has a large variation in primary lithologies. The upper and lower shales are dominated by dark grey to black, fissile, hard-to-soft, calcareous to noncalcareous, organic-rich shale.

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The middle unit consists of various lithologies, including calcareous sandstone, argillaceous sandstone, dolomitic siltstone, calcareous siltstone, silty lime-mudstone, limestone, and dolostone.

The variation in primary lithologies, the report said, “may indicate that the Exshaw and basal Banff merit a more detailed stratigraphic study to determine erosional boundaries and confirm stratigraphic equivalence to the Bakken.”

In the study area, depth to the top of the basal Banff/Exshaw ranges from 500 meters (1,640 feet) near the subcrop erosional edge to about 4,000 meters (13,123 feet) along the deformed belt.

The upper and lower shales are both thin. The thickness of the lower shale ranges from four to 13 meters, or 13 to 43 feet. The upper shale is more difficult to correlate and has a smaller aerial extent than the lower shale. The upper shale ranges from <1 to 2.3 meters, or <3 to 7.6 feet, thick.

The gross isopach of the middle unit in southeastern Alberta ranges from zero to 40 meters, or zero to 131 feet, along a roughly northeast-to-southwest trend.

Four wells were selected for a cross-section that displays the stratigraphic relationship of the three units and the correlation to the Bakken.

www.lyrec.com 3200 W. Holly Street PO Box 1047, Sidney MT 59270

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BAKKEN OIL REPORT – SPRING 2013

Phone:(406) 488-1602 Fax: (406) 488-6524

A porosity-thickness, or Phi-h, map of the basal Banff/Exshaw was constructed for the study, using density-porosity logs calibrated to a grain density of 2.74 g/cm3 with no porosity cutoff and a >75 API gamma-ray–log cutoff.

The gamma-ray cutoff excluded any lithology, such as sandstone or limestone that was relatively free of argillaceous material.

The map shows high porosity-thickness values in the northeast near the erosional edge. Current hydrocarbon exploration is concentrated in the southwest corner of the study area.

The grain density used to determine porosity accounted for the presence of total organic carbon by converting TOC to kerogen and counting it as a mineral component. The methodology used works well, the findings said, when the TOC content range spans only a few weight percent.

“The TOC content of the upper and lower shale, however, is quite variable, which may cause significant error in the calculation of the porous volume of shale in our methodology,” the report said. “For the present resource estimation, we chose not to include the porous volume of the shale. A well-by-well evaluation of the data is necessary to achieve a reliable estimate of shale porosity. However, because the upper and lower shales are quite thin, the resource estimate may not change dramatically by this exclusion.”

The resource estimate for the basal Banff/Exshaw “is based on the adsorbed gas content of the upper and lower shales, as well as the porous volume of the middle unit, which is the primary production unit in the Bakken play in the Williston Basin.”

The TOC content ranges from 0.1 to 16.9 weight percent in the findings, based on 75 samples from 13 wells. The TOC content of the middle unit is generally <1.0 wt. % in the southern area.

“There is some indication that the northern area may contain a higher content of TOC,” the report said. “The thermal maturity of the basal Banff/Exshaw source rocks, based on vitrinite reflectance data, exhibits increased maturity to the southwest, corresponding to an increased depth below the surface.”

Using Dean Stark analysis and helium pycnometry on select samples, the laboratory calculated water saturation.

“The distribution of values for the basal Banff and Exshaw formations in the southern area shows dominance in the range of about 10 percent to 50 percent, which we used as P90 and P10 constraints in our resource evaluation,” the report said.

Constraints Not Considered The report cautioned that the numbers represent “endowment of hydrocarbons” and that geological and engineering constraints along with economic, social and environmental considerations will eventually determine the volumes that can be recovered.

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Mountainview Energy Ltdâ&#x20AC;&#x2122;s mission is to explore, drill and develop for oil and gas in the Williston Basin Bakken/Three Forks Resource Play and the South Alberta Bakken Resource Play. By acquiring these properties we have the opportunity, through exploration and development drilling, to increase our daily production. Our strategy will allow Mountainview Energy Ltd to build an oil and gas company based on solid fundamentals. To accomplish our goals Mountainview will reply on Managementâ&#x20AC;&#x2122;s proven record of over 50-years of developing oil and gas fields, both in private and public companies.

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Phone: (406) 873-2235 Fax: (406) 873-2835 e-mail: mvw@bresnan.net

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REPORT

Co-author Dean Rokosh said the operators will be in the best position to say which plays are economic.

“It’s still a learning stage in every one of these formations,” Rokosh said.

Data and information produced by the study may help in the evaluation, exploration and development of the resources and can be used by industry to help identify shale gas prospects, plan effective drilling and completions strategies and guide land acquisition decisions.

In Alberta, 15 formations have the potential for shale and/or siltstone-hosted hydrocarbons, which may represent a valuable resource for the province, the report says.

Estimates for the total amount of gas in Alberta shale vary from 80 tcf to 100 tcf, pointing to the “great potential size of the resource, which can contribute to economic benefits and energy security for Alberta.”

The Energy Resources Conservation Board launched its study of shale- and siltstone-hosted hydrocarbons in 2006, initially focusing on shale gas in the formations which had attracted industry interest, such as the Colorado shales and the Banff/ Exshaw.

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As the study moved ahead, the ERCB found that many of the formations it was analyzing also contained significant quantities of natural gas liquids and oil, prompting it to expand the assessment.

In total, 3,385 samples were analyzed, including duplicates and standards for quality control.

Samples were collected from 65 outcrops and core samples were taken from 316 wells. Of the total samples collected, 2,746 were from core, 440 were from outcrops and 199 were standards and duplicates. Some of the data generated by the ERCB’s resource appraisal group will be presented in future digital databases.

Read the full report at http://www.ags.gov.ab.ca/publications/ OFR/PDF/OFR_2012_06.pdf.

Note: The text under the subhead “Technical snapshot of Exshaw findings” was compiled by Kay Cashman.

Previously published in the Petroleum News Bakken, Vol. 17, No. 47.

Reprinted with permission from Petroleum News Bakken. w

The right place, right from the start It all started in the Williston Basin. When we launched Legacy Oil+Gas in 2009, this was our land of opportunity. The area has delivered on its promise ever since, helping Legacy evolve from an upstart junior to a premier intermediate producer.

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Today, we are a company of over 100 people, with a development drilling inventory in excess of 2,000 net locations and 2013 exit production of 19,700 Boe per day. Technology-driven light oil resource plays continue to steer our success, with the Williston Basin as a core operations region.

Our Bakken, Three Forks and conventional assets have driven our strong growth and plays like the Spearfish ensure this pace continues into the future. And with our dedicated people, high quality light oil assets and extensive development inventory, we know we are in the right place for a story that is just beginning.

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LYNDEN TRANSPORT

Lynden supports Bakken oil and gas customers with experience and expertise

By Tami Beaumont

100

In the 1970s it was the trans-Alaska pipeline. Today, it is the

Lynden Transport trucks have been departing twice weekly

Bakken oilfields of North Dakota and Canada. From season

from Houston and Dallas and from Oklahoma City and Tulsa

to season, decade to decade, Lynden has been a strong and

bound for Williston, North Dakota, and points in Canada and

steady presence in the oil industry. Wherever a new project

Alaska.

is underway and transportation and logistics services are

Brown is regional manager for Lynden Transport in

needed, the company mobilizes and responds with its unique

Houston where oil and gas projects are routine. In fact,

brand of customer service.

Lynden is so skilled in this segment of the market, it handles

Two years ago, Sherri Brown and her colleagues at Lynden

air, sea and ground transport for the biggest names in the oil

Transport knew something big was coming. North Dakota’s

industry and is often asked to handle logistics and project

Bakken oil reserve started drawing attention in 2006 with

management duties as well. With its extensive experience

early development and exploration. By 2011, oil development

coordinating and moving equipment, supplies and oversized

had more than doubled, thrusting North Dakota into the “big

freight to support the oil and gas industry in Texas, Alaska,

three” of U.S. domestic suppliers along with Alaska and Texas.

Canada and worldwide, Lynden is uniquely positioned to

“With the oil industry booming in the Bakken region, we

support customers developing the Bakken oilpatch.

decided to take a proactive approach by supporting our

“We knew the North Dakota trade lane would be a busy

customers with scheduled Less-than-Truckload (LTL) service

one since Williston is the heart of the new oil patch,” Brown

to North Dakota and Oklahoma,” Brown says. Since 2011,

explains. “Customers needed more choices for departures

BAKKEN OIL REPORT – SPRING 2013

LYNDEN TRANSPORT

refineries and miscellaneous freight to support the hundreds of rigs now operating and the thousands of people now living and working there. Stretching from Bismarck, North Dakota north to Regina, Saskatchewan, the Bakken oilpatch is about the size of West Virginia and is expected to produce as much as two billion barrels of oil per day.

Decades of hauling freight to the Prudhoe Bay and Kenai oilfields in Alaska gives the company the experience to provide the same level of commitment and service to customers in the Bakken region. Lynden Transport is one of more than 15 transportation and logistics companies that make up the Lynden family of companies. The “family” offers customers a variety of intermodal options on land, air or sea.

“We can call on a fleet of L-382 Hercules, barges, hovercraft, and arrivals and we wanted to help customers who may want to venture into this market and take advantage of new opportunities. We’re transporting everything from compressors and heaters for the refineries, to the really big stuff like an 80,000-pound piece of equipment we moved just a few weeks ago. That particular piece measured 60-feet long, 16-feet wide and stretched almost 15-feet high.”

Loads that big need special permits, trailers, pilot cars and experienced drivers. “We have all that and more,” Brown notes. “We can handle just about anything that we are asked to haul north from the U.S. or south from Canadian Lynden Transport in Edmonton. Our experience is a huge benefit for the oilpatch customers. We’ve done this type of work all over the world so they can come to us for the know-how and expertise to get it where it needs to go.”

Forty years ago Lynden did the same in Alaska; responding to the need for transportation – and anything else – for the construction of the trans-Alaska pipeline. A pipeline may be on the horizon in North Dakota, but for now, the freight moving into the region is mostly equipment for drill rigs and

specialized trucks and tankers. If you need it shipped, flown or trucked, onshore or offshore, we can get it there,” Brown explains.

Lynden also offers a unique “Dynamic Routing” service to oil and gas customers, allowing them to make changes in the mode of transportation enroute. The tagline: Only pay for the speed you need.

“With shipping costs increasing, we came up with a way to help customers save money and time,” Brown says. “Dynamic Routing allows customers to slow-down or speed-up the delivery of their freight into Canada or North Dakota by switching from truck to air options, for instance.”

As the Lynden Transport and Canadian Lynden Transport trucks log the miles to and from the U.S.-Canadian border, the company is also supporting oil and gas customers in northern Alberta with the development of the Canadian oil sands. Lynden provides freight-forwarding, customs brokerage, warehousing and logistics support to oilpatch customers in Canada. Oil and gas projects in Russia, Papua New Guinea and all over the world keep the company busy and on the cutting-edge of the most innovative ways to serve customers in remote oilfields.

Serving customers well also includes paying attention to safety and the environment. Lynden Transport is an EPA SmartWay Transport Partner, an Inbound Logistics Green

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Supply Chain Partner and the company was one of the first trucking companies to earn a Green Star rating in Alaska. In addition, Lynden Transport was voted the No. 1 LTL Carrier in the Western Region in the 2012 Quest for Quality Awards and included in the Top 100 Motor Freight Carrier list by Inbound Logistics magazine. w

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In the Bakken,

asking to be told

By Karen Grosz, CPC blogger for www.synergystation.com

You are going to utter 16,000 words today. So is everyone else. On a daily basis, the average American will hear the words spoken, directly or indirectly, of well over 900 people and will be bombarded roughly by 5,000+ advertisements.

The question is, out of all of the words that compete for our attention, how many do we really hear?

Unfortunately, at both the corporate and personal level, probably very few; yet it is no secret that productive two-way communication is the single-most fundamental component of prosperous and lasting relationships. Conversely the absence of productive communication is an almost certain guarantee of dysfunctional and ineffective interaction. Left unchecked, the breaches created by the lack of communication at the corporate and community level could suppress every facet of productivity, including continued growth and prosperity. In a world where communication occurs at the speed of bits and bytes, the absence of productive communication is amplified.

Why does that matter? But more importantly, how does this topic of productive, relatable communication translate to the Bakken?

For most of us, we frequently hear the replays of parent tapes in the recesses of our memories. For me, of all the things my father told me, “People won’t listen unless they asked to be told” is probably the one that has made the most difference in my world. My dad, with his quiet wisdom, offered both the problem and the solution in that nine-word utterance. People won’t listen, a problem that plagues us all. And upon review of the Bakken microcosm, a dilemma magnified by the shear level of economic activity. Raising your voice, pounding your fist or spitting sentences of venom in a blog won’t fix the problem either.

Getting folks to ask to be told is the solution, and it is the one the TRAC Team decided to tackle when designing 104

BAKKEN OIL REPORT – SPRING 2013

the 2013 Convergence Session at the upcoming TRAC Regional Energy Convergence and Trade Show in Billings, Montana. Imagine, if you will, community members, business representatives, and civic leaders each as a stream of people, with problems and solutions, ideas and beliefs, all flowing into the Billings Hotel and Convention Center on August 1st. Many of them, the ones who want to listen, the ones who want to be heard, will join together for four hours of conversation. The kind of conversation that makes people ask to be told. The kind of conversation that shapes community.

We call this coming together “Convergence.”

An initiative inspired by Synergy Station co-founder Kendall McRae, keynoted by Dr. Lydia Pugh, and facilitated by Karen Grosz, CPC, and a team of willing volunteers, the Convergence is a different way to hear and to be heard. Utilizing the latest in technology, the best trends in communication and the energy that only a crowd can bring, Convergence is designed with unique interactions, powerful conversations, and new opportunities to shape an amazing future as we harvest these vast energy resources.

Convergence at TRAC is not a PR campaign or retrofitted marketing ploy. It is a rare opportunity to come together with individuals from all areas of community, business and the energy industry to build rapport, establish relationships, and lay the groundwork for solving tough industry challenges.

Together, these efforts will be used to take deliberate action in the development of pragmatic strategies for success.

Convergence offers the solution dad’s statement begged for; people listening because they have asked to be told and people who have something to say because they have listened. w

rapid city economic development

Black Hills region reaches out to the energy industry

By Benjamin L. Snow President, Rapid City Economic Development Partnership

The Best of Both Worlds Located on the eastern edge of South Dakota’s Black Hills, Rapid City serves as the economic hub for a broad swath of the High Plains. It’s a trade area that extends out 300 miles and includes dozens of counties in five states. The region serves a population base of nearly half-a-million people.

In fact, within this region, three of North America’s biggest energy plays – the Bakken, the Niobrara and the Powder River Basin – are less than a day’s drive from Rapid City. That means our region is perfectly situated as a servicing and supply-chain hub for the extractive-energy industry. The Black Hills region is surrounded by energy activity, and we expect to take full advantage of that as we continue to drive our economy forward.

And the Black Hills have a long tradition of mining, minerals and

Rapid City Regional Airport offers direct flights to Houston, Dallas, Chicago, Denver, Salt Lake City, Minneapolis, Phoenix and Las Vegas.

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BAKKEN OIL REPORT – SPRING 2013

extractive industries. Since 1876, the Black Hills have yielded gold, silver, feldspar and other minerals from deep beneath its pine-covered surface. In fact, the former Homestake Mine in Lead, S.D., which reached the depth of 8,000 feet, is now home to the Sanford Underground Lab. The lab, at the 4,850-foot level, is home to some of the world’s most cutting-edge physics experiments.

We believe Rapid City and the Black Hills have a great deal to offer the energy industry.

For one thing, we are close to the action. A service firm, for instance, could dispatch crews to the Bakken, the Powder River Basin next door in Wyoming and to the Niobrara south of the Black Hills – all from the same headquarters.

However, we’re not too close. The Black Hills are far enough from the

energy centers to avoid the boomtown hassles of high prices, labor shortages and growth pains.

And for both business and pleasure, Rapid City’s climate is optimal. Our dry mountain air means warmer temperatures than Minneapolis, less snow than Denver and more sunshine than Miami. Low taxes and less regulation provide corporate comfort that few states can offer. South Dakota has no income tax. And the regulatory environment has won praise from business groups throughout the nation.

In fact, many companies in a variety of industries have found Rapid City and the Black Hills to be the perfect place to relocate or expand. We also enjoy several competitive advantages for businesses, including: Air Service: Rapid City Regional Airport offers direct flights to Houston, Dallas, Chicago, Denver, Salt Lake City, Minneapolis, Phoenix and Las Vegas.

Education: One of America’s toprated engineering schools, South Dakota School of Mines & Technology, is in Rapid City. Nearby Spearfish is home to Black Hills State University. At the West River Campus in Rapid City, classes are offered by both South Dakota

rapid city economic development

State University and the University of South Dakota. Western Dakota Technical Institute trains workers in a variety of trades and professions.

A diverse economy: Rapid City is not a one-company or one-industry city.

A variety of robust industries drive our economy, led by agriculture, tourism, medical services, financial services and manufacturing. That’s especially important for professional couples and working families.

An active, athletic culture: The Black Hills are a million-acre playground for skiing, snowmobiling, fishing, hunting and hiking. The 110-mile Mickelson Trail takes mountain bikers through some of the most scenic back country in the Black Hills. Rapid Creek, which snakes through Rapid City, is one of the few urban waterways with a naturally spawning

South Dakota’s Black Hills, an island on the High Plains, supports a variety of wildlife and year-around recreation.

Rapid City, S.D., is known for its scenic beauty, its mild climate and its business diversity.

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A GREAT CLIMATE Moving a business. Starting a business. Setting up shop. It’s easy – and profitable – in Rapid City and the Black Hills of South Dakota. Low taxes and less regulation provide corporate comforts that few states can match. High, dry mountain air means less snow than Denver, warmer temperatures than Minneapolis and more sunshine than Miami.

THE RAPID CITY ADVANTAGE • Great Air Service – Direct flights to 8 cities, including Houston, Dallas, Denver.

• Education – Top-ranked schools like South Dakota School of Mines & Technology.

• Economic Diversity – Agriculture, tourism, medical, financial, manufacturing.

• Black Hills are a million-acre playground for fishing, hunting, skiing, snowmobiling.

FIND OUT MORE BENJAMIN SNOW, President bsnow@rapiddevelopment.com www.RapidDevelopment.com Rapid City Area Economic Development Partnership 525 University Loop Suite 101 Rapid City, SD 57701 605-343-1880

BAKKEN OIL REPORT – SPRING 2013

107

The Black Hills are a million-acre playground for skiing, snowmobiling, hunting and hiking

brown trout population. The Rushmore Plaza Civic Center features entertainment ranging from Rapid City Rush professional hockey to Black Hills Symphony – sometimes on the same night.

Cost of Living: The Black Hills offer a lower cost-of-living over large cities and oilfield boomtowns. Home prices are affordable and stable. The market is large and robust enough to let you sell your home and trade up when the time is right.

There are a number of other advantages as well. If you’d like more information about our programs or have contacts in the energy industry we should be talking to, please let us know. Our goal is to make your decision to invest in our community easy and your experience positive. We hope you respond to our invitation to learn more about the benefits of doing business in Rapid City, South Dakota – a strong, stable and growing business location

that combines the best elements of a mid-western workforce and an intermountain western lifestyle.

To find out more about Rapid City and South Dakota’s Black Hills, visit our website, www.RapidDevelopment.com. You can also contact me directly.

Benjamin Snow, President – bsnow@rapiddevelopment.com or 605-343-1880. w

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BAKKEN OIL REPORT – SPRING 2013

Baranko Bros., Inc. began as a partnership in 1967 doing primarily soil conservation work. We expanded into the oilfield in the 1970â&#x20AC;&#x2122;s and were incorporated in 1979. Baranko Bros., Inc. is owned by Emil Baranko who retired in 2000, and his son Glenn. Center CoalThe company is based in Dickinson, North Dakota, with yard and shop facilities in Beulah, Center, and Fairfield, North Dakota. Glenn also owns a coal crushing facility in Center, North Dakota, providing stoker and lump coal to customers throughout North and South Dakota and into Canada. Click on Center Coal Company for more information.

The company continues to expand into all types of earthwork, including: underground, concrete, material hauling, construction of landfill facilities, coal mine ash pits, clay liners, as well as projects involving installation of plastic liners for water or waste containment.

We have successfully completed projects in size from few hundred yards to over a million yards. Clients we have worked for include Amerada Hess, Encore Operating, Headington Oil Company, Burlington Northern Santa Fe, N.D. Public Service Commission, Montana Dakota Utilities, N.D. Department of Transportation, Dakota Gasification Company, Minnkota Power Cooperative, Basic Electric Power Cooperative, Great River Energy, Falkirk Mine, Exxon/Mobil, Conoco/Phillips, U.S. Forest Service, U.S Army Corps of Engineers, and many other clients.

As of April 2003, we became a preferred supplier for Basic Electric Power Cooperative.

We have experienced estimators and job supervisors that can give quotes and perform supervisory duties. We also maintain a regular safety program and employ a full time safety coordinator.

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Breitling Oil and Gas is one of the largest independent (non-integrated) oil and natural gas companies in the U.S. with proved reserves throughout most major basins in North America.

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Breitlingâ&#x20AC;&#x2122;s exploration activities are focused on adding profit generating production to existing core areas and developing potential new core areas.

Breitlingâ&#x20AC;&#x2122;s production operations supply liquid hydrocarbons and natural gas to the growing world energy markets. Worldwide production operations are currently focused in North America. The Company also holds ownership interests in both operated and outside operated leases in Canada, Europe and the MIddle East.

L AND GAS

OIL AND GAS

REPORT

The Bakken shale region:

permitting across an international basin There are many producers operating within the Bakken shale region in Canada and the United States. While Canadian-based companies are typically familiar with permitting in Saskatchewan and Manitoba, there are a few significant differences as soon as one crosses south of the 49th parallel. An awareness of the various permitting requirements at the federal, provincial/state, and local level is critical for the successful execution of a project when operating on both sides of the international border.

Permitting on federal lands in the United States or in Canada can be a slow process and companies need to plan ahead to accommodate the lengthy timelines. In Canada, federal agencies are involved if the project includes federally owned land such as national parks, national historic sites, Agriculture and Agri-Food Canada pastures (formerly PFRA pastures) and Indian Reserves.

In addition, the National Energy Board becomes involved in certain instances such as when a pipeline crosses a provincial or international boundary. Similarly, the Canadian Environmental Assessment Agency may need to be included for projects that could have a potential effect on aquatic species, fish and fish habitat and migratory birds under federal jurisdiction, as well as projects located on federal lands and project-related effects that cross federal or provincial boundaries.

In the United States, there potentially is federal involvement as a result of either surface or mineral ownership. Typically, when U.S. federal agencies are involved, the application process starts with a Notice of Intent that initiates the National Environmental Policy Act (NEPA) process. Depending on the scope of the project, NEPA decides on the level of assessment required that can range from months to years to complete and get approval.

In addition to the NEPA process, consultations with a number of other federal agencies are usually required. These include the U.S. Fish and Wildlife Service, the U.S. Army Corps of Engineers, and the U.S. Environmental Protection Agency (EPA). The U.S. EPA deals with many of the regulations related to air and water and often require air quality and air monitoring/ modeling as part of the permitting process.

In Canada, at the provincial level, oil and gas activities on provincially-owned or designated lands, such as Wildlife Habitat Protection Act (WHPA), Fish and Wildlife Development Fund (FWDF), Protected Areas, or crown lands will require a submission (typically either an Oil and Gas Project Proposal or a 112

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

REPORT

Class 2 Environmental Assessment) to the appropriate provincial regulatory agencies for approval prior to construction. The typical turnaround on these reports is shorter than the federal process and averages less than a month. In addition, all archaeological resources in Saskatchewan and Manitoba are regulated by the province and an archaeological impact assessment may be required if it is located in a sensitive area regardless if the project is on government-owned or private land.

In North Dakota, numerous state agencies can be involved in permitting oil and gas activities, but two important ones are the Public Service Commission and the State Historic Preservation Office. Again, depending on the scale of the project, navigating through state-level processes can be a lengthy procedure, particularly for larger pipeline projects that can involve numerous impacts requiring management.

At the local levels, Saskatchewan, Manitoba, Montana, and North Dakota share many of the same issues such as road maintenance, waste disposal, and concerns of local landowners and municipalities. Many operators make a concerted effort to contribute back to the communities in which they work, building positive working relationships between the oil and gas companies and the local communities.

In both countries, oil and gas producers are faced with numerous permitting issues at the federal, provincial/state, and local levels. Overall, there are many similarities, but producers are finding that there are significant differences when operating in different jurisdictions. Taking the time to understand the various permitting requirements and the associated timelines to acquire the necessary permits allows companies moving into a new area to successfully execute their projects without unexpected delays.

A well-thought-out permitting strategy saves time and money in the long run.

About Golder Associates With offices strategically placed in the Bakken shale region in Estevan, Sask. and Bismarck, N.D., we are well-positioned to provide a full range of environmental and ground engineering services to our oil and gas clients on both sides of the Canadian-U.S. border.

To learn more about our services in the Bakken, please contact Brad Novecosky in Estevan (bnovecosky@golder.com, 306.634.2814) or Jon Ellingson in Bismarck (jellingson@golder.com, 701.258.5905). w

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miller architects & Builders

Stakes in the ground Minnesota’s Miller Architects & Builders meets Bakken’s challenges Holiday Inn Express & Suites lobby.

“The activity in the Bakken has been a boon for Miller,” says Miller Architects & Builders’ president Joe Seifert. “It’s great to be a part of this, but it’s not easy to work the area. Much more planning goes into the preparation for the work.”

Yes, this St. Cloud, Minnesota-based firm knows stakes are high, which is why it addresses challenges unique to the Bakken–manpower shortages, scarcity of materials, and lack of infrastructure.

Miller Architects & Builders began in 1874, providing residential and commercial construction to the Midwest.

Now strictly a commercial design/build firm, Miller has seen construction booms before, but nothing like the frenzied building in the Williston Basin, a result of oil drilling in the Bakken. The company has taken advantage of the demand and proven resourceful, erecting hotels, apartment complexes, offices, and other commercial projects. It’s currently working on a sixth hotel–averaging 80 to 90 rooms–with three pending.

However, Seifert estimates the need at 5,000 housing units per year for the next three years.

“It’s a nice problem to worry about,” says Seifert. “At some point, though, demand will come down.”

Manpower Considerations A difficulty to working in the Bakken is finding local subcontractors. Miller utilizes local subcontractors and material suppliers whenever possible. “We like to support the communities in which we work. The lack of available subcontractors and other skilled workers is one of the biggest 114

BAKKEN OIL REPORT – SPRING 2013

issues we face today,” says Seifert. Dakota contractors have more than enough projects on their plates. Too, some are reluctant to expose their men to the lure of high oil-company wages, especially around Williston. So instead, Miller uses Minnesota subcontractors who are skillful, dependable, and have a good work ethic. This workforce remains true; the men have families back home and plenty of other Minnesota projects to keep them busy. This reliability has greatly contributed to Miller’s stellar reputation and has led to even more opportunities. In fact, 30 percent of Miller’s undertakings are North Dakota projects. Miller has turned this particular manpower challenge into a selling point.

Miller’s dozen or so subcontractors on each project use a mixture of man-camps, apartments, and rented homes to accommodate their crews which, typically, work seven-daysa-week, 12-hours a day, in a two-week rotation. Thus far, three of Miller’s hotel projects have accommodated man-camps and temporary bathing facilities on-site. The company’s latest apartment project will offer temporary housing in a portion of the structure slated for offices and a community room.

“Housing is a cost of doing business in the Bakken,” says Seifert. “We need to be as efficient as possible.”

The company has found it efficient and safer for subcontractors to move crews to the jobsites and keep them there for a while. The less time transporting the better, especially on rain-soaked or pothole-filled roads, or barely broken trails. Water, sand, equipment, pipe, all of these are being hauled into and around the Bakken on fleets of oil

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Miller has seen construction booms before, but nothing like the frenzied building in the Williston Basin, a result of oil drilling in the Bakken. The company has taken advantage of the demand and proven resourceful, erecting hotels, apartment complexes, offices, and other commercial projects.

Weatherford office addition.

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BAKKEN OIL REPORT – SPRING 2013

company trucks. The shear volume of moving men and materials makes driving dangerous, a safety consideration for Miller and its workforce.

There’s kind of a “Wild West” attitude in the Bakken, notes Seifert, who has driven in North Dakota many times to check jobsites and confer with superintendents. Miller superintendents monitor everything about each job from start to finish, including coordinating subcontractors’ schedules, clarifying specifications and procedures, and monitoring time and deadlines. They operate in rotation, usually two superintendents per jobsite. This type of arrangement is unique to Miller’s North Dakota jobs. Miller Architects & Builders has also had manpower challenges within, and has added employees this year to meet the increased demand of work in the Bakken.

Scarcity of Materials Miller’s subcontractors transport materials from Minnesota out of necessity. Often, building supplies are not available in the high-demand area, and if they are, they sell at inflated prices. The incredible growth of the oilpatch has driven up costs for items associated with construction projects. Miller orders supplies early, in quantity, then transports them from Minnesota and stockpiles the materials on-site. The company also prefabricates whenever possible and hauls in “panelized” wooden framing.

Infrastructure Issues Dealing with a lack of infrastructure is not normally unique for Miller. However, in the Williston Basin, the company faces more infrastructure issues than elsewhere. So, Miller cooperates with city governments to connect new buildings with existing water, sewer, gas, electric, and roads. This may mean the private company and its subcontractors excavate and place lines over substantial distances before the connection is made. The question of who – city or private entity – will produce the services first is always there, notes Seifert. However, discussions and decisions usually happen quickly on the Bakken because there’s a sharper realization of the urgent need for the project to move ahead.

All in all, Miller Architects & Builders is taking advantage of the economic boom in the oilfields.

The company has a stake in the land of the Williston Basin. And even though the manpower, materials, and infrastructure issues will continue to demand additional planning, Miller’s troubleshooting, flexibility, and ingenuity are certain to meet the challenges of the Bakken. w

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Certified by the Canadian Standards Association (CSA), combustion safety controllers produced by ACL Manufacturing Inc. provide a safe means of automatically lighting and monitoring the pilots and burners in gasfired equipment. Through extensive testing by CSA and proven performance in the field, ACL controllers have gained a reputation for reliance and safety. Quick flame-out response times and automatic shut-down features also guarantee that combustion safety controls systems made by ACL meet and exceed section B149.3 of the CSA code and the US NFPA86.

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lufkin industries

Lufkin fortifies Bakken commitment with all-inclusive service center

Lufkin’s new Multi-Function Service Center located on Highway 22, just north of Dickinson.

With the christening of its sprawling MultiFunction Service Center in Dickinson, Lufkin Industries, one of the most recognized names in the U.S. oilpatch, has further reinforced its well-established presence in the Bakken.

The newly opened 41,230-squarefoot facility offers all-inclusive sales and service capabilities for Lufkin’s artificial lift portfolio that supports the Bakken, including its iconic pumping units, oilfield automation technologies, downhole pumps and gas lift/plunger lift products.

In addition, a dedicated training facility will allow Lufkin experts to conduct a wide range of artificial lift-related classes for the Bakken oilfield community, with an emphasis on safety and demonstration solutions that offer peak production.

The full-service center, which is located on 18 acres, includes 34,720 square feet dedicated for repair and maintenance workshops and a warehouse.

“We’ve seen incredible growth in the Bakken region and with our MultiFunction Service Center, Lufkin has taken another giant step in reinforcing our firmly established position as a predominate service provider for the entire eastern Montana, western North Dakota and 118

BAKKEN OIL REPORT – SPRING 2013

northwestern South Dakota Bakken region,” says Wes Hall, Lufkin Western U.S. regional sales manager. “This center further reflects our strong commitment to the Bakken region.”

Prior to opening the spacious Dickinson complex, Lufkin operated two smaller area service centers in Glendive, Montana and Minot, N.D., which will now be used as satellite facilities to service the outer edges of the Bakken. Dickinson is one of three such facilities Lufkin operates in the U.S., with the other two multi-function service centers located in Bakersfield, California and Odessa, Texas.

One-stop-shop The center represents Lufkin’s unequaled pumping and artificial lift technology offerings, making it a onestop-shop for Bakken operators. For instance, Hall says the center includes the equipment and expertise to totally repair the largest pumping units Lufkin has to offer. The Dickinson facility gives Lufkin the capability in the heart of the Bakken to repair the full range of gearboxes and the largest-size beams in-house.

“This facility allows us to repair any size of pumping unit,” Hall says.

The Dickinson facility also houses comprehensive sales, service and training for Lufkin’s oilfield automation technologies, featuring the widely popular Lufkin Well Manager automatic pump-off control device. “The Lufkin Well Manager is the most widely used pumpoff-control device in the world,” he adds.

The well manager also is incorporated into a variable-speed drive, which Hall explains has further increased what has been a tremendous following.

“The Lufkin Well Manager VSD unit has really changed the way people look at automating their pumping units,” Hall states. “It used to be when you pumped a well off, you would stop the pumping unit at that point and allow the reservoir to fill the wellbore and then you’d start pumping again. With the VSD unit, as we pump the well down, we just slow the pump with the idea being to try and match the pumping speed with the inflow from the reservoir. That way, you’re always keeping the well pumped down and optimizing production from the reservoir.

Your pumps are never sitting idle when they could be producing.”

Complementing the wide range of pumping and automated oilfield

lufkin industries

Safety is a core element of all the training classes at the Dickinson Multi-Function Service Center.

products, the Dickinson center also offers

Training, Safety are Front-

“We’ll conduct classes on safety

sales and service for Lufkin’s diverse and

and-center

around pumping units, which is the most

growing line of sucker rod hydraulic

One element that sets the new

important class we’ll teach,” he stresses.

pumps, as well as its wide range of gas,

facility apart is a classroom with

“That will be a major focus and it’s another

and plunger lift systems, and completion

capacity for up to 24 students where

way for us to really reach out to the

products. As the largest parts warehouse

training can be conducted in an

community.”

in the Rocky Mountains, the Dickinson

intimate hands-on environment.

facility holds the most extensive selection

“Lufkin has a wealth of knowledge and

of Lufkin pumping parts in the Bakken

experience we want to share with our

region, Hall said.

partners in the industry,” Hall says.

While safety will be at the core of all the Lufkin training efforts, the Dickinson center also will offer specialized courses on the company’s automated oilfield technologies. “We’re offering instruction on how to design, select and trouble-shoot our full range of automation solutions,” Hall says.

“We’ll also offer classes on the proper handling of rod strings, rod pumps and how to properly design and size downhole rod pumps. We also have our own design software called S-ROD. We offer classes on

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S-ROD that teach operators how to select the optimum pumping unit and the best rod string design for each well. We also do basic artificial lift classes for people who are new to the industry or not acquainted with artificial lift.”

“While challenging in the Bakken, Lufkin continues to attract and retain qualified personnel though its reputation and focus on employees,” Hall concludes. w

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BAKKEN OIL REPORT – SPRING 2013

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bismarCkmandan Economic development

Bismarck-Mandan, North Dakota: Growing metro with a diversified economy

Growing metro The Bismarck-Mandan, North Dakota metropolitan statistical area (MSA) was noted as one of the 50 fastest-growing metro areas when the U.S. Census Bureau’s 2011 population estimates were released. The estimated 2011 population of 110,879 showed an increase of 1.9 percent over the 2010 Census count of 108,779. The cities of Bismarck and Mandan, with the mighty Missouri River flowing between them, form the core of the two-county MSA in south-central North Dakota and home to the bulk of the population.

Located in the center of the State of North Dakota, as well as the center of the North American continent, the Bismarck-Mandan metro area sits at the intersection of Interstate 94 and U.S. Highway 83.

Located in the center of the State of North Dakota, as well as the center of the North American continent, the BismarckMandan metro area sits at the intersection of Interstate 94 and U.S. Highway 83. Bismarck is the North Dakota state capital, and serves as the center of government for most state agencies, Burleigh County, and most of the federal agencies that service North Dakota. In addition, Mandan is the Morton County seat.

Combined, Bismarck and Mandan are the economic hub of a large portion of south-central North Dakota, and stand poised to continue their steady growth and leadership.

Diversified Economy, Boosted by Oil and Gas Growth The Bismarck-Mandan ND MSA enjoys a diversified economy that is thriving across the board. Industries making their mark in the metro include healthcare, government, energy, back office and IT, government, manufacturing and agriculture.

Annual employment and worksite numbers in those industries and others have increased steadily, with wages increasing along with them. From 2002 to 2011, annual average employment grew from 49,640 to 60,217. Over the same period of time, 873 worksites were added in the metro, while annual average wages 122

BAKKEN OIL REPORT – SPRING 2013

increased by slightly more than $11,700 per year. Also steadily increasing in the Bismarck-Mandan MSA: taxable sales and purchases, city sale tax collections, home values, the number of new construction permits issued, and airline boardings.

“The current diversified economy will continue to form a stable base, with growth coming in most, if not all industries,” says Bismarck-Mandan Development Association president and CEO Russell Staiger. “The metro maintained its strong diversified economy and came through the recession relatively unscathed.

And it continues to thrive.”

Long a center of coal mining and oil refining, the BismarckMandan region is experiencing additional energy growth thanks to increasing oil production in the western half of the state. While Bismarck-Mandan is not directly in the oilpatch itself, it has seen substantial growth in the professional service sectors that work with the oil and gas industry.

“The oil and gas industry will no doubt continue to have a great impact on the community,” notes Staiger. “Combined with ongoing coal and refining activities, the energy sector overall remains a vital part of our economy.”

A Place to Call Home, for Businesses and People The positive economy that Bismarck and Mandan continue to experience offers a wealth of opportunities for businesses to expand or locate in the metro area. Additionally, the greater community boasts a quality of life that is impossible to beat.

Whether you are a business owner or employee, BismarckMandan presents you and your family an outstanding community to make your home.

To learn more about the Bismarck-Mandan, North Dakota MSA and the opportunities available to you, contact the Bismarck-Mandan Development Association (BMDA). BMDA offers assistance to companies considering an expansion or new location.

Contact Russell Staiger, President/CEO Brian Ritter, Director of Business Development Bismarck-Mandan Development Association 400 East Broadway Ave., Suite 417 Bismarck ND 58501 • 701-222-5530 info@bmda.org • www.bisman.org w

Bismarck-mandan, north dakota

Bismarck-Mandan, North Dakota, is growing with the state’s oil industry . . . professional services, logistics, commercial space, residential neighborhoods and family living.

Whatever your needs – business, employment, housing – consider Bismarck-Mandan and all it has to offer.

• convenient location – Bismarck-Mandan sits at the intersection of US I-94 and US Highway 83, giving it easy access to the oil industry to the west and north.

• air service – daily jet service to Minneapolis-St. Paul and Denver with charter service to western North Dakota.

• access to government – the State Capitol in Bismarck offers direct contact with regulatory agencies and elected officials, as well as the North Dakota Petroleum Council and the Lignite Energy Council.

• Well-rounded community – Whether for business or family, Bismarck-Mandan offers available workforce, quality educational institutions, stateof-the-art healthcare, recreational opportunities yearround, and a safe atmosphere to live, work, and raise a family.

Contact the Bismarck-Mandan Development Association to learn more, or visit bmda.org

bmda.org • 701-222-5530 • info@bmda.org • 400 East Broadway Ave. • Bismarck ND 58501

Life in the Bakken Looking at the social ramifications of the oil boom

By Melanie Franner

Everyone living in the Bakken would readily admit that the oil boom has generated more than just revenue. There is another side of the oilfields that has emerged over time, one that directly correlates to the problems associated with a huge influx of people and underfunded cities.

“The oil boom has got its pros and cons,” explains Bret Smelser, mayor for the City of Sidney, Montana. “It’s obviously placed a burden on infrastructure.”

Mayor for the last 12 years, Smelser has seen his city grow rapidly. Back in 2010, the population of Sidney was around 5,100. Today, Smelser suggests that it is probably closer to 6,500 to 7,000.

Unfortunately, this rapid growth has come with inadequate government funding.

Bret Smelser, mayor for the City of Sidney, Montana, has seen his city grow rapidly. Back in 2010, the population of Sidney was around 5,100. Today, Smelser suggests that it is probably closer to 6,500 to 7,000.

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“The cities and towns were written out of the oil revenue streams in 2000,” says Smelser. “We went back in 2005 and got some temporary money that equates to one-tenth of one percent of the revenue stream. In 2007, we went back and asked for 25 percent of the federal mineral revenue, which would have been about $10 million per year, but the previous governor didn’t sign the legislation. The only bipartisan consensus going on now in Helena at the legislature is to try to get some sort of financial help out here.”

One area badly in need of financial resources is law enforcement.

“Overall, we’re up in everything – including crime – just because of the additional people coming into the city,” states Smelser. “I’m sure we’re going to show an increase in domestic violence events due to the alcohol increase but I don’t think it will be any different from what you would find in other cities of this size. It’s the same for illegal drug use.

I’m sure it’s on par with other cities in the oilfields.”

To help combat this increase in crime, the State of Montana recently offered up seven additional highway patrolmen and two more drug enforcement officers. The additional police staff will go a long way toward to helping combat crime in the Bakken.

City of Billings Mayor Thomas Hanel admits that alcohol and drug use may be up, but he adds that the increase is not significant.

“As far as the criminal element, like drug activity, I would say it’s been minimal,” he explains. “We haven’t experienced much of a change in our crime stats.”

City of Billings Mayor Thomas Hanel admits that alcohol and drug use may be up, but he adds that the increase is not significant: “We haven’t experienced much of a change in our crime stats.”

Hanel attributes this “status quo” to the fact that Billings is located about 220 miles from the Bakken oilfields.

“We’ve noticed a considerable increase in regard to demand for workers, oilrelated supplies and certainly affordable housing in relation to the increase in the oil-field/energy development,” he adds.

“But our growth has been more gradual than in some of the other cities in the Bakken.”

Over in Miles City, Mayor Butch Grenz concedes that the oil boom has resulted in an increase in people and thus, an increase in crime. But the advantages outweigh the disadvantages.

“The two new oil businesses that have taken up residences here have provided over 200 very good-paying jobs for this community,” he states. “So I think the

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better question would be whether it is a good trade-off and in my opinion, the answer is yes,” he states.

The Numbers Have It Mark Long, narcotic bureau chief for the Montana Department of Justice, Division of Criminal Investigation, can speak first-hand of the increase in illegal drug use in the Bakken.

“During our calendar year 2012, we had a 133-percent increase and that’s just in our agency’s drug enforcement and in the area we call the Bakken, which is essentially the five most northeastern counties in our state,” he explains.

Long has been with the department for the past 25 years and says that in all those years, he hasn’t seen more than five major drug enforcement cases in that area. But along with the oil boom has come change.

“It used to be a real rural area where we might have seen some local streetlevel drug use,” he explains. “Now, we’re attracting big-time drug-users and multipounds of high-level drugs like meth,

coke and powered heroin. We’re also seeing synthetic drugs.”

Long attributes the increase in illegal drug use to the working environment and to the type of people who have moved into the area.

“Quite frankly, the reason for the increase in drug use is the concentration of drug users in the area and the greater availability of the drugs,” he says.

Long is the first to admit that his agency is understaffed and scrambling to get the resources in place to deal with the rampant drug use. The problem, he explains, is that the area in question used to be a quiet environment that didn’t need much enforcement. Additionally, the shortage in housing means that there is no space available to set up a muchneeded office, while the cost of the little housing available makes it out-of-reach of most enforcement officers. So, officers are forced to operate from an office located 450 miles away from the heart of the action.

“We can increase the number of officers ten-fold and that will curtail the

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Morgan Fox, communications manager for the Marijuana Policy Project (MPP), the national organization committed to the legalization of the drug in all the U.S. states, believes that if people in the Bakken oilfields want to stem the social cost of the oil boom, they should support the legal use of marijuana. problem to some extent,” states Long.

“But it’s not going to stop until the oil wells are shut off.”

Helping Where You Can Tim Anderson, clinical director for the Sidney-based District II Alcohol and Drug Clinic, also speaks of an increase in the use of illegal drugs and alcohol.

He attributes the increase to the area’s bleak social environment.

“People are living in campers and tents,” he says. “They tend to go out for their meals and alcohol is part of that restaurant environment. A trailer gets to be very small after a while so people are always looking for somewhere to go.”

Anderson points to DUIs, methamphetamine use and opiate abuse as the top three issues dealt with at the clinic.

“When I was working here before the oil boom, we would have an average of maybe 50 clients at a time,” he states.

“Now, that number is probably closer to 100.”

Marijuana Not a Priority According to narcotic bureau chief Long, the use of marijuana in the Bakken is prevalent but it’s not a priority for the agency.

“Based on our triage of drug enforcement, we don’t focus a lot on marijuana,” he says. “It’s just not a priority for us.”

That being said, marijuana use is a priority with the Marijuana Policy Project (MPP). The national organization is committed to the legalization of the drug in all the U.S. states.

“Cities are going to see an increased criminal association with marijuana because only criminals are allowed to sell it right now,” explains Morgan Fox, communications manager for the MPP. “If people in the Bakken oilfields want to stem the social cost of the oil boom, then they should support the legal use of marijuana. Many people report using marijuana as a substitute for alcohol, largely because it is known to generate far less violence and health problems.

By allowing people to use the safer choice of marijuana rather than alcohol, there will be a decrease in violence and associated societal costs.”

Back in November 2012, the states of Colorado and Washington officially legalized the use of marijuana by allowing anyone 21 years of age and older to possess up to one ounce of marijuana for personal purposes, as long as they do not use it in a public place. Both states are currently in the process of establishing rules to regulate the licensed cultivation and sale of the substance.

According to Fox, 18 states and the District of Columbia currently allow the use of marijuana if approved for medical use and if the individual has a doctor’s recommendation. North Dakota is not one of these states but Montana is.

“Montana does allow for the medical use of marijuana but unfortunately, the legislators recently made it a lot tougher for people to be able to access their medicine, so participation in the program has dwindled,” states Fox. North Dakota, on the other hand, has very harsh marijuana laws, with the first possession offense of even a single joint being punishable by up to

Mayor Butch Grenz concedes that the oil boom has resulted in an increase in people and thus, an increase in crime. But the advantages outweigh the disadvantages. “I think the better question would be whether it is a good trade-off and in my opinion, the answer is yes,” he states. a year in prison and up to a $2,000 fine.

The state voted on a Compassionate Care legislation policy in November of last year. It needed around 13,500 signatures to qualify for a vote and a total 20,000 signatures were gathered.

The opportunity to vote was quashed, however, when it was found that 11 of the petitioners allegedly faked more than 7,000 signatures.

“The gateway theory has been shown to be a fallacy,” concludes MPP’s Fox. “There is nothing about marijuana that intrinsically encourages users to want to use other drugs. Prohibition is the real gateway because under current law, the only place to get marijuana is in the illicit market, where dealers have

access to hard drugs and no incentive to check a customer’s age.”

More of the Same Regardless of whether or not the states of Montana and North Dakota will follow the examples set forth by Colorado and Washington, it looks like drug use in the Bakken oilfields will continue for some time to come.

“My counterparts agree with me that we won’t see the situation getting any better before it gets worse,” concludes Long. “We’re so far behind right now because there has been very little federal drug or law enforcement needed up there in the past. It’s really hard for us to scramble and try to catch up.” w

BAKKEN OIL REPORT – SPRING 2013

127

lightowler johnson associates

Designing solutions beyond the boom LJA project shown here: a Residence Inn

by Marriott, an extended-stay hotel.

Lightowler Johnson Associates (LJA) has established a name for itself as a comprehensive architectural and engineering firm in North Dakota. Since 1954, LJA has worked in a variety of industries across the Midwest and nation.

All architectural and engineering services are provided in-house, which makes the design and development phase run seamlessly for their clients. With headquarters in Fargo and two satellite offices in Bismarck and Williston, LJA is able to give direct support to clients across the entire state of North Dakota.

The firm primarily concentrates on commercial, industrial and niche markets, such as hospitality. The team is 128

BAKKEN OIL REPORT – SPRING 2013

equipped with architectural professionals, structural, mechanical, electrical and civil engineers, and also includes a land survey crew. Additionally, LJA employs LEED-accredited professionals who are dedicated to designing facilities that are environmentally friendly and energy efficient.

“We’re large enough and professionally diverse enough to meet many needs, but still small enough to provide specialized attention,” says Stevan Dewald, president and principal civil engineer at LJA. Although LJA can provide all architectural and engineering services for a project from start to finish, the

firm works well with other partnering design and engineering professionals.

The team’s expertise allows for easy coordination with partnering firms and thorough problem-solving on all projects. Their expertise and communication skills have been valuable for several clients, saving them time and money by anticipating the needs of other disciplines before issues arise.

Today, LJA’s team is focused on working smarter and more efficiently than the competition to keep costs competitive, while upholding the firm’s reputation for responsive design services.

The hospitality market has proven to be a big sector for growth as the company has

lightowler johnson associates

been able to streamline its design and engineering services to suit a selection of big-brand names.

“We currently work with 111 hospitality clients nationwide, but our focus has been finding a good balance between fullservice and not-quite-custom,” Dewald explains.

This company has remained on top of the hospitality industry and has been continuously named a Top Design & Architecture Firm by Lodging Hospitality and Top Architects & Designers in Hotel Business Design – both national recognitions.

LJA has become increasingly involved with the limited-service hotel market in the Bakken area. This market cuts out the four-star amenities and fancy lobbies in favor of higher quality basic amenities, which are in high demand in oil-booming western North Dakota. LJA opened its Williston office to cater to this growing need for hotels, commercial spaces and industrial facilities. They are also working to provide a more permanent housing solution for the oil and energy industry while helping the region develop its infrastructure and facilities for a future beyond the boom.

In addition to hospitality, LJA has maintained its foothold in the commercial and industrial markets. The team has completed franchise restaurant designs across the state including Ruby Tuesday and Quaker Steak and Lube. They are also capable of designing and overseeing large-scale industrial projects for clients such as Caterpillar, Cargill and Anheuser Busch.

For the future, the LJA team plans to focus on its core competencies and look for ways of increasing its internal efficiencies and delivering diverse capabilities for a fair price. w

LJA is a full-service architecture and engineering firm that specializes in industrial design. From pre-engineered buildings to large scale industrial projects, we have the capabilities to achieve your energy goals.

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SURVEYING

BAKKEN OIL REPORT – SPRING 2013

129

MESSAGE Wade J. VanEvery, Executive Director, Sidney Area Chamber of Commerce and Agriculture

A message from the Sidney Area Chamber of Commerce and Agriculture The Sidney Area Chamber of Commerce and Agriculture has been a proponent of growth in the energy industry in Eastern Montana. The chamber has a front-row seat to all the dynamics happening in the community.

Sidney celebrated its centennial in 2011, and has been known as an agriculture community. Long-time residents look forward to the changing seasons being marked by activities such as spring field work, summer irrigation, sugar beet harvest, and then the winter sugar factory campaign. Our community is now bombarded with people who have no connection or appreciation to the past. It also bothers the locals that they don’t know everyone in town.

The traffic is another issue. There is a lot more traffic, larger trucks, and all types of vehicles hauling everything imaginable through town.

We see our schools struggling with several issues. Numbers in the schools are going up, and because of the housing shortage, some of these students are technically considered “homeless” as their families do not have a physical address. The school system also needs more teachers, but the funding is lagging behind to pay for them, and housing isn’t available for teachers to even move here.

I haven’t even mentioned all the problems our local government has to deal with. Our mayor and city council have the job of making difficult decisions at every meeting.

However, I want to go the other direction to discuss the “good” this industry is bringing to Sidney, Montana. There are job openings for every part of our local economy. And this new industry brings new opportunities for entrepreneurship. So we are keeping more of our children home to work, or establish their

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own businesses. This is a very good thing created by the oil and gas industry.

Back to the schools: enrollment had been declining for decades. Filling up the schools means more variety in the offerings, and a more diverse curriculum. The school athletic programs can continue to compete in the same level it is used to.

We can go up and down Sidney’s downtown area and see that every store, shop, and office building is occupied and being used. New motels have sprung up, and others are in the works.

Shopping centers are being planned and will start going up. This certainly is better than our situation just five years ago when storefronts were vacant, and we worried about losing businesses.

Grocery stores report that they have a wider variety of staples to accommodate people who have moved here from different regions of the country.

We know wealth has been created for mineral owners and folks involved directly in the industry. I believe our whole community receives benefits if it will consider the facilities we all get to use, such as the Richland County Fairgrounds Event Center. Our local leaders are working diligently to use revenues to enhance the quality of life here whenever possible.

The Sidney Chamber is seeing growth in its membership, which helps it provide more services to the members. We have established a Sidney Tourism and Business Improvement District with the city. We also anticipate being designated a Convention and Visitor’s Bureau by the Montana Office of Tourism. These are all good things coming as a result of our energy industry. Energy is a good diversity with agriculture in northeastern Montana.

This article started with what we term as “good problems” here in Sidney. The Chamber believes the capabilities of our local people will be evident as they work through these issues. Sidney is changing, but will still be a community in which we will want to raise our children, and call our home. w

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Maximizing proceeds from the sale of your business

By Carleen E. Shilling, CPA Partner with Eide Bailly LLP, CPAs and business advisors

The time to begin to develop a strategy for exiting your business is when you start the business.

Choices you make when forming your company, as well as the management decisions throughout the years of operating your business, will impact the net proceeds you receive when you sell your business.

Forming your Business Entity There are many choices for your business structure, each with advantages or disadvantages that depend upon the nature of the business and your needs and goals throughout the life cycle of the business. The list of choices of entity looks like alphabet soup: C Corporation, S Corporation, LLC, and LLP, in addition to sole proprietorship and partnership options. So, how do you choose?

The impact of income tax due on net profits from operations; benefits from start-up losses; and taxation of gains from the sale of your business are important factors in selecting your business entity. Income taxes are not the only consideration, however.

Capital and ownership structure, industry influences, importance of maintaining control, personal liability for business debts, industry norms, and state statutes governing each entity type are also top contenders for factors impacting your entity selection.

Once an entity selection is made, you may have little flexibility in changing to a different type of entity without substantial income tax charges or other burdensome

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BAKKEN OIL REPORT – SPRING 2013

administrative costs. Invest the time to understand the pros and cons of each of your entity choices so you can make an educated choice for the long term.

Managing your Business for Profitability The characteristics buyers seek must exist before the sale process begins. It is your job as the owner to create value within your business prior to a sale. The items that drive-up value are common to all industries and include the following: • A stable, motivated management team • Operating systems that sustain consistent cash flows • A solid, diversified customer base • A realistic growth strategy • Effective financial controls, and • Facilities and equipment in service Buyers will pay a premium price based on perception of risk and return. If a buyer finds characteristics that both reduce risk and improve return on investment, he or she will pay top dollar.

Buyers will compare the perceived risk and return from your business against alternative investment opportunities as part of the purchase process.

The process of preparing your business for sale begins years before the business listing is posted. The items that drive up value need time in order to be developed, implemented, and to produce the targeted results.

Maximizing Proceeds from the Sale The sale price is only one factor in realizing the benefits from

eide bailly llp

the investment you have made in your business. More important is maximizing the amount of proceeds you get to keep under the terms of the contract, and after paying the income taxes on the gain.

After taking all of the steps you can to drive value to your business, and you are ready to sell, consider assembling a team of advisors who will represent you in the sales process.

Statistics indicate that working with a merger and acquisition advisor generally results in a higher offering price for the sale. A qualified tax advisor can structure the deal for the least tax cost for your circumstances. Legal representation is critical to minimize risk of misunderstanding over the terms of the contract. At times, a psychologist is added to the team to coach the business owner through the psychological aspects of the sale and life thereafter.

Working with a professional merger and acquisition advisory team is a wise investment that will significantly improve the overall valuation, terms and certainty of the transaction.

Retirement Planning The transaction has closed, but you are not done yet.

How do you invest the proceeds to ensure a comfortable retirement?

Your business may be your most significant retirement asset. After the sale, your focus shifts from your business to investment options that replace the cash flow and increases in net worth that your business had provided. You have an opportunity to diversify your portfolio from a single asset to many different asset classes. An investment advisor who understands your goals and needs can provide a plan for your future and monitor the benchmarks set to reach those goals.

You may consider yourself too young to retire, so you are in the market to buy another business, or start the cycle of developing a business from ground level. If that is the case, read paragraph one… w

----- IRS CIRCULAR 230 NOTICE ----Any tax advice expressed in this communication is not intended to be used, and cannot be used, for the purpose of avoiding penalties imposed on the taxpayer by any governmental taxing authority or agency. The information presented herein does not constitute legal, accounting or other professional advice. It is not intended to be responsive to any individual situation or concerns as the contents are intended for general informational purposes only. Readers are urged not to act upon the information contained in this publication without first consulting competent legal, accounting, or other professional advice regarding implications of a particular factual situation.

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133

REPORT

NTSB Chair Deborah Hersman.

Pipeline safety makes NTSB’s priority list Pipelines to transport the output of the Bakken oilfields to ports and refiners may be mostly in planning and/or construction phases, but the time is ripe to plan for pipeline safety. So says Deborah A. P. Hersman, chairman of the National Transportation Safety Board.

“Of course, the Bakken creates transportation safety issues involving railway lines and highway safety, especially at railroad-grade crossings,” Hersman acknowledges. “But our focus right now as far as the Bakken is concerned is enhancing pipeline safety while the pipelines are being planned.”

She points out that “Enhance pipeline safety” is on the NTSB’s “Ten Most Wanted List.”

“We need to make certain that safety is taken into consideration on the front-end – when the pipeline is being designed,” Hersman says. “We usually get involved when there has been a problem, but we can make recommendations because of our past experience when things have gone wrong. For instance, we know it’s important that the pipeline construction people [are] well-qualified and that the pipes themselves have been well-tested before they even get laid in the ground.”

The NTSB is an independent federal agency charged by Congress with investigating every civil aviation accident in the U.S. and significant accidents in other modes of transportation: railroad, highway, marine and pipeline.

“Our responsibility is to try to prevent 134

BAKKEN OIL REPORT – SPRING 2013

By Marjorie Smith

accidents by investigating those that have occurred,” Hersman says. “We can’t investigate everything so we end up investigating high-visibility incidents.”

Beyond planning for safety, the NTSB doesn’t get involved in the politicallycharged issues surrounding pipeline siting. “Other agencies are often involved in these projects,” Hersman says. “For instance, the State Department currently has lead responsibility on the Alberta pipeline issue.”

At present, the NTSB has five pipeline accident investigators (there are 15 each for rail and highway accidents). Examples of high-visibility highway accidents which the NTSB would likely investigate would be a huge motorcoach accident, or an incident like the I-35W bridge over the Mississippi that collapsed in Minneapolis in 2007. (In that case, the NTSB cited a design flaw as the likely cause.) The purpose of all investigations is to understand what happened, why it happened, and how to prevent it from happening again.

“We are guided in our selection of work by statutory regulations and by our internal priorities,” Hersman says, bringing the discussion back to the NTSB’s Ten Most Wanted list.

Hersman says that a major factor in pipeline safety is the education of the general public. “It’s difficult for the average citizen to understand what is risky” where pipelines are concerned, she says. “Pipelines are out-of-sight, out-of-

mind.”

“Improving pipeline safety in large part means increasing public awareness,” she says. That would include how to recognize an emergency and how to respond to it. A timely decision to shut down pipelines is critical. Hersman says that, regrettably, many emergency responders are not really aware of how to handle pipeline emergencies. Many of the pipeline accidents the NTSB has investigated occurred because the pipeline operator’s safety programs didn’t adequately identify potential problems.

According to Hersman, incidents chosen by the NTSB for investigation usually involve loss of life and/or huge monetary loss. “We don’t have the resources to investigate every incident,” she reiterates. “Sometimes we delegate to a state agency.” In the case of the 2011 break-in on an Exxon pipeline that polluted the Yellowstone River downstream from Laurel, Montana, the lead agency was the Pipeline and Hazardous Materials Safety Administration within the U.S. Department of Transportation.

Examples of high-profile pipeline incidents investigated recently by the NTSB include the 2010 explosion of a natural gas pipeline in San Bruno, California, where eight people died. The NTSB laid the blame squarely on the pipeline owner, Pacific Gas and Electric.

The NTSB’s final report showed that the San Bruno pipeline explosion was caused

REPORT

Hersman stresses that it is important to remember that despite high-visibility incidents like those in California or Michigan, pipelines are one of the safest and most efficient means of transporting commodities.

by decades of deficiencies at every level of PG&E’s operations, compounded by

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701-774-8001 1819 1 st Ave West Williston, ND 58801 www.kotana.com BAKKEN OIL REPORT – SPRING 2013

135

Oilfield jobs: do you want some training to go with that?

By Sid Pranke

Those who want oilfield job training that could give them an edge when they jump into the job-seeking fray have educational choices, but the familiar refrain of “no place to live” can present a challenge in the area.

Some area training centers, keenly aware of the housing shortage, have shifted more coursework to short-term or online program options.

Though the western half of North Dakota has been hit hardest by the demand for housing, it’s getting tight around Bismarck-Mandan as well, says Bruce Emmil, associate vice-president of Bismarck State College’s National Energy Center of Excellence (NECE).

“It’s definitely coming down the interstate toward us. There’re 40 houses for sale in Bismarck-Mandan on any given day, where a year ago it was closer to 100, so we’re not sitting here with a bunch of space, either,” Emmil states. “It’s hard to get apartments; the dorms are all full on campus.” The college is trying to fund additional dorms, but in the meantime, the NECE tries to steer students toward the online program.

“There are some who would just as soon be in the classroom so they’ll wait, but of the 12 programs we have some are only available on campus, some available only online, some are available both settings,” Emmil says.

NECE’s petroleum production program is offered only online, though the program requires brief on-campus labs or shadowing at an approved facility, according to the school’s website. Courses 136

BAKKEN OIL REPORT – SPRING 2013

Jeremy Mohl, a trainer with TrainND, works with a new full-size drilling-well control simulator at TrainND’s Petroleum Safety and Technology Center at Williston State College. begin every three to five weeks, and are

the degree is really beneficial.”

designed to provide students with a broad

Another NECE oil industry-related

background to operate and maintain the

training option is its two-year mechanical

equipment used in the oil extraction and

maintenance program, which could be

services industry.

taken as an on- campus/online combo.

Students can choose the two-year

Students could start online with their

option – an Associate in Applied Science

general courses, and then switch to the

degree in petroleum production

hands-on, on-campus classes as more

technology (a two-year plan), a program

dorms become available, Emmil says.

certificate in petroleum production

The mechanical maintenance option

technology or petroleum production

would be a good fit for would-be oilfield

technology courses (college courses for

workers, Emmil comments. “It’s basically

professional development).

repairing and maintaining large equipment

Longer-term programs are geared for

out at a power plant or oilfield setting,” he

students who are thinking about the future,

says.

Emmil says. “They really may not at first recognize it, but down the road they’ll get

Shorter-term Training

older and they’ll want to move up in the

TrainND’s Petroleum Safety and

company, so having the knowledge plus

Technology Center at Williston State

an authorized OSHA training institute, piloted the program in North Dakota in the summer of 2012. (For more info, visit www.ndsc.org.)

Sitting Bull College recently offered a 10-day oil drilling training program, which 22 participants successfully completed, says Harriet Blackhoop, workforce development coordinator with the college.

The training was a trial-run, but plans could include workshops that reach out to tribal members across North and South Dakota, Blackhoop says.

“People were calling left and right; they wanted to get into the oil trainings,” she states.

For Nathan Blankenship, a recent graduate of Bismarck State College’s I&C mechanical maintenance program, every job interview turned into a job offer.

College has an even bigger housing crunch and that has led the group to explore shorter-term training programs in instrumentation, automation and lease operation at the Center, says TrainND operations manager Billy Giles.

The Center had developed a two-year lease operator program that was to begin in late summer, but Giles said they realized it wasn’t going to fly. “I’m not sure a twoyear program is going to be effective up here. It costs so much to live; it’s long, there’s so much work to be done,” Giles says.

“We’re looking to put together some four- to six-month training programs in the evenings. The downside is that a lot of these major companies want their employees to have some type of degree at the level of lease operator or instrumentation. That’s one of the hurdles – we’re talking with the companies to see how they’re going to view that,” Giles states.

TrainND works with thousands of students every year, both through open enrollment and contracted training for area oilfield companies. “We are really busy,” Giles says. “I was really surprised, coming from Texas, a lot larger school, we didn’t do near this much training.” Giles relocated to North Dakota in January 2011.

TrainND also offers short-term training and certification in Well Control for Drillers and Workover Rigs; Floorhand for Well Servicing Training Program; and

a Commercial Driver’s License Training Program, which includes preparation to take the state-regulated CDL test.

The Williston State College facility has three classrooms for training, along with a high-bay area for large equipment training.

The hands-on training site includes an area for its oilfield-related programs.

Training programs have their own set of requirements, which can differ depending on the school. According to its website guidelines, the Floorhand program at the Petroleum Safety and Technology Center requires a drug test, the ability to lift 100 pounds, a statement of health, equipment purchases including coveralls, steel-toe safety boots, and multiple gloves.

A pre-training questionnaire requires a yes-or-no response to the statement: “I may be required to work long days in a dirty, muddy and hazardous environment in hot/ cold weather.”

An OSHA safety course for the oil and gas industry recently was launched with the North Dakota Safety Council. Dubbed “Hazard Recognition and Standards,” course goals include giving contractors and service companies a foundation to help protect North Dakota oil and gas workers by teaching them to anticipate, recognize, evaluate and control hazards common to U.S. onshore oil and gas exploration and production.

Rocky Mountain Education Center,

On-the-job Training According to the Occupational Outlook Handbook, U.S. Department of Labor, formal training for oil industry jobs is becoming more important as more technologically advanced machinery and methods are used.

Most workers, the handbook reports, start out as helpers to experienced workers and learn skills on the job. Important qualities for oil and gas workers the handbook cites include: depth perception, physical strength, eye-hand coordination, attention to detail and interpersonal skills.

Some companies prefer to train their employees from scratch, teaching them their in-house methods and grooming the employees over time.

For information about Bismarck State College’s NECE program, visit www.bismarckstate.edu/energy or call 800-852-5685. For information on TrainND’s upcoming lease operator program, call 701-774-4554; for general info about TrainND’s Petroleum Safety and Technology Center at Williston State College, contact 701-572-2835 or 866-938-6963 or email: safety.training@willistonstate.edu to be added to the program’s newsletter list. For general info, visit www.trainnd.com and www.willistonstate.edu.

This article originally was published in The Drill, in Dickinson, North Dakota.

Republished with permission. w BAKKEN OIL REPORT – SPRING 2013

137

haws

Understanding the ANSI Z358.1-2009 standard

The rules of emergency showers and eye/facewashes are changing

By Casey Hayes

Workplace safety has seen great improvements over the past several decades, due at least in part to regulatory pressures that define acceptable limits for risks and establish safeguards and emergency measures in the event of an incident.

Integral to these advancements is the current state-of-the-art technology in emergency showers and eyewashes.

The ANSI standard that guides functional, placement and maintenance requirements for emergency showers and eyewashes is ANSI Z358.1, which was last revised in 2009.

In its current form, it is the clearest and most useful tool for preparing to meet most workplace spill, splash and blownparticulate incidents.

This is not attempt to interpret Z358.1, but to provide a checklist aimed at assisting in understanding some of the significant requirements included in the standard.

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BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

It should be understood that compliance is not a once-ayear or once-a-month thing. Compliance is an all-day, everyday requirement. Accordingly, emergency showers and eyewashes are required to be activated weekly, with a more thorough evaluation on an annual basis. This requirement is established in sections 4.6.2, 4.6.5 and others. Many companies today opt to have an outside third-party inspection performed for them annually, which provides an added measure of credibility to the review process.

Beyond that, the following areas should be reviewed: â&#x20AC;˘ Emergency showers, eyewashes and combination showers/eyewashes must be accessible within 10 seconds, must be on the same level as the hazard, and the path of travel shall be free of obstructions (sections 4.5.2, 5.4.2, 6.4.2, 7.4.2).

haws

• Emergency shower, eyewash and combination shower/eyewash stations should be designated by highly visible signage (sections 4.2, 5.2, 6.2, 7.4.3) positioned so that the sign shall be visible in all areas served by that specific equipment.

• Control valves on emergency showers, eyewashes and combination shower/ eyewash equipment should be designed to enable them to be moved from “off” to “on” in one second or less and to remain open until intentionally closed (sections 4.2, 5.2, 6.2, 7.2).

• Spray nozzle outlets on eyewashes and eye/facewashes should be protected from airborne contaminants when idle.

Whatever means is used to protect them should not require a separate motion (from equipment activation) to remove the protection for equipment use (sections 5.1.3, 6.1.3).

• Plumbed and self-contained eyewash equipment must be capable of delivering flushing fluid to the eyes at a flow of not less than 1.5 liters per 140

BAKKEN OIL REPORT – SPRING 2013

•

•

•

•

•

minute (.4 gpm) for the full required 15-minute irrigation cycle (sections 5.1.6, 6.1.6).

For eyewashes, a means must be provided to ensure a controlled flow of flushing fluid to both eyes simultaneously (Section 5.1.1). With respect to eye/facewashes, the standard includes both eyes and face (Section 6.1.6).

There should be a minimum distance of six inches between the eyewash outlet nozzles and any adjacent obstruction, such as walls, etc. (Section 5.4.4).

The proper heights for eyewash or eye/ facewash heads is between 33 inches and 45 inches above the floor (Section 5.4.4).

Drench showers must deliver a minimum of 20gpm flow (Section 4.1.4).

The proper height for drench shower or combination drench shower and eyewash shower heads is between 82 inches and 96 inches above the floor (Section 4.1.2).

• Drench shower-flow patterns should be a minimum of 20 inches wide at 60 inches above the floor (Section 4.1.5).

• There should be no barrier closer than 16 inches from the center point of the installed emergency drench shower or combination shower and eyewash (Section 4.1.5).

• Combination shower and eyewash equipment is subject to the same individual component requirements, even when those components are used simultaneously. That means, among other things, that flow and pattern requirements for the shower and eyewash remain in effect during simultaneous use. Sufficient pressure and volume of fluid to “drive” both features is necessary (Section 7.4.4).

• Combination shower and eyewash equipment must be capable of simultaneous use of the shower and eye or facewash by the same user (Section 7.4.4).

• Flushing fluid must be tepid, which by the standard established guideline is between 60ºF and below 100ºF for the full 15-minute use cycle (Section 7.4.4).

There are other requirements established by ANSI Z358.1-2009, but the ones listed are the most commonly overlooked or not followed. Every month there are published recaps of the OSHA violations processed and the fines levied against companies who neglect to live by the requirements. Fines are usually in the six-figure range! Aside from the potential punitive regulatory assessments that are possible, however, there is the potential for negligence claims and litigation. For example, the company that incurred a $213,000 fine for a “blocked eyewash” would have gotten off easy compared to negligence associated with an employee who was permanately blinded.

haws

About the Author: Casey Hayes is the director of Haws Integrated at Haws Corporation, located in Sparks, Nevada.

He can be reached at (775) 353-8320 or via email at casey@hawsco.com.

Then there is the whole issue of tepid water, our final checklist item above. The tepid water requirement has been in Z358.1 for some time now. Prior to 2009, it was left to interpretation as to what was the acceptable temperature range.

In the 2009 revision, the standard was clarified to provide the specifics outlined above. Tepid water is essential to assuring that an injured worker remain under the shower or submersed into an eyewash for the required 15-minute use cycle. Cutting short on the required time risks less than complete removal of the hazardous material, as well as failure to adequately cool the area affected by, let’s say, a chemical burn.

Likewise, remaining in contact with the water supplied by most municipal authorities for that time can easily lead to hypothermia. So, the tepid water requirement is a solid one. However, it is estimated that the vast majority of multiple shower and/or eyewash installations in the U.S. still do not provide tepid water.

Today, simply providing emergency showers and eyewashes isn’t enough. We

need to monitor their condition and the

Check yourself out or ask for an impartial

areas surrounding each shower and/or

third-party assessment.

eyewash installation. And, importantly, we need to stay current with state-of-the-

For more information on the full range of

art technology in product features and

ANSI-compliant soluctinos visit

designs. Access, useability and quality-of-

www.HawsIntegrated.com. To arrange a

care are the keys. Is your equipment up-

third-party inspection at your facility, call

to-date? Are you providing tepid water?

us at (888) 640-4297. w

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Polymer Services llc

New technology and best practices yield dramatic improvements Polymer treatments produce outstanding results in Kansas and Wyoming

By Randy Prater, Polymer Services, LLC

Although polymer treatments have been around since the late 1960s, recent advances in technology, coupled with experience gained in the application of earlier treatments, have resulted in dramatic increases in both the success rate and long-term benefits resulting from a typical polymer treatment.

Since early 2003, Polymer Services has pumped more than 3,379,891 barrels of polymer gel in nearly 1,500 individual treatments. A conservative estimate of incremental oil resulting from the treatments is around 5,703,978 barrels of additional oil. These numbers can be largely verified on third-party production tracking sites on the Internet, such as IHS Energy Data, or the Kansas Geological Survey website.

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Using an average oil price of $80/bbl, the treatments have potentially yielded as much as $456,318,240 in additional oil revenues.

What Types of Wells can Benefit from a Polymer Treatment?

The most successful applications have been mature oil wells producing at a high water cut. These wells typically have been in strong water-driven carbonate formations such as dolomite and limestone. Other successful applications include new wells which have channeled to an underlying water zone, and blocking direct channels in a waterflood situation, which typically results in one well “watering out”

prematurely. In this case, the injection well can often benefit from a polymer gel injection to block a direct channel to an offset producing well without limiting injectivity. Gas wells have also been successfully treated.

Candidate Selection A number of factors should be examined to determine if a well is a viable candidate for polymer treatment.

These factors include wells that: (1) show significant original-oil-in-place; (2) are located in a field or on a lease with high cumulative (historical) oil production. This indicates a significant amount of additional oil is likely to be recovered as a result of a polymer treatment.

polymer services llc

Designing the Treatment Each polymer treatment is optimized to fit the conditions of the subject well to yield the best possible outcome.

Key factors in designing the treatment include: (1) the type of polymer and associated chemicals that will be used; (2) the size of the treatment; and (3) a detailed treatment procedure, including alternative procedures if well conditions are different than anticipated, once the treatment has commenced.

Since early 2003, Polymer Services has pumped more than 3,379,891 barrels of polymer gel in nearly 1,500 individual treatments.

Treatment Design Information Important details should be reviewed to help determine the optimum treatment strategy for a candidate well. This includes basic wellbore data such as tubing size and depth, casing size and depth, and whether the well is completed open-hole or if it is cased through the target zone and perforated.

Other important factors include current total fluid rate and oil percentage, and pumping fluid levels and static fluid levels, if possible, to help determine the amount of fluid movement required to pump the well off. Any geological information, such as well logs, core analysis reports, geological reports, drillerâ&#x20AC;&#x2122;s reports, etc., are extremely helpful. If this information is not available for the subject well, similar information on other wells in the field or area is still a useful tool.

Preparation is Important!

Proper cleanup and preparation of the well for treatment is critical to a successful outcome!

During the Treatment A specially designed polymer unit and trained crew will hook-up to the tubing and water supply (usually one or more frac tanks) and take an injectivity test with treated water, which also helps the polymer adsorb to BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

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polymer services llc

Polymer gel treatment can be an effective solution in oil and gas wells affected by excessive water production. the rock surfaces in the formation. Once injectivity has been established, polymer injection will commence according to the treatment design. Care is taken to make sure the calculated fracture pressure for the target formation is not exceeded, and also to ensure the well is not “locked up”.

Some pressure increase during the treatment is desirable to ensure all fractures and high-permeability streaks likely to be conducing water to the wellbore are selectively blocked off. Bottom-hole pressure is often monitored in real-time to facilitate proper placement of the treatment, without invading the oil or gas-saturated matrix, which is where “bypassed” oil saturation often exists. The goal is to effectively change the drainage pattern to the wellbore and make it easier for oil and gas which had been previously “overrun” by water to be produced as a result of the treatment. When the optimum treatment volume has been pumped, the wellbore is flushed, usually with clean lease crude, and the well is shut in for five to 10 days to allow the polymer to develop maximum gel strength before the well is returned to production.

A Case Study In 2012, a four-well project was commenced in the Big Horn Basin of northwest Wyoming. Prior to treatment, the subject wells produced a combined average of 12 bopd and 6,700 bwpd on submersible pumps. Treatment sizes ranged from 14,400 barrels of polymer gel to 21,720 barrels of polymer gel. Individual well production immediately

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after treatment ranged from 60 bopd to 125 bopd with a 77-percent reduction in water production. Peak production occurred in one month, at just over 500 bopd from the first two wells. The first two treatments doubled field production

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from 500 bopd to 1,000 bopd for the 27-well field, which was discovered in 1927. The operator estimates the net present

Protection You Need, A Name You Can Trust (701) 572-3786 144

BAKKEN OIL REPORT – SPRING 2013

reserve value of the wells has increased from approximately $14.6 million to approximately $29.2 million as a result of the www.mangerins.com

treatments. Incremental oil production to date is estimated to be approximately 182,500 additional barrels of oil.

polymer services llc

Economic Value At an average price of $80/bbl, the estimated value of this additional oil production is valued at approximately $14.6 million for the first year of production after treatment.

About the Author Randy Prater is owner of Polymer Services, LLC, and

Conclusion Polymer gel treatment can be an effective solution in oil and gas wells affected by excessive water production. Polymer is also an effective tool in controlling early water break-through in waterfloods. Significant increases in oil production and total incremental oil recoveries have been demonstrated as a result of polymer gel treatment programs. Although expensive, workovers involving polymer gel treatments often pay out in less than 60 days, and continue paying benefits for years. A polymer gel treatment program will often significantly increase the reserve value of an oil property.

has been active in

For more information, contact Randy Prater, owner of Polymer Services, LLC, by phone at: 785-434-2474 , fax: 785-434-2476, email: randy@polymergel.com, or visit the website at: www.polymergel.com.

1733 W Road, Plainville, Kansas 67663.

Prior to his entry into the polymer industry, Prater was a

the field application of polymer gel treatments and other enhanced oil recovery technologies since 1989. Prater has applied polymer technology in many parts of the U.S., as well as Canada, Mexico and Argentina, and has personally designed and administered the application of more than 2,000 polymer gel treatments during his career. cementing/stimulation specialist with Halliburton Services in Ness City, Kansas, where he also acquired extensive testing and downhole tool experience. Prater entered into oil industry with Great Guns, logging and perforating in 1977. w

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canelson drilling

At CanElson Drilling (US), Inc.’s Mohall office, it’s about family When CanElson Drilling (US), Inc. (“CanElson” or “the company”) purchased Redhawk Drilling based out of Mohall, North Dakota in June 2011, not only did the company acquire some excellent drilling equipment, but it also had the good fortune of welcoming a group of highly experienced and dedicated personnel to the CanElson team.

The management team in the Mohall operations office consists of Larry Bloms, operations manager; Paul Bloms, drilling superintendent; and Tina Zietz, office manager. Larry and Paul are brothers who have worked together on and off for various drilling contractors in the Williston Basin during the past 30 years.

Working their way up the drilling ranks from floorhand to rig manager and then into the office as operations personnel, the brothers have worked together consistently for the last 12 years. Tina Zietz became part of the team over 10 years ago, when she joined Larry in the office at Wolverine Drilling.

The family connections don’t stop with the brothers. Larry’s oldest son, Landis, started working on drilling rigs in 2005, working floor and derricks until the autumn of 2011, when he took a drilling position on CanElson Rig #41, where he still works to date. His younger son, Lyndon, worked floors for Redhawk/ CanElson during the summer months of 2010 through 2012, while attending college, and is now working for Marathon Oil Company as a lease operator.

Paul’s sons, Lucas and Alex, worked for the company as floorhands during the summer months of 2010 through 2012 while attending college. Larry 146

BAKKEN OIL REPORT – SPRING 2013

and Paul’s nephew, Jaeden Jenson, has also worked as a shop-hand during the summer months from 2010 through 2012, and is eager to get out of the shop and work on a CanElson rig this summer after graduation.

And it’s not just the Bloms who have the family connection: Tina Zietz’s daughter, Chelsey, worked in the Mohall office as a summer student during the summer of 2012 and during holiday breaks. Chelsey will be joining the office staff again this summer.

It’s no wonder this family atmosphere in the Mohall operation has fit in so well with CanElson. The company prides itself on a culture where family values, relationships and an open-door policy are strongly supported. Not to mention that the company’s CEO, Randy Hawkings, also works with his brother, Ryan Hawkings, VP of operations in charge of CanElson’s U.S. division, as well as their nephew, Ryan Hawkings Jr., who is a motorhand on a CanElson rig in Texas.

“Working with family can be a challenge, but in our case, because we know each other so well and trust in each other’s work ethic and expertise, it makes decision-making and the handling of challenges that much easier. I’m sure that’s how Larry and Paul have worked together so well all these years also,” says Hawkings.

Company Profile CanElson operates contract drilling rigs in the Western Canadian Sedimentary Basin (WCSB), the U.S. and in Mexico for oil and natural gas exploration and development companies. CanElson also assembles

A few of the staff in the Mohall office.

new drilling rigs at a facility in Nisku, Alberta, operates contract oil and gas service rigs in Mexico, and operates a CNG transportation and related services business.

CanElson’s WCSB operations are currently focused in Alberta, Saskatchewan and Manitoba. The United States operations are currently focused in the Bakken region of North Dakota and the Permian Basin of West Texas.

The corporation’s Mexico operations are conducted through a joint-venture company, Diavaz CanElson de Mexico, S.A. de C.V., of which CanElson holds a 50 percent ownership interest, and is currently focused in the Ebano-PanucoCacalilao fields of the Misantla-Tampico Basin of Mexico.

CanElson’s CNG transportation and related services are provided through its wholly owned subsidiary, CanGas, a North American leader in the development and utilization of containerized natural gas transport.

More information on CanElson can be found on its website: www.canelsondrilling.com. w

CanGas S

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Leading the Way.

Specializing in Natural Gas Transport and Flare Gas Collection.

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2010, 444 - 5th Avenue SW, Calgary, AB, Canada T2P 2T8

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Slow down and be safe!

Tractors and oil rigs don’t mix on highways

By Rebecca Colnar

Accident statistic: in 2008, the Williams County Sheriff’s Department reported 168 accidents. In 2011, that number increased to 700. Even though Sheriff Scott Busching noted the department doesn’t track types of vehicles involved in the accidents, the fact of the stunning increase is enough to make anyone realize the risks of driving in the Bakken area, especially if you’re a farmer creeping along in a slow-moving vehicle.

It’s spring and that means farmers will be traveling the busy highways and county roads around the Bakken oilfield development. A few years ago, traffic wasn’t such an issue, but with the increased energy development activity, some farmers feel they are taking their life in their hands every time they have to move a seeder, combine or baler.

The Steinbeisser family has been farming near Sidney for many years, traveling along Highway 16 to get from field to field. They farm sugar beets, soybeans, potatoes and alfalfa hay, farming land on both sides of Highway 16, which often necessitates moving their large equipment along the road.

“Last fall during beet harvest, we had to let our 12-row beet digger sit for two days until I could move it on a Sunday, when there wasn’t so much traffic. It was too spooky moving it during the week. If I didn’t have to move it, I didn’t,” explains Don Steinbeisser, Jr. Steinbeisser says that it’s ridiculous that a farmer can sit for 10 minutes trying to turn onto the highway because of all of the traffic, as well as the speed of the traffic.

“We really need those truck drivers to slow down,” says Steinbeisser. “A lot of these trucks drive way too fast. Just because a truck can reach speeds of 75 mph, it doesn’t mean the drive has to go that fast. We need drivers to be more courteous; it always seems they are in a hurry.”

The Sidney farmer says trucks will be doing 75 mph, but the top speed of tractor pulling farm equipment is closer to 15 mph. “If I have a combine with a drill on it, I can’t see around it very well. We have flaggers, but I can’t figure what a person is thinking who passes me around a corner going up a hill.”

Steinbeisser explains that their newer machinery has turn signals, blinkers and flashers, “but a light flashing back there doesn’t mean they’re going to slow down. When I’m doing 148

BAKKEN OIL REPORT – SPRING 2013

about 15 mph and they’re doing 80 or 90 mph, that gap closes really fast.”

“We don’t have a problem with the development or the oil industry, and our main highways are standing up pretty well, but people need to slow down and I think speed limits need to be lower, and also be enforced,” the beet farmer says.

“A lot of drivers aren’t used to being around farm machinery,” Steinbeisser says. “It’s not our goal to slow them down; we’re just trying to do our work, too.”

Ron Sylte, who has been farming in Williston since 1976, says the problem of farm equipment/oil truck conflict is that some truck drivers don’t understand agriculture.

“They assume we can pull over and let them by. Well, we are 30-feet wide and we can’t just pull over,” he says. “Some of the drivers will get upset and drive in the ditch, flip us off and scream at us, showing no respect at all. We are trying to move this equipment up and down these roads. We have no other choice.

They don’t seem to understand it. We take our lives in our hands every time we move our equipment because the trucks drive 60 mph down the middle of a gravel road. I was always taught if you come to a hill, move over to the right. These guys don’t; they expect you to get off the road. It’s tough.”

Sylte explains that generally most farmers will be moving tractors, drills, combines and grain carts for less than a mile, so patience to those following works best. “Our equipment might be 20-feet wide, 18-feet high and 70-feet long, and that’s hard to hide on the road. But the only people who slow down for us are the locals.”

Cowboy-turned-crude oil hauler Paul Woods is cognizant that spring finds a lot of farm machinery on the road.

“The farmers are doing the yearly routine as they have for years, and certainly traffic on the roads has increased very significantly since the boom. As a truck driver, one should always be cognizant of potential hazards on the road such as slow-moving machinery. In other words, slow down and be courteous and respectful of others. Above all, be safe. Others have their place on the road as well,” Woods explains.

He acknowledges the resentment among locals toward truckers because of the increased traffic and particularly the enormous amount of dust that is created in the dry months.

“It coats everything from crops to feed to cattle,” he says.

Don Steinbeisser, Jr., who grows soybeans, sugar beets, potatoes and alfalfa hay, says he has a hard time moving equipment on Highway 16 south of Sidney.

Paul Woods had worked on both sides of the fence, in agriculture and as a crude oil truck driver.

Photo courtesy: Rebecca Colnar.

“It is what it is. We are not all bad people. The majority are people like myself, who are working to make a living and provide for a home and family, the same as the farmer.”

“Trucks run day and night. In many cases, the farmers have had little to no choice in placement of wells and roads.”

Woods explains one reason trucks run so fast is everything in the Bakken is geared toward “time is money.” Woods also explains the logic for trucks hurtling along at 80 mph.

“Many loads are paid by percentage of the load, so the more loads hauled in the 14-hour work day equals more money. Many drivers hurry to haul their assigned loads and finish sooner,” Woods says. “The oil and water tanks need to be emptied in a time-frame as they are always producing.

Everything runs on a tight schedule, from rig hauls to sand hauling.”

He adds that one indirect reason truckers might be rude is hostility about landowner’s exorbitant prices. “From an oilfield worker point-of-view, there is resentment of the farmer/ landowner for the outrageous prices they charge for truck parking to camper parking to rental housing. In some cases, they’ll charge $500 per camper space to $800 to $1,200 per

room for a barely habitable shack, and that can cause some hard feelings.”

Still, he notes that a tight timetable is no reason to drive in an unsafe manner. “The company I work for has a policy of 35 mph on gravel roads,” he says.

“From having literally been on both sides of the fence I can see and understand the farmers’ concerns.

However from a trucker’s point-of-view, farmers need to know that the way of life has changed here in the Bakken. It is what it is. We are not all bad people. The majority are people like myself, who are working to make a living and provide for a home and family, the same as the farmer,” Woods says. “In the few interactions I have had with the local farmers, I have extended courtesy and respect to them first and have had it returned every time. I think that we all need to realize that, yes, the farmers and ranchers were here first; but on the other hand, we are here now, and we all need to get along. We are all in the same boat.” w BAKKEN OIL REPORT – SPRING 2013

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huesker

HUESKER:

the answer to reflective cracking in asphalt pavements

The Bakken oil boom has been great for America as a whole.

The boom has employed thousands of Americans with highpaying jobs, revitalized towns with new economic activity and residents, and decreased the reliance on foreign oil. But local communities, counties, and state officials have also had to deal with the many challenges presented by such rapid growth and the resultant expanding oil operations.

Infrastructure, in particular, has been stressed. Nearly all roads in the Bakken region were constructed many years ago and were not designed to handle the current levels of heavy truck and vehicle traffic. The need to rehabilitate and strengthen these under-designed roads has become a matter of preserving roadway safety and fostering sustainable and responsible growth. The wide-spread need has also placed a premium on cost-effective solutions.

For many communities, geosynthetics have presented the strongest geotechnical answer for supporting the heavy vehicle traffic and weight, extending roadway life, and reducing maintenance costs. Bituminous-coated grids have become a considerably effective solution for quick installation into and support of asphalt overlay designs.

Reinforcing North Dakota Geosynthetics are engineered to perform certain functions, such as the reinforcement provided by geogrids. Because of 150

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

this precision, they are only a small part of civil engineering in general; but they play significant roles in improving the integrity of infrastructure.

In Burke County, North Dakota, the situation in Powers Lake has exemplified the infrastructure challenge, as well as the implementation of an economical geosynthetic solution.

The main road running through the town has connected oil operations and access to larger shipping routes, but the volume and weight of traffic led to significant cracking, oxidation, and other signs of distress and failure in the road.

Founded more than 100 years ago, and having never surpassed 650 residents in the U.S. national censuses (conducted every 10 years), Powers Lake was not in a position to command significant roadway funding despite its strategic position in the booming oil market.

Reinforcing well sites and access roads with HUESKER geogrids

704.588.5500

800.942.9418

www.huesker.com

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

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huesker

152

The county and design consultant

term survivability against the known

looked at what many communities

and anticipated usage.

in this situation have traditionally

It was the same limitation so many

started with: milling the road and

other communities had run up against.

adding a thin asphalt overlay. It

Then an option was presented

would enable some rehabilitation

to utilize a bituminous-coated grid

and, importantly, would fit within

composite. Engineered to extend

the cost and construction window

pavement life by strengthening the road

constraints. It wasn’t an ideal

against reflective cracking, the polyester

solution, however, and would still

grid – HaTelit® C40/17 from HUESKER

leave the road unprepared for long-

– was a new option for the town and

BAKKEN OIL REPORT – SPRING 2013

county, but it brought 40 years of project installations worldwide to support its use from both geotechnical and economic perspectives.

The extensive records on HaTelit® have, in fact, proven it to extend pavement overlay life three to four times longer than an unreinforced overlay. The unique composite structure, a polyester grid with a nonwoven geotextile in a single rolled product, bonds strongly with a roadway in an overlay system because of the bituminous coating. The high modulus grid and thin but durable geotextile add significant tensile strength and distribute loads over a greater area, which minimizes the stresses that typically cause reflective cracking. As a single-roll product, the reinforcement can be installed quickly and efficiently during the overlay process.

The design consultant reviewed the proposal and selected HaTelit® as the best solution for this project.

In July 2012, 30,000 square yards of HaTelit® C40/17 were installed on all lanes of First Avenue W. and Powers Lake Boulevard between Highway 50 and County Road 7. Installation was performed by Border States Paving.

Surface preparation included milling and brooming the surface. A thin coat of emulsion (0.12-0.13gal/SY) was sprayed directly on the milled surface. Once the tack coat broke, the HaTelit® C40/17 was installed with a small tractor laydown machine. To finish the road, 1.5 to two inches of asphalt overlay was installed.

The HaTelit® bituminous-coated grid solution makes sense for overlays in the Bakken region. It is a robust but easy-to-install geotechnical solution, strengthening roads against the oil and energy industry-related traffic and resisting the freeze-thaw cycles common to the Bakken’s northern soils.

Longer-lasting, safer roads and a decreased need for maintenance are benefitting everyone. w

c&j Energy services

C&J expands into the Bakken

By Ashlee Espenell

C&J Energy Services is set to further capitalize on their current Bakken operations by adding capacity and bringing their first fracturing fleet to the area. The Texas-based company is already providing a range of completion services in the region, and they’re hard at work with 2013 expansion plans.

“We have wireline, pump-down and coil-tubing operations in the Bakken right now, but currently the majority of our fracturing operations are in Texas,” says Don Gawick, C&J’s chief operating officer. “We expect to deploy a new fleet to North Dakota in mid-2013.”

“The services we provide are focused on the completion end of the business. We concentrate on higherend, differentiated services: targeting complex work and jobs where advanced technologies are required,” says Gawick. “Our new Bakken fracturing fleet will allow us to offer 154

BAKKEN OIL REPORT – SPRING 2013

a full range of completion services in the area, which only a handful of service companies are able to do.”

C&J has built its reputation in the industry by focusing on providing superior customer service with best-in-class efficiency, using highperformance equipment. C&J provides premium hydraulic fracturing, coiled tubing, pressure pumping, wireline and other complementary services in some of the most geologically challenging basins in the country.

The company was founded in 1997 and today employs over 2,000 people. Since 2011, C&J has been a publicly traded corporation, listed on the New York Stock Exchange under CJES. In that same year, they acquired subsidiary Total Equipment and Services, gaining a primary equipment supplier and the ability to manufacture and repair hydraulic fracturing, coiled tubing, pressure pumping and other specialized

equipment. The company’s expansion into the Williston Basin would come just one year later, with the June 2012 acquisition of Casedhole Solutions.

Casedhole Solutions is a multiregional provider of casedhole wireline and other complementary services, and has a well-established presence in many of the most active basins across North America – including the Williston Basin. With Casedhole Solutions now part of the family, C&J has strengthened their position in some new domestic markets and gained a foothold in the booming Bakken.

C&J got its start in South Texas, but a decade and a half of growth and technological innovations have seen their operations expand throughout Texas and into New Mexico, Louisiana, Oklahoma, Utah, Pennsylvania, Ohio and now North Dakota. Their customer service strategy and efficient project management helped the company

c&j Energy services

(307) 797-9262 | 2105 Oil Drive | Casper, WY 82604 156

BAKKEN OIL REPORT – SPRING 2013

grow in the early years, but Gawick says that the incredible technological advancements over the last 10 to 15 years in the industry helped the company to find their niche.

“The industry has changed dramatically in North America with the advent of new and improving technologies over the last few decades.

The ability to drill horizontally and precisely control the well trajectory, then perforate and fracture multiple stages in a single well has allowed the industry to dramatically increase our oil and natural gas production,” says Gawick. “We now do projects where the horizontal portion of the well can be over two miles long. We still do work in vertical wells and conventional reservoirs, but the majority of our growth is coming from the horizontal multistage shale plays.”

C&J’s new fracturing fleet will be ready to tackle the challenging geology of the Bakken soon enough. The fleet is currently being winterized and is set to be deployed during the second quarter of 2013. w

mrc

MRC

Providing the infrastructure in the booming Bakken shale play

MRC is committed to its mission to be the Global Supplier of Choice® for pipe, valve and fitting (PVF) products to the energy and industrial markets while remaining true to their core values.

“Looking back on our 92-year history, we have built a thriving and innovative global distribution company on the solid foundation of customer service, quality products and company-wide dependability developed by our founders,” says Andrew Lane, MRC chairman, president and CEO. “What a powerful legacy and exciting future.”

Growing to Serve the Midstream “The robust activity in the North American shale plays and Canadian oilsands is a key driver of our growth in the midstream sector,” states Jim Underhill, MRC executive VP and COO – U.S.

This year, MRC is also planning to expand its Edmonton, Alberta operations to include an additional 5,575 square meters of warehouse space.

Because of this growth, MRC has

(371.6 square meters) of valve

committed extensive inventory of

automation shop space, in Cheyenne,

bare and coated pipe, high-yield

Wyoming at the heart of the Niobrara

fittings, ball valves, actuators and

shale play and to support the Bakken

other pipeline products to meet

shale play.

immediate customer requirements

This year, MRC is also planning

in these key regions. However, the

to expand its Edmonton, Alberta

company is investing in more than just

operations to include an additional

inventory to support their customers.

5,575 square meters of warehouse

The company maintains an

space. The larger location will support

extensive distribution footprint, and

the robust capital projects activity in

is constantly strategically expanding

both the Canadian oilsands and the

to stay ahead of their customers’

Canadian portion of the Bakken shale

needs. In 2012, MRC established a new

play.

80,000-square-foot (7,432-square-

“We are intensely focused on these

meter) regional distribution center,

shale plays, and we are continually

which includes 4,000 square feet

reviewing our expansion plans to BAKKEN OIL REPORT – SPRING 2013

157

mrc

ensure that they align with our customers’ goals in these regions,” Underhill says. “Thanks to our network of stocking locations and valve automation centers, we are uniquely positioned to provide even the most complicated of requirements quickly and efficiently.”

The company isn’t just growing one location at a time. In January 2013, MRC welcomed Permian Basin and Eagle Ford-based Production Specialty Services to the MRC brand. This acquisition expanded the company’s service footprint in the area while adding a talented and experienced workforce to their company.

Global Reach with a Local Touch MRC has an impressive global infrastructure to service its customers and support its suppliers. The “Fortune 158

BAKKEN OIL REPORT – SPRING 2013

500” company maintains an intricate supply network made up of more than 400 global service locations, 13 distribution centers, 24 valve-automation centers and 4,750 knowledgeable employees.

MRC leverages this infrastructure and its long-term relationships with a global manufacturing base to provide quality products to endusers. The distribution company also provides procurement services, work process redesign, quality assurance, safety leadership, technical support and training, project solutions, supply chain solutions and valve automation and modification services. MRC is known for its extensive inventory and experienced salesforce.

“We believe in providing value through our global strength, without losing our local touch,” Underhill

says. “We know that our success is a result of the personal service we provide on the local level.”

In 2011, MRC acquired Stainless Pipe and Fittings Australia (MRC SPF), the largest distributor of stainless-steel piping products in the southern hemisphere.

Headquartered in Perth, Western Australia, MRC SPF brought seven locations across Australia, as well as Italy, the United Kingdom and the United Arab Emirates.

MRC SPF’s 430,000-square-foot (40,000-square-meter) facility in Perth, Western Australia also serves as MRC’s premier pipe, fittings and flange stocking and distribution center for Australasia. Then in 2012, the company welcomed One Steel Piping Systems Australia to MRC. When added to MRC’s current business in the region, MRC became

mrc

the largest full-service distributor of PVF in Australia to the markets they serve.

“The combined capabilities of our family of companies in Australia will provide our key customers and suppliers a one-stop solution for all their PVF needs,” Lane states. “We are proud of the quality companies and employees we have been able to add to our international footprint.”

“We listen to our customers,” Rory Isaac, executive VP – Corporate Strategy and M&A, says. “They wanted a global distribution company that could provide standardization and add value to their supply chain – we delivered by adding only the best operations with similar cultures to our organization.”

After more than 92 years in business, MRC has grown beyond what its founders could have ever hoped. Yet the company remains grounded on its core values of integrity, dependability and customer service – only now it performs on a global stage. w

Serving the Williston Basin & Rocky Mountain Regions

Kyle Hudson President

Dick Ramsdell Vice President

RPM Consulting, Inc.

PROJECT MANAGEMENT

Please recycle this magazine when you are done.

∇ Drilling Programs & Permitting ∇ Completion Design ∇ Fracture Stimulation Design

FIELD SUPERVISION § Drilling Rigs § Fracture Stimulation § Workover & Completion

RPM Consulting strives to enhance our clients’ operations with skilled and experienced engineers, field supervision and support staff.

For companies who appreciate the flexibility and expertise consultants can provide.

RPM Consulting, Inc. 1600 Broadway,Suite 1510 Denver, CO 80202 Office 303-595-7625 Fax 303-595-7628

www.rpmconsultinginc.com

BAKKEN OIL REPORT – SPRING 2013

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Dakota heritage

By Larry M. Mosbrucker

As the oil boom continues to affect western North Dakota, state park officials have found a new development – campers taking up permanent residence. With these campers comes the litter and problems associated with enforcing standards in these areas.

At the eastern edge of the Bakken, a new Walmart has just been approved for Mandan, N.D. – the third in the Bismarck/Mandan community. Thirty miles west, in the small community of New Salem, rental houses are nonexistent, and houses sell as fast as they enter the market.

North Dakota hasn’t always been known for the Bakken oil region; there is a vast history hiding in this prairie state. Several foreign powers – especially the French and English – vied for control of the fur trade, as it was politically and economically important. In addition, it paved the way for regional settlement and contributed to technological advances in transportation systems.

A variety of vessels transported cargo from the frontier to St. Louis, Missouri.

Long-distance trips were reserved for keel boats, mackinaws, and steamboats.

Dugout canoes were used for short hauls and bullboats for the shallow Missouri River tributaries. Steamboats were faster and carried larger loads, but required high initial costs and led to a diminishing wood supply.

Diminishing populations and the introduction of silk top hats marked the decline of the beaver fur trade.

However, with extremely large populations, the buffalo fur trade grew 160

BAKKEN OIL REPORT – SPRING 2013

in popularity, while steamboats offered an affordable mode of transportation for the heavy and bulky furs.

In 1843, buffalo hides were transported to St. Paul, Minneapolis via the oxen-driven commercial cart trains of the Metis Settlement of St. Joseph, Dakota Territory.

In 1865, there were no railroads in northern North Dakota, but by 1889 – the end of the U.S. Territorial Period – there were more than 2,000 miles of track. By 1870 they had put barge canals out of business and had driven steamboats from all but the most important rivers. In the 1945 film

North Dakota residents have always been known for their work ethic and are sought after by firms across the nation.

Dakota, a depiction of life in 1871, John Devlin (John Wayne) helps Dakota wheat farmers save their land from swindling entrepreneurs who want to make a fortune selling it to the railroad companies (www.imdb.com). Although largely inaccurate, this movie gave a clear depiction of river boats and wheat farms of the time. The only land speculation that took place was when a speculator might try to purchase or settle on land in the path of the Great Northern Railroad or a branch line in an attempt to sell land, in order to develop a town site.

Claim-jumping was even more of a problem. The railroad came first and then the settlers, as the railroad got its pick of the land. The railroad had plenty of land for sale along their right-of-way, and made plenty of money.

Builders of transcontinental railroads were motivated by the potential for huge profits. By the late 19th century, North Dakota had more than one mile for every 100 people – more than four times the national average.

After a financial disaster in 1873, the Northern Pacific Railroad sold most of its property to holders of its bankrupt stock. The only way to recover their investment was to develop the land, and thus huge bonanza farms were born; one of the most famous being the Bagg Bonanza Farm.

The characteristics of the land – flat, treeless, without rocks, nearly all tillable, suitable for large farm machinery, and fertile – made the Red River Valley suitable for large bonanza farms. Combined with improvements in transportation, shipping, and new milling processes, bonanza farms met with great success, while riverboat trade on the Red River increased dramatically.

During the North Dakota boom years of 1870-1915, towns sprang up almost overnight to accommodate newcomers to the frontier. By 1890, the average farm was nearly 277 acres, as immigrants arrived from all over the world to settle.

By 1880, ranching was also an important part of western North Dakota heritage, where the Missouri Slope

region was an ideal place for huge cattle ranches. Famous names such as Teddy Roosevelt and Marquis de Mores built very large operations. The town of Medora was named after the Marquis’s wife, Medora Von Hoffman, where he built a slaughter facility. By 1886, ranching began to decline due to a series of disasters, including extremely hot summers, locusts, drought, and several massive blizzards which brought ruin to the land.

The early years of the 20th century were an era of optimism, however; over 250,000 new settlers entered North Dakota to pursue the cheap land and properties. North Dakota’s population exploded by 81 percent between 19001910 – the largest increase in history.

At its peak, two-thirds of the state’s population had been born outside its boundaries, and only half of the new immigrants had any farm experience.

Many came to engage in land speculation rather than farming, where individuals and companies, alike, made millions.

In 1906, Alexander McKenzie turned to land sales, buying and selling 300,000 acres. W.H. Brown of Chicago opened an office in Richardton and promoted the sale of 200,000 acres in that area. From 1900-1904, the Northern Pacific Railroad sold 1,569,000 acres west of the Missouri River for an average price of $1.93/acre. The promotions worked, and by 1950 the wheat crop had doubled, on average, over the previous two decades.

By the early 20th century, farmers adopted new technologies on a major scale, which continues today. Melroe Manufacturing created the first skid steer loaders, and Concord Air created one of the first no-till drill seeders.

Other companies include Amity, WilRich, and Wishek, as well as nationwide building manufactures and software firms such as Great Plains Software and Appareo Systems. Sugar beets and potatoes also play a big role in the state. Crystal Sugar and J.R Simplot have a major presence here.

North Dakota residents have always been known for their work ethic and

North Dakota hasn’t always been known for the Bakken oil region; there is a vast history hiding in this prairie state. are sought after by firms across the

About the Author

nation. The cities are considered the

Larry M. Mosbrucker is a North

best places to live and retire by rating

Dakotan native. Information courtesy

agencies across the country. North

of the State Historical Society of North

Dakota has a past rich in heritage and

Dakota.

its history certainly tells a splendid story. Will this state be known only for

Previously published in the Sept./Oct.

the Bakken oil region? Only time will

2012 edition of the Bakken Oil Business

tell.

Journal. Reprinted with permission. w

BAKKEN OIL REPORT – SPRING 2013

161

oasis petroleum

Oasis Petroleum:

aggressively drilling the Williston Basin Oasis Petroleum is a premier, fastgrowing E&P operator in the Williston Basin with over 335,000 net acres in the heart of the play. We are committed to creating long-term shareholder value and believe the best way to accomplish this is through resource conversion. We do this by identifying and capturing large acreage positions in economic plays and then executing large, repeatable drilling programs with a focus on driving down costs through efficiencies and technology.

With extensive industry experience and a proven track record of resource conversion, our team’s implementation of management processes gives us a distinct advantage to drive value in the Williston Basin. The Williston Basin, a highly attractive oil province with multistacked pay zones and substantial oil in place, has been our focus since inception.

Oasis has proved reserves of approximately 143.3 million barrels of oil equivalent and employed 281 people as of December 31st, 2012. Since 2007, we have grown production from 1,000 barrels of oil equivalent per day (“Boepd”) to over 27,500 Boepd and, looking to next year, we’re expecting to average between 30,000 to 34,000 Boepd in 2013. One of the key components to driving value through resource conversion is drillable inventory. We currently operate 280 spacing units and have identified 2,020 gross-operated drilling inventory locations. This assumes four Bakken and four Three Forks wells in our “core” acreage and equates to an approximate 14-year drilling inventory.

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BAKKEN OIL REPORT – SPRING 2013

As we look to 2013, a key strategic focus will be to add inventory through a few initiatives. First, we will drill infill density tests to increase the number of wells per spacing unit in both the Bakken and Three Forks formations. Second, we will drill step-out wells in the Three Forks to delineate additional acreage we currently hold. And third, we will drill vertical pilot wells into the lower benches of the Three Forks, which will add a layer of depth to our inventory. If we can prove these initiatives successful, we will add a significant amount of inventory to our program.

A second key component of resource conversion is driving down costs. The large concentrated acreage blocks provide us with a competitive advantage to drive down drilling and completion costs while becoming more efficient. In 2012, we decreased our well costs by $1.7 million to $8.8 million through efficiencies, lower service costs, and optimization of

Pure Bakken Oasis Petroleum Inc. is 100% focused on the Williston Basin and has been since the companyâ&#x20AC;&#x2122;s inception in 2007. We have rapidly grown our acreage position, production, reserves, and employees. With over 335,000 net acres and production in excess of 27,000 barrels of oil equivalent per day in the fourth quarter of 2012, we have positioned ourselves as one of the leading operators in the Williston Basin. We have 9 rigs currently drilling and are operating Oasis Well Services, which provides completion services exclusively for our operated wells.

We now have close to 300 exceptional employees and over 100 are located in our new Williston, ND office. We are actively seeking intelligent, innovative, and committed people who want to be challenged, work hard, and have a direct impact on our ongoing success.

Great People. Great Assets.

Great Opportunity.

5437 137th Ave, NW Williston, ND 58801 | EOE

OasisPetroleum.com

oasis petroleum

well design. In 2013, we’re looking to drive down costs even further primarily through well design and pad operations.

We will drill approximately 60 to 70 percent of our wells on pads in 2013, and estimate that we can reduce well costs by five percent to 10 percent compared to a single well. As we move to pad development, we will be able to mobilize rigs more efficiently, improve frac-crew utilization, decrease the well footprint, lower environmental impact, and implement central tank batteries to ultimately reduce well and operating costs.

Another key component to our well cost reduction has been the implementation of Oasis Well Services (“OWS”), our internal fracking service provider. We saved approximately $17.5 million in capital expenses in 2012 through the utilization of OWS on our operated wells.

Going forward, we estimate that we will save approximately $500,000 per gross well on up to half of our operated wells.

Finally, it’s important to note that we couldn’t do any of this without our employees, partners, contractors, and all of our investors for their dedication and support of Oasis Petroleum. The growth and successes have been made possible by our hard-working self-motivated team. At the heart of our ability to grow shareholder value is a function of our people’s talents, self-motivation, and ability to work together. At Oasis, we have achieved these positive attributes. w 164

BAKKEN OIL REPORT – SPRING 2013

larson electronics

Portability in explosion-proof lighting equipment Explosion-proof lighting forms an integral part of equipment safety when operating in areas that have been deemed as being hazardous locations. The presence or potential presence of flammable or explosive gases, vapors and materials in the hazardous workplace presents a serious threat to the safety of workers in that area, the structures and goods of nearby private residences and commercial businesses, and the health and safety of people in these buildings and nearby areas. In many cases, the presence of flammable materials is a normal part of operations and an unavoidable necessity. As a result, preventing the ignition of these materials becomes a critical part of maintaining safety while they are present.

In most hazardous locations, explosion-proof or intrinsically safe lighting equipment is integrally installed and part of a comprehensive approach to safety that benefits from regular inspection and maintenance. Such lighting is generally well-suited to the environments at hand and performs quite well. Additionally, the wiring, controls, and power supply for such systems is likewise matched through classification to such lighting systems in order to meet compliance and help provide the highest degree of safe operation possible. The problem, however, is that it is not possible to utilize such integrally installed lighting systems in all hazardous locations. In locations such as production lines,

refineries and processing areas where work is commonly performed on a routine basis that deals, produces, or otherwise causes interaction with hazardous materials, it is of course more practical to utilize integral explosion-proof lighting. Other locations, where work is not so routinely performed but the potential for ignition exists, present new challenges for the workers who must enter them.

Any work area can become a hazardous location if flammable gases or vapors are present. The structure or location need not be the usual control area or work floor within a building in order to require explosionproof protection. Items such as storage tanks in refinery

Any work area can become a hazardous location if flammable gases or vapors are present. operations, sealed rail car tanks, shipholds and containers in the commercial marine transport industry, paint-spray booths, power plants and the like all hold the potential for the presence of flammable materials and atmospheres when working within or nearby to them. Servicing, maintenance and repair of such containers and structures often require worker ingress, and although the contents may be removed, flammable vapors and gases may remain which can still potentially be ignited by the electrical tools and lighting workers bring with them. As a result, it is necessary to provide portable illumination which holds the same explosion-proof approval and certification as normally integrally mounted lighting.

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

165

Portable explosion-proof lighting is constructed similarly to fixtures designed for permanent mounting, but there are a couple notable differences that must be taken into consideration if it is to be utilized safely. Since such lighting is portable, providing power for the lighting will require external cords and connections rather than the protected conduit and wiring permanently mounted fixtures use. This presents the first important difference that can cause potential problems if not fully understood. The primary problem with such cords and connections is that every time the device is connected and disconnected, such as when plugged into an outlet, it is possible for arcing and sparking to occur at the point of connection. As a result, it is usually safest to connect the device to a properly rated explosion-proof extension cord, then connect the cord to an outlet outside of the hazardous area. In this way, the operator completely removes the potential for sparking that could ignite a flammable atmosphere.

Another way to safely supply power to your portable lighting is to utilize specialized receptacles, plugs and switches which are designed to allow connection and disconnection within the hazardous location.

Such plugs, receptacles and switches must also meet classification for the area they are to be used within â&#x20AC;&#x201C; the same as the lighting or devices connected to them. These connectors and switches are typically sealed units which utilize deeply recessed sockets and a twist-lock operation to protect against sparking. The deeply recessed sockets provide better sealing and less potential for sparking, and the receptacle itself does not become fully energized until the plug is fully seated and twisted into position, locking the plug and then energizing the receptacle. Receptacles equipped with a switch provide a higher degree of protection by allowing operators to make all their connections while the receptacle is not carrying current.

Once everything is securely connected, the operator simply turns the switch to complete the circuit.

Another important consideration is the durability of the portable lighting in question. Due to its very nature, portable lighting is subject to a great deal more abuse and rough handling than a typical permanently mounted fixture. Portable light towers, pedestal lamps, trouble-lights and work-lamps are prone to being knocked 166

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

larson electronics

One great way to avoid potential shattering or exposure of hot lamps to hazardous atmospheres is to utilize newer portable explosion-proof LED lamps. over or dropped, as well as receiving accidental shocks

durable. LEDs have no fragile glass or wire filaments to

and impacts from the high amount of activity occurring

break or shatter, and their solid-state design can withstand

around them. The problem here is that although a light

substantial shocks and impacts without any serious

may be properly classified, it is possible to damage the unit,

degradation in performance or protection.

or even shatter a bulb or lens, which can then result in an

The use of portable lighting within hazardous locations

extremely unsafe condition, as the hot parts of the lamp

has grown significantly over the last decade, as regulations

can be exposed to the flammable outside atmosphere. This

continue to tighten and OSHA pays ever-closer attention to

potential is greatest with explosion-proof lights, which

operations in potentially hazardous industries. By paying an

rely on incandescent or HID bulbs for their light output, as

extra bit of attention to how this portable lighting is chosen

both these lamp styles utilize a fragile glass bulb prone to

and operated, workers can maintain safety and compliance

breaking or shattering under heavy impacts.

while reaping all the benefits that portable explosion-proof

One great way to avoid potential shattering or exposure

lighting holds.

of hot lamps to hazardous atmospheres is to utilize newer portable explosion-proof LED lamps. These lamps run far

Visit http://www.magnalight.com/c-190-explosion-proof-led-

cooler than HID or incandescent lamps and are much more

lights.aspx for more information. w

1-800-369-6671

sales@magnalight.com Browse our collection of products and information on our website to learn more about us and how we can help you find solutions for all of your heavy duty and hazardous location lighting needs.

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BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

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beaver creek archaeology

Beaver Creek walkin’ in the Bakken

Overview of the N.D. Badlands.

Beaver Creek Archaeology (BCA) is a cultural resources firm located in Bismarck, North Dakota, that has been actively involved in the Bakken region from the beginning of the current oil boom in North Dakota. In 2007, the viability of the Bakken formation as a sustainable oil-producing source rock was uncertain. One can easily see why North Dakotans were skeptical; the state had experienced oil booms before.

The existence of the Bakken formation has been known since the mid‘50s and in the ‘80s, oil production was on the rise, bringing new industry to support.

This greatly benefited the field of archaeology in North Dakota, as new firms arrived to meet the high demand for archaeology services. However, the following “bust” caused hardship for North Dakotans and left businesses closing their doors.

Today, the Bakken oil play has proven its worth: moving North Dakota’s total oil production from the number-eight spot in 2007 to the number-two spot in 2012 among U.S. states [source: U.S. Energy Information Administration].

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BAKKEN OIL REPORT – SPRING 2013

BCA staff perform a cultural resource inventory on an access road for a well location.

Beaver Creek recognizes that our clients face strict time constraints on projects due to scope/budget and expiring leases.

Beaver Creek Archaeology was an

steadfast commitment to provide

established player in the archaeology

superior archaeological services to

field well before the Bakken oilfield’s

clients throughout the Great Plains

production skyrocketed, and Beaver

region. BCA achieves this goal by

Creek will be here long after the oil

emphasizing the importance of

boom subsides.

communication and technology in order

Founded in 2004, president and

to complete all projects, small or large,

founder Wade Burns, M.S., RPA, saw

in a timely and economic fashion.

a gap in the marketplace and started

Beaver Creek recognizes that our

Beaver Creek Archaeology with a

clients face strict time constraints

beaver creek archaeology

BCA staff test a site for an oil-well pad project.

Judith Mountain Survey in central Montana. on projects due to scope/budget and expiring leases. As a result, Beaver Creek utilizes state-of-the-art technology (e.g., GIS, Trimble, MS Surface, GPR, etc.) combined with wireless capabilities to ensure that all parties stay up-todate on project developments and changes both in the office and in the field. The use of modern technologies facilitates constant communication among all parties which, in turn, allows Beaver Creek Archaeology to complete each project in a time-conscious and costeffective manner. The paramount priority is getting our clients’ projects moving forward; Beaver Creek is where progress meets preservation.

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BAKKEN OIL REPORT – SPRING 2013

It would be understandable to attribute North Dakota’s good economic fortunes entirely to the oil boom resulting from increased production in the Bakken region. However, North Dakota was enjoying steady economic growth before the oil boom set the state’s GDP growth on fire. For example, North Dakota realized a 4.5 percent increase in GDP from 2003 to 2004 [source: U.S. Bureau of Economic Analysis].

Beaver Creek, much like North Dakota, enjoyed steady growth prior to the oil boom. Originally composed of just two employees, BCA has grown to 15 full-time archaeologists in North Dakota, with additional seasonal employees as needed. Beaver Creek was in a prime position

beaver creek archaeology

Overview of a road update project surveyed on the Little Missouri Grasslands for oil traffic.

BCA staff record a site on a pipeline project in western N.D. to capitalize on the plethora of new projects in the Bakken, because it had built a strong portfolio and a pristine reputation for completing projects on-time and under-budget. As a result, BCA has experienced its own “Bakken boom”, spurring first the creation of a field office in Watford City, North Dakota, to support our clients’ operations in the Bakken region (of North Dakota, Montana, and South Dakota), and then the need to open an office in the heart of Denver’s oil district on 17th Street, which allows BCA to better serve our clients’ needs in the southern plains region.

This exciting new step is just the beginning. Beaver Creek Archaeology works with clients of all sizes, from small-scale operations to large corporations, and will continue to grow in order to better serve our clients’ archaeological needs throughout the U.S.

TRIPLE B & PIPELINE

TRUCKING

Trenchers | Excavators Cats | Backhoes Trucks | Cranes 40 Ton Rock Truck with Scrapers

References U.S. Energy Information Administration. Feb. 28, 2013. <http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm> U.S. Department of Commerce – Bureau of Economic Analysis.

Feb. 28, 2013. <http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1#reqi d=70&step=1&isuri=1&7036=-1&7007=2009&7093=Levels&709 0=70&7006=38000&7001=1200&7002=1&7003=200&7004=NAI

BILL BOKMA billbokma@yahoo.com

406-450-0414

CS&7005=-1&7035=-1> w BAKKEN OIL REPORT – SPRING 2013

171

xylem, inc.

Navigating the landscape of hydraulic fracturing

Over the past few years, increased

extracted from a single well source. A

use in the fractionation process.

awareness of environmental impact has

fracture network is created through

Water can come from many sources:

led to a need for greener, safer methods

horizontal drilling to access a wider

• Surface waters (lakes, streams, rivers)

and technologies. Clean energy is an

area and restore or increase the flow

• Municipal water supplies (convenient

essential part of this, and companies

of natural gas. Water and additives are

have begun finding ways to meet the

injected into a well under very high

• Produced waters from area wells

demand for more environmentally

pressure to increase the number of

• Alternative sources like mine drainage

friendly energy sources. Domestic

fractures and push them open. Sand is

natural gas is one such resource. Newer

typically pumped into the well with the

The use of portable dewatering

technology was necessary to access

fracking liquid to allow the pores in the

pumps instead of water trucks saves

natural gas reserves, which are available

rock to remain open and gas to flow

energy companies time and money.

deep underground in several areas of

more freely through the fracture. This

Some projects would need to employ

the United States. Hydraulic fracturing

allows more product to be extracted

hundreds of trucks to get water to the

– which has been used for decades as a

and maximizes results from each

site. Instead, temporary pumps and

method of aiding production in oil wells

location.

piping can be used to transfer the water.

or treated wastewater

Aside from the bulky operation the

– was further developed as a natural gas

172

and easy, but costly)

extraction method.

Portable Pumps in Fracking

projects would require, pumps keep

Hydraulic fracturing, or fracking,

Portable pumps are used in hydraulic

truck traffic off the roads, which reduces

is often performed in shale rock

fracturing applications to transfer water

the carbon footprint from the trucks’

formations where fractures are already

and drill mud. Submersible pumps or

emissions and prevents expensive

present. At accessible depths below

centrifugal pumps are used in water

repairs of road infrastructure.

the earth’s surface, expanding these

withdrawal stations to draw water from

Moving liquid is a necessity during

fractures allows more gas to be

their source to the site or well pad for

all phases of the process. “Pumps are

BAKKEN OIL REPORT – SPRING 2013

xylem, inc.

used to circulate drilling mud while the

The benefits of working with a vendor

drill rig is on-site, before fracking even

with a large rental fleet include:

begins. The mud is used to flush out the

• Rental availability of pumps,

boring hole, as well as for lubrication,” explains Brent Hatch, branch manager for Xylem. “There can be up to 15,000 feet or more of pipe in the ground, and oil-based drill mud as a lubricant keeps everything running smoothly without

accessories and control equipment • Complete 24/7 access to service, support and inventory • On-site system set-up, operation and maintenance

• Application specialists and design engineers • Optimized pipeline installation and HDPE pipe fusion service • Regulatory compliance • System optimization for reduced cost and carbon footprint • Ease of scaling pump system up or down, safely and effectively

the need for additional product.”

Portable pumps can move water from impoundment to storage tanks and supply water to high-pressure frack trucks. Well flow-back and produced water can be blended with fresh water during the fracking process, treated and reused during the operation. Pumps are used to manage flow-back from the wells to the storage tanks and pump solids-laden drill fluids. When they pump raw water up through storage tanks that feed the water system, pumps with hard iron parts – such as impellers and insert rings – are used because of their durability and strengthwithstanding tough product. They are suitable for wastewater with oxygen or chloride levels up to 500 ppm, which prevents clogging and erosion.

Standard diesel or natural gas powered pumps are used for flat ground and high-head, high-pressure pumps are needed for long distances and hilly areas. Geography and area topography dictate the flow rate and lift that will be needed. Centrifugal dewatering pumps are used for these applications, along with rental pipe, hoses and manifolds.

Fluid transfer specialists should operate pumps, tanks and valves. For a temporary job of this nature, one could consider utilizing a pump company with all essential accessories and service technicians. Water transfer is needed in each step of the hydraulic fracturing process, but a rental company has the knowledge to keep it running smoothly.

Alutiiq Oilfield Solutions, LLC

OIL REPORT – SPRING 2013 Bakken Oil Report - Half Page -BAKKEN Color 2/7/2013173

xylem, inc.

Landscape

Environmental Precautions

Shale rock, which consists of consolidated clay particles, is

Federal and state regulators work to ensure natural

the most common sedimentary rock. It has high porosity and

gas extraction does not harm the environment. There are

low permeability. Shale gas occurs in vertical fractures or tiny

limitations in place on the amount of groundwater and surface

poorly connected pores, so new methods were needed to

water withdrawn to reduce any potential stress. There are

extract the natural gas within. But this gas is an unconventional source of energy, which had untapped potential in many locations where energy was not usually produced.

In many cases, shale basins in the United States are found in flat regions, such as the basins found in Texas. When everything is flat, it’s most economical to use ring-lock pipe,

also efforts in place to prevent spills and restrict potential contamination. Fracking is a regulated industry, as long as guidelines are followed, it is an environmentally sound method of extracting natural gas.

Said Ramos, “Several pumping elements can be tailored to be environmentally friendly. We use interim Tier 4 engines in our dewatering pumps, which offer a substantial reduction

snap it together and begin. Marcellus shale, however, located

in nitrogen oxides (smog), particulate matter (soot) and

throughout Pennsylvania and New York, is found in a very

hydrocarbons. The pumps also have the option of electric

mountainous environment. High-density polyethylene (HDPE)

motor or natural gas engines, which use fuel produced right on

pipe with various pressure ratings is used, and a knowledge of

the fracking site.” Spill containment is stressed to even further

pumping extreme high head is crucial.

minimize the carbon footprint.

“It’s important to have an understanding of the environment and geography, so you are able to perform

Kristen Gurick is a marketing communications specialist for Xylem.

pressure calculations for piping and fusion requirements. For

She can be reached at kristen.gurick@xyleminc.com or

example, as the pipe continues up a mountain, different pipe

856-467-3636.

ratings would be utilized and fusion requirements would be evaluated,” states Mike Ramos, director of engineering for Xylem.

High-pressure systems are required to get the water over the mountain. A typical portable pump would not work for supplying water in the Marcellus Shale region. Rather, the ideal would be a high-head pump with total dynamic head

REFERENCES “Hydraulic fracturing.” Wikipedia, the free encyclopedia. N.p., 4 Jun 2012. Web. “Hydraulic Fracturing Background Information.” U.S. Environmental Protection Agency. EPA, 09 May 2012. Web. “Natural Gas Extraction - Hydraulic Fracturing.” U.S. Environmental Protection Agency. EPA, 04 May 2012. Web.

capabilities reaching 500 feet or more. This would eliminate

174

the need for multistage pumps for jobs where placement

Previously published in the August 2012 edition of Upstream

could be crucial to a successful, streamlined project.

Pumping Solutions. Reprinted with permission. w

BAKKEN OIL REPORT – SPRING 2013

MESSAGE

Solutions needed to tackle infrastructure challenges surrounding shale formations

By Leyla Kianpour, Infocast Inc.

While most of the U.S. is frustrated that real estate and bank-owned signs litter the homes in their neighborhood, there are still parts of the nation which do not even have the housing to meet demands.

The Bakken shale boom has bought remarkable opportunities, but it has also created equally challenging obstacles to its infrastructure.

North Dakota has a faced a critical housing shortage due to oil and gas production within the Bakken oil formation. Exploration within the oilfield is responsible for the creation of thousands of jobs, and a low unemployment rate within the area. As of Nov. 2012 North Dakota had the lowest unemployment rate nationally at 3.2 percent, according to data from the U.S. Bureau of Labor Statistics. However, despite the benefits of the Bakken boom, it has also left thousands homeless with people living in hotels, RV parks, campgrounds, and within dormitory facilities. It is estimated that to meet requests, between 2,000 to 3,000 housing units need to be created within the next three to four years, according to an article by the American Oil & Gas Reporter.

Due to the rapid demand of homes within communities which lie near the Bakken oil formation; there has also been a swift increase in prices for multifamily housing units. A hasty Craigslist search for an apartment within Williston, a region within the oilpatch, will show that a single-bedroom apartment can cost well over $1,200 a month.

In addition, construction and development within the area has been slow due to the logistics and the mechanics of the location.

Developers face many serious constraints toward building the necessary housing and infrastructure within towns along the Bakken oil formation. A few of the issues that developers face include limited local transportation, maxed-out municipal services, the difficulty for finding construction labor, and the ability to obtain construction materials. Only the informed developers and investors will be able to maximize profits from this poignant opportunity, given the equally noteworthy obstacles.

Moreover, it is apparent that many of the same significant opportunities and daunting challenges exist in the numerous other rapidly developing shale oil and gas plays scattered throughout the country. Inflow of oil and gas industry workforces into shalebooming areas such as the Bakken, Marcellus and Utica, Eagle Ford, Mississippi Lime and others is creating housing shortages near the formations nationwide. There are many lessons to be learned from the Bakken shale boom which can be utilized in other shalebooming areas. Competition among all these plays and each play presents different characteristics, risks, production history and economics.

Hundreds of people are gathering at Infocastâ&#x20AC;&#x2122;s annual Bakken Infrastructure Finance & Development Summit. This event brings together industry leaders in an effort to further the advancements of the community surrounding the shale formation.

In response to this critical situation, an event production organization is working to bring all the key players involved under one roof. Infocast Inc., the networking and deal-making hub of the oil and gas industry, is launching a meeting called Emerging Real Estate Opportunities in U.S. Oil and Gas Plays. This event will bring together the oil and gas supply chain, real estate developers and investors, and municipalities to take advantage of the business development and investment opportunities within the Bakken oil formation. Infocast will also be hosting a pre-summit briefing, Real Estate Opportunities in Existing and Early Stage Plays, to discover what shale plays are currently driving U.S. drilling and development and evaluate their multi-year potential to develop future investment strategy in various U.S. shale plays at different stages of development.

The various shale formations across the country have shown to be promising to investors. The communities booming and developing due to shale formations across the nation need to learn from each other. A proper assessment of what proposed real estate projects will get built and what capital is available to build-out the infrastructure surrounding shale plays is needed.

Related Links http://www.bls.gov/eag/eag.nd.htm http://www.minneapolisfed.org/publications_papers/pub_display. cfm?id=4852 http://nd.craigslist.org/apa/ http://money.cnn.com/2011/09/28/pf/north_dakota_jobs/index. htm?iid=EL http://www.aogr.com/index.php/magazine/cover-story/ soaring-oil-production-spurs-infrastructure-growth-acrossbooming-bakken-pl w BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

175

pcs brokers llc

When to cash out

The best time to sell a business often gets missed

By Scott Lester

There are a variety of reasons why

are health issues and burnout. In nearly

business owners decide to sell. Probably

all cases where the real motivation to

the three most common motivations

sell is emotionally driven, it generally

are personal reasons, internal business

negatively affects the sales price of the

reasons, and external market reasons.

company because the emotional driver

In many cases, the best time to sell the

of the decision puts the seller in a weak

business occurs during a time when

negotiating position. While it is often

the owner would be least likely to

unclear when the absolute best moment

think about it. And the circumstances

to sell the business is, it is almost always

in which an owner decides to sell

better to put the company up for sale

the business can often mean all the

before there is an emotional reason

difference between getting a good price

motivating it.

and selling off the assets at auction.

Internal Reasons Personal Reasons

Things such as experiencing rapid

The primary reasons owners sell their

bottom-line growth, getting key

business are personal. Most owners start

employees running the business or

thinking about selling their businesses as

winning significant new contracts are

they approach retirement. Other reasons

all internal reasons to sell. But these

nexus

security solutions

Reassuring Innovation

176

BAKKEN OIL REPORT – SPRING 2013

are all the same circumstances where most owners often wouldn’t think about selling, since they’re inclined to keep running the business when it’s doing well. Instead, business owners often start thinking about a sale as their business gets harder to run. But while a buyer is willing to pay a premium for a company that easily runs itself in a profitable way, they often won’t consider buying a business that is weakening.

External Reasons Circumstances in the general local or national economy can also offer reasons to sell. Improving markets will often mean higher prices for sellers of businesses. That’s because in many cases, buyers will look past weaknesses in the business if the market is hot.

In North Dakota, we’ve seen many buyers who were willing to overlook weaknesses in business performance or management structure because they were more concerned about obtaining the employees, assets and access to the marketplace. The flip side of this, however, is that when a market begins to peak or decline, buyers become

It’s better for owners to choose the time to sell than to have the time to sell choose them.

pcs brokers llc

much pickier – or even hesitant to buy altogether. In every instance of a hot market, there is a peak. And in every instance there are individuals who will hold out to catch the highest price possible. But – just as in the stock market – it’s nearly impossible (even for a full-time professional) to “call” the exact turning point in a market.

Therefore, in many cases, owners who hold out for the peak moment will wait too long, and will end up stuck holding a company that has passed its peak.

Another important external circumstance is interest rates. Almost all business acquisitions require the buyer to obtain some form of financing. Just as in real estate, the less the interest rate, the more the buyer can afford to pay for the business. As with the industry’s economic trend, it’s difficult to pick the moment when interest rates are at an absolute bottom. It’s better to aim for a time when rates are good and on a down-swing, and the business performance is on an uptrend, rather than trying to “call” the exact peak or valley.

Better to be Proactive than Reactive The best time to sell a business is when the company is making money for the owner, the owner doesn’t need to sell for any personal reasons, the market is growing and will likely continue to grow for some time, and there are opportunities that the company can easily pursue. But while this is the time to get the best price, it is usually the most difficult time for the owner to want to let it go. The thing to remember is this: the second something changes and the future is not as bright, it will become difficult to sell the business for an excellent price. We have, of course, seen circumstances where owners walk away from extraordinary offers because they

didn’t need to sell and things looked

the time to sell choose them.

rosy, only to have something change in the business or market that makes it

About the Author

impossible to sell the business for even

Scott Lester, MBA, is a broker and

half as much, just a short time later.

co-owner of PCS Brokers, a business

A general rule of thumb to

brokerage that has successfully

remember is this: it’s better for owners

completed more than $300 million

to choose the time to sell than to have

business sales in the Williston Basin. w

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177

dakota gasification company

Tap into the future

Dakota Gasification Company, a whollyowned subsidiary of Basin Electric Power Cooperative, is a global leader in carbon capture. Its Great Plains Synfuels Plant has been collecting carbon dioxide from its Rectisol unit since 2000.

Dakota Gas has successfully collected and transported over 20 million metric tons of carbon dioxide for Enhanced Oil Recovery (EOR) to date.

The Great Plains Synfuels Plant is the only commercial-scale coal gasification plant in the United States that manufactures natural gas. Located five miles northwest of Beulah, N.D., the Synfuels Plant has been in operation since 1984. The Synfuels Plant produces approximately 170 million standard cubic feet (mmscf ) of natural gas daily. Other products produced at the plant include anhydrous ammonia, ammonium sulfate, cresylic acid, phenol, krypton/xenon, liquid nitrogen, naphtha and carbon dioxide.

Dakota Gas started collecting and transporting carbon dioxide from its Rectisol unit in 2000. It is the largest carbon dioxide capture project from 178

BAKKEN OIL REPORT – SPRING 2013

an industrial source in the world.

Dakota Gas captures carbon dioxide in a gaseous form and compresses the carbon dioxide in three eightstage 20,000-HP compressors. The carbon dioxide exits the compressors in its dense phase (liquid), or super critical phase. The carbon dioxide is then injected in a 205-mile pipeline that extends from the Synfuels Plant in Beulah, N.D., to oil plays in central Saskatchewan. Oil companies inject the carbon dioxide into oil reservoirs for EOR. Carbon dioxide is injected into oil reservoirs in order to pressurize the reservoir and push oil to collection wells.

EOR allows companies to collect 10 to 30 percent more oil than would have otherwise been possible.

Dakota Gas currently transports 150 mmscf per day to oilfields in Canada.

“We currently have additional carbon dioxide available for EOR,” reports Steven Liebelt, marketing manager for Dakota Gas. “Dakota Gas is always looking for new and innovative ways to capture and transport additional carbon dioxide. The

response from oil companies has been very positive and we are glad we can offer a value-enhancing product to help the energy needs of our country.”

“We have carbon dioxide and we would love to expand our development in the United States,” says Paul Quist, market development manager for Dakota Gas. “We are always looking for opportunities, both big and small, to improve energy development in the area. EOR is a great opportunity to take carbon dioxide out of the atmosphere and put it to good use in the oilfields.”

Dakota Gas, a pioneer in capturing carbon dioxide from an industrial source, has carbon dioxide available in the northern plains.

For additional information, please contact Paul Quist at 701-221-4412.

Dakota Gas is a Responsible Care provider and is dedicated to providing products and services for rural communities.

“Tap Into The Future” – call to find out where there is a pipeline tap near you! w

Shale exploration llc

Shale Exploration’s philanthropy demonstrates long-term commitment to communities “Always do right.

This will gratify some and astonish the rest.” ~ Mark Twain Recognized for its leadership in the oil and gas industry and backed by a proven track record of developing and producing oil and gas prospects in every major play in the United States, Shale Exploration, LLC, is an independent oil and gas company that proudly calls Fort Worth, Texas home. With four U.S. offices, and plays in nine states, this industry family enjoys a wide range of success. With over 50 years of combined management experience in the industry and a Texas determination to “do the right thing,” this industry player is wellpositioned to becoming a major player in all U.S. oil and gas plays.

Led by CEO Sid Greehey and president Sam Tallis, Shale Exploration, LLC is on the right track. With their vision and creativity, Greehey and Tallis have taken an active role in assembling an incredible team of talented, hardworking individuals. Utilizing the latest industry technology including fracking, geochemistry, seismic 3D, and even seismic 4D, Shale Exploration, LLC has proven itself a frontrunner in this everchanging industry. One of Shale’s many successes has been the acquisition of leaseholds totaling over 500,000 acres in Daniels County, Montana. Using their bright team of scientists, engineers, and 180

BAKKEN OIL REPORT – SPRING 2013

Sam Tallis stands next to a state-of-the-art test well.

Poster from Shale’s Montana Make a Wish Raffle. leasing and acquisition experts, Shale Exploration, LLC has positioned itself in the middle of the Bakken shale activity.

As emerging industry leaders, Shale Exploration, LLC has the clear foresight to plan ahead, work efficiently, and use their knowledge and know-how to produce real and tangible results.

The well-founded success of Shale Exploration, LLC is not limited to oil and gas, however. Believing it is right to be a good corporate neighbor, Shale Exploration, LLC is making a tremendous impact in the communities and lives it touches through

Shale exploration llc

their humble generosity. Last year, alone, Shale Exploration, LLC contributed over $1 million to numerous worthy causes including community development, social services, medical/health and education. It is not uncommon to find members of the Shale Exploration family volunteering at local community events. Their charitable spirit in their own hometown was recently highlighted in a Fort Worth, Texas real estate magazine segment, FYI Fort Worth.

Whether providing iPads for students in Scobey Public Schools, donating funds for life-saving equipment to a rural fire department in Daniels County, or surprising a women’s and family shelter in

701-272-6161 800-334-7863

Montana with a much-welcomed check, Shale Exploration, LLC is ever-mindful of the opportunity and privilege they have to make a lasting difference in their neighbor’s lives – which may possibly be their greater success.

With contagious excitement, Shale Exploration, LLC continues to look forward to all future oil and gas frontiers yet to be discovered. Shale Exploration, LLC recognizes that their continued success in this competitive industry depends not only on their solid leadership and their utilization of the latest technology, but in the right partnering with fellow industry professionals who share their same vision and passion for success. As Shale explores our nation’s resources, they continue to welcome promising opportunities in lease acquisitions, drilling investments, minerals estates, and joint ventures in their effort to maintain their successful

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position in all U.S. plays from the Eagle Ford Shale to the Bakken shale and the Utica to the Monterrey. With an emphasis on “doing what is right” together with their dedication to the community, this Texas leader, Shale Exploration, LLC is a shining example what is right in the oil industry

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today. w BAKKEN OIL REPORT – SPRING 2013

181

mvtl laboratories inc.

MVTL:

services beyond the laboratory

In the two previous editions of the Bakken Oil Report, MVTL has described its origins, its available analytical services and its sincere desire to partner with the many different entities working in the Bakken. Providing quality field-sampling services, as an option to our clients, is another way of enhancing our value to the customers we serve.

MVTL has been providing environmental sampling support services to consultants, engineers, industry and municipalities for 40 years. Our trained and experienced staff has been involved in the sampling of groundwater monitoring wells, surface waters, treatment lagoons and a variety of industrial discharge streams.

More recently, our field services personnel have been involved in assisting landowners with domestic well sampling and well certification. This is usually performed to check for the presence of bacteria and to establish a baseline profile or monitor the water quality of the source water.

MVTL’s field services are not limited to only water supplies. Our trained staff have been involved with soil sampling due to both suspected and obvious surface contamination. We also provide methane monitoring of landfills and indoor mold sampling.

Typical groundwater quality monitoring includes water-level measurements, purging of the well volume, recording field test parameters and well sample collection. Routine field test parameters are temperature, pH and specific conductance.

Groundwater monitoring wells are purged using an appropriate pump or bailer system, depending upon the well’s depth, diameter and recharge capacity. The actual sample will be 182

BAKKEN OIL REPORT – SPRING 2013

obtained employing the same method used to prep the well.

The samples are prepared in the field based on the analytical requirements (i.e., filtration, preservation and appropriate sample containers). Samples are then placed in a cooler and taken to MVTL’s laboratory in Bismarck for analysis.

MVTL’s staff maintains HAZWOPER, OSHA, MSHA and confinedspace certification. MVTL’s field services department is equipped to handle on-site, roadside and remote-access sampling points.

If you have staff who are familiar with sampling techniques, protocols and operation of the equipment, we also rent this equipment.

Whether your need is as simple as a water-level measurement or a grab sample for a bacteria test to monitor groundwater for Subtitle D requirements or complex composite influent measurements and sampling, MVTL stands ready to assist you with your sampling and analytical needs. This is why MVTL Laboratories, Inc. is your “go-to” lab. w

RELY ON MVTL

FOR QUALITY ANALYTICAL & SAMPLING SERVICES Surface & Ground Water Drinking Water Wastewater Biosolids Soil & Overburden Solid Waste Waste Characterization Industrial Waste Priority Pollutants Coal & Petroleum Products Hydrocarbon Residues Field Sampling Services Wastewater Flow Studies Rental of Flow Recorders & Sampling Equipment MVTL Laboratories, Inc. 2616 East Broadway Avenue Bismarck, ND 58501 P: 701.258.9720 F: 701.258.9724 E: csc@mvtl.com Toll Free: 800.279.6885 www.mvtl.com

allstate peterbilt group

Allstate Peterbilt Group: the Midwest’s dealership

By Jillian Mitchell

Allstate Peterbilt Group new Williston, N.D. facility.

Allstate Peterbilt Group has 17 locations and one goal: to provide the best truck parts and services in the industry. And that’s exactly what the company has been doing everyday – for over 40 years – says representative Matt Vanthournout.

“We always make sure we do the best job we can,” says Vanthournout, manager of strategic development.

“Taking care of every customer, whether in person, on the phone or online, is number one.”

Originally founded in 1971, the Allstate Peterbilt Group has evolved from a single location with a single truck in Bloomington, Minnesota, to an industry leader in parts (OEM for Peterbilt, Ford, Ottawa and Hino trucks), service and sales of all types of medium- and heavy-duty trucks and equipment. Their extensive inventory also contains thousands of aftermarket parts and accessories for all makes and models of heavy-duty and medium-duty trucks and trailers.

In the last two years, specifically, the group has witnessed incredible momentum with the opening of 184

BAKKEN OIL REPORT – SPRING 2013

six new locations, three of which are in the Bakken region. It is a momentum currently “unmatched by any other dealership in the region,” Vanthournout confirms, adding that the group offers more service points, inventory levels, and overall locations than any other dealer in the region.

Recently, Allstate Peterbilt Group welcomed two new locations to their roster – one in Williston, N.D., and one in Dickinson, N.D. These upgraded locations – complete with a state-ofthe-art lounge area, locker room, and laundry services – really cater to the clientele, says Vanthournout.

“In this region of the world, there are a lot of people who live and work out of their vehicles everyday,” he says, “and finding a place to sit down and watch T.V. or to wash your clothes and take a shower is relatively difficult.

So, at our new locations we’ve gone above and beyond to make sure our drivers are comfortable.”

In early February, the 15,000-square-foot, six-bay Dickinson facility opened its doors; the upgraded 25,000-square-foot, six-bay

Williston facility followed suit in midMarch. Both locations offer the drivers’ amenities in addition to the services, truck sales and expanded parts inventory.

“Our expansion has served us well,” Vanthournout says. “We are entertaining a store in Minot, provided Dickinson and Williston go well.”

Today, the award-winning dealership is the second-largest Peterbilt dealership in the United States. In the last year, the company’s financial division hit the $100-million mark, and between their 18 locations, they have sold an additional $100 million in parts last year. As the manager confirms, business has been going very well.

“Providing the best in customer service has been our goal from when we began in 1971 and remains our core focus to this day,” he says. “Our expansion is simply an extension of this same customer-service focus – more service points and more inventory in locations where our customers need us the most.” w

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The SWD future is NOW...

Oilfield Integrators is ready to deliver automation, SCADA, HMI and surveillance

So what the frac is SWD?

wastewater will be trucked to saltwater

Interface) as automation and control

Oil reserves in the Bakken formation

disposal (SWD) sites. The wastewater

solutions for the SWD industry. This

need to be hydro fractured to release

must be disposed of in an ecological

allows SWD sites to operate with

the oil from the shale. Water used

and safe manner. The most efficient

minimal staff. Without automation, it

in the fracking process, along with

way of disposing the wastewater is to

would take several people to operate

naturally occurring salt and other

deposit it back into the ground. This is

a facility. Additionally, the company

contaminations, mix with the oil as itâ&#x20AC;&#x2122;s

the primary function of SWD sites.

can integrate video surveillance

pulled to the surface. This oil and water

186

into the automated control scheme.

mixture will be present for the life of

Efficiency and Safety with

Customers can then view their sites

the well. Once the oil and water mix

Automation, SCADA, HMI and

remotely, not only having readings

is out of the ground, it will require an

Surveillance

and reports, but also real-time

additional process to separate the oil

Oilfield Integrators provides

information like who was at the site

from the wastewater. The separated oil

SCADA (Supervisory Control and Data

yesterday, who is there currently, etc.

will be trucked off to depots and the

Acquisition) and HMI (Human Machine

Oilfield Integrators offerings provide

BAKKEN OIL REPORT â&#x20AC;&#x201C; SPRING 2013

oilfield integrators

full situational awareness and control, remotely. With cutting-edge automation and video surveillance systems, there is a tremendous amount of safety value added because there is less physical contact on the site. When you can look on a computer screen and see how everything is operating, you don’t need employees on-site and in harm’s way.

How Can Oilfield Integrators Help?

There is a substantial need for additional SWD sites due to the tremendous amount of wastewater that is generated at each producing oil site. It’s a relatively immature industry that’s growing fast because the demand is insatiable. At Oilfield Integrators, we design and build every aspect of the SWD site, from automation and electrical to surveillance, and we work with a number of different companies to produce industry leading results. Our staff is comprised of consultants, engineers, electricians and technicians that work together to provide SWD companies with solutions customized to their needs. With our pooled resources we provide some incredible results for clients who require efficiency and superior ROI. We position our solutions keeping in mind current industry standards, all the while keeping an eye to the future. As we continue to drive the industry forward, our focus is to enhance our current offerings, continue to respond to our customer’s needs and deliver superior results. w

SERVING THE OIL AND GAS INDUSTRY SINCE THE DISCOVERY OF ELK BASIN ATTORNEYS KIMBERLY BACKMAN BRIAN R. BJELLA COLBY L. BRANCH GARY G. BROEDER CRAIG B. BURNS JOSHUA COOK JON DYRE CHRISTOPHER D. FRIEZ JOHN L. GALLINGER SHANE A. HANSON RACHEL HASSELLE KEN HEDGE BRIAN HOLLAND KRISTIN BJELLA HOW

BLAINE JOHNSON ARTHUR F. LAMEY, JR. JOHN R. LEE TIMOTHY LERVICK DENISE D. LINFORD MOLLY A. LITZEN CHRISTOPHER LUEHR CHRIS MANGEN, JR. WADE C. MANN JILL MCKIERNAN LORI MCMULLEN LOUIS R. MOORE JOHN W. MORRISON JENNIFER M. NASNER

ADAM OLSCHLAGER JEFFREY OVEN URIAH PRICE FRED C. RATHERT STEPHANIE REGENOLD P. JAYE RIPPLEY STEVEN RUFFATTO CRAIG C. SMITH GARTH SJUE KIRSTEN SJUE MARK STERMITZ

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BILLINGS 490 North 31st Street Suite 500 Billings, MT 59101 Phone: (406) 252-3441

BUTTE 65 East Broadway Suite 503 Butte, MT 59701 Phone: (406) 533-6892

MISSOULA 305 South 4th Street E. Suite 100 Missoula, MT 59801-2701 Phone: (406) 523-3600

BISMARCK 400 East Broadway Suite 600 Bismarck, ND 58502 Phone: (701) 223-6585

CASPER 152 North Durbin Street Suite 220 Casper, WY 82601 Phone: (307) 265-2279

SHERIDAN 101 West Brundage Street Sheridan, WY 82801 Phone: (307) 673-3000

BOZEMAN 45 Discovery Drive Bozeman, MT 59718 Phone: (406) 556-1430

WILLISTON 1331 9th Avenue Williston, ND 58801 Phone: (701) 572-2200

CROWLEYFLECK.COM BAKKEN OIL REPORT – SPRING 2013

187

camex sales & equipment

Equipment demands rebound

Camex tandem/tandem big-bed truck and 50-ton picker truck.

Camex tri-axle extendable trombone trailer.

“We noticed a slight dip in sales to North Dakota in the last quarter of 2012 but it is spiking up again in 2013,” says Tom Huyghe, sales manager at Camex Equipment Sales and Rentals. “What we are seeing is the oil industry stabilizing in the Bakken where the local business are growing stronger.”

Mergers and acquisitions are also playing a part in changing the dynamics of the smaller companies – giving them more buying power and the ability to branch into other areas of the oil business. Taking advantage of these growing business opportunities is

188

BAKKEN OIL REPORT – SPRING 2013

Camex tri-axle winch tractor with lift axle.

providing long-term stability for these companies.

DRILLING INNOVATION CHANGES EQUIPMENT NEEDS The Bakken is still a hot spot for drilling activity and as such, employs the very latest in drilling technology and recovery. These innovations have sparked demand for specialized rig moving equipment that can take on the challenges of the Bakken oil play.

Bed trucks, multi-axle trailers and extendable trailers that can handle the heavy tonnage of this newer

drilling equipment are garnering more attention.

Camex’s heavy-spec winch tractor and trailer makes short work of this rig-moving job. Farden Construction has been using Camex rig-moving equipment for a number of years now and it has enhanced their rig-moving operations dramatically.

CAMEX POISED TO HANDLE INCREASED EQUIPMENT DEMANDS “We feel that as drilling operations ebb, the well service business and the pipeline sector will see significant

camex sales & equipment

Photo courtesy of Steve Farden, Farden Construction Inc., N.D.

and substantial growth. With a doubling of manufacturing capacity and strategic alliances, Camex is in a strong position to handle the increased demand for the service and pipeline equipment that will be needed,” continues Huyghe, “equipment that is best suited to handle the rigors of North Dakota oil exploration and production.” w

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Heavy-Duty Picker Trucks

Texas Bed Winch Tractors

T/A & Tri Winch Tractors

Extendable Trailers

BAKKEN OIL REPORT – SPRING 2013

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calfrac well services

Calfrac Well Service’s new home now open

By Dale Larsen and Tammie Wyatt

The past year has been quite a rollercoaster for us here at Calfrac in Williston. We were busting at the seams, working several 24-hour crews out of our trailers and a tiny two-bay workshop with attached cubicle offices. With many delays and much fervor, on January 22nd, 2013 the Williston District finally took possession of its new facility. As of March 2013, we have a headcount of 293 employees. It is amazing to look back and realize some of the hostile obstacles we overcame to succeed in our old facility – or should we say “lack of facility”!

We are grateful to all those involved for bringing our new site to fruition.

The approximate size of the new site is 32 acres. The office/ shop building has 25,000 square feet of shop space with 11 service bays. There are 18,000 square feet of combined office, break, locker and training rooms and a parts warehouse. In addition, the chemical warehouse/wash building is 26,500 square feet and includes laboratory, office and warehouse space with two truck washbays. Finally, the bulk cement plant is 10,000 square feet. This new facility really places Calfrac in a position to service the Williston Basin at the highest level for years to come. And we are very excited to grow with the Williston community.

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The Calfrac group has been staying busy with other activities as well. The Williston State Teton Athletic club hosted the second annual Hot-wing Cook-off at the Williston Fair grounds October 12th, 2012. Calfrac’s local team took second place out of 12 for our hot wings. Calfrac also took second place for homemade cornbread and honey-butter sauce.

February brought around the Williston API 30th Annual Cookoff, which Calfrac has participated in since our introduction to Williston, N.D. in 2010. We were able to raise $4,000 for API, which in turn contributes the money back into the community.

Our chili received rave reviews from attendees. Although Calfrac didn’t win, it was great practice for next year when we will take the grand prize!!

Between the blizzards and frozen roads, Williston District, and its new team members who have relocated from other districts, have faced great challenges and trials. Thank you to all of those who have chosen to leave their homes and/or move their families to this robust environment to benefit the Williston District. With the new facility and our community involvement, we will continue to enjoy the camaraderie which comes with building our Calfrac family. We can’t wait to see what 2013 brings! w

Where people and technology meet...

...that’s the strength behind Calfrac.

At Calfrac “Service First” means providing the highest degree of expertise and service, field-proven, reliable technologies that result in enhanced production and measurable cost savings. Calfrac’s specially designed, innovative technologies and equipment for fracturing, coiled tubing, cementing and associated well servicing solutions deliver results, and add value by improving operating efficiency, reducing environmental impact and lowering finding costs.

T echnologies T haT W ork in The F ield Calfrac provides both conventional and unconventional hydraulic fracturing services and has become a leading service provider in the deeper, more technical areas of completion and production, integrating the latest downhole fracturing technology to design the specific amount of chemicals, fluid, and equipment necessary to deliver successfully on each project and increase your hydrocarbon production.

To learn more about how Calfrac can deliver for you, call 303.293.2931 in Denver, 701.774.2080 in Williston or visit us today at www.calfrac.com

Technologies that work in the field

The silver lining:

getting prepared to prepare Prepared by the National Tax Office of Eide Bailly LLP

Thanks to the fiscal cliff tax legislation

While the IRS is still revising forms and

activities at the end of 2012 and the first few

delaying the filing of several tax returns,

days of 2013, the Internal Revenue Service

not having the forms necessary to file

(IRS) was placed in a position of having to

your tax return may allow you more time

modify and reprogram various 2012 tax

to think about what you need to consider

forms for new or extended tax laws.

when you finally can file your tax return.

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BAKKEN OIL REPORT – SPRING 2013

As a result, you may be better prepared to save time, aggravation and, hopefully, a few dollars along the way. Here are a few things to think about as you get prepared to prepare your tax return.

Starting in January, you began receiving 2012 tax information forms.

These include a W 2 from your employer, and various type of Forms, including 1099s or K-1s from organizations you do business with, or from investments you hold. It is extremely important that you have these tax information forms available to complete your tax return.

Why the importance? It’s always easier to fill out a return when someone else gives you the information rather than searching for it, but that’s not the main reason.

The main reason these tax information forms are needed to prepare your return is because the IRS has what is called a “matching program.”

The IRS gets a copy of all tax information forms you receive and they are diligent in recording the information related to your social security number.

When you file your return, the IRS compares the information they have received for your social security number against the information in your tax return (the matching program). If the IRS finds any difference, where your tax return reports less than the tax information they have received, they will send you a correspondence audit letter asking you to explain the difference, or pay the additional tax. Incidentally, correspondence type audits, as described, are the cheapest and easiest method the IRS has to verify tax returns and tax return filing requirements; expect one if something in your return does not match.

When you make an investment, for example, in a real estate project, that investment will typically be made into a Limited Liability Company (LLC), a

partnership or an S Corporation. All of these entities require that you have positive tax basis to use current tax losses. Therefore, just because you receive a Form K-1 showing a loss or tax credits available for your interest in the investment does not mean that the loss is currently deductible or the credits useable. You will need to determine that you have positive tax basis exceeding the available current loss amount to take the full deduction. And, unfortunately, keeping track of your tax basis in an investment is your responsibility.

A passive activity is any investment activity that involves an active trade or business in which the investor/taxpayer does not materially participate in the business. Passive activity tax losses and associated tax credits, as could arise in a real estate venture, are generally only deductible or used against passive income items. Any unallowed and unused tax loss or credit amounts are held in suspense until passive income is generated to offset the amounts or until the entire investment is disposed. There are specific rules for determining material participation and being considered an active investor not subject to the passive loss limitation rules, which is generally a better tax position to have. You should review all K-1s received and determine if the classification provided (active or passive) needs to be questioned or modified before filing your return.

Think of it this way: the ability to put a deduction down on a tax return without documentation is simple.

The ability to prove to an IRS agent examining your return two years after you filed the return that the deduction is proper, is not simple and can be costly without documentation. In addition, the courts have been increasingly hard on taxpayers that do not have correct and timely documentation, particularly for charitable donations. Therefore, before you prepare your own return or provide information to your tax preparer, organize your receipts, proof of payments, loan refinancing papers, charitable donations letters or anything else that you are considering as deductible from

taxable income. These materials serve as documentation.

While most items of taxable revenue or expense are fixed at year end, certain retirement-type payments can be made and deducted as late as the date for filing your return, some even to the maximum extension date. As you prepare yourself for filing your return, determine if you have any capacity for using any of these after year-end retirement type payments for deductions, just in case you need them.

The bottom line is – be prepared! Filing a return can be complicated, but the better

organized, documented and prepared you are to answer the questions that come up, the easier the process will be.

Eide Bailly’s National Tax Office serves as a resource for clients to help analyze complex tax issues related to business decisions. Our professionals help clients stay informed about tax news, developments and trends through various specialty areas, including cost segregation studies, wealth transfer, state and local taxation, international tax, tax exempt organizations, accounting methods, S-corporations and tax legislation. w

Committed to Serving the Bakken Region’s Oil & Gas, Energy & Construction Industries

Building Materials & Specialty Products • Framing Lumber & Panels • Drywall • Roofing, Siding & Trim • Insulation & Windows • Waterproof Storage Containers

New & Used Mat Products • Rugged-Road™ - Composite Mats • Laminate Mats • Heavy-Duty Rig Mats • Timber Crane Mats Our Value-Added Services: • Strategic U.S. & Canadian inventory • Personalized Service • Jobsite Delivery Services

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Contractor Direct 800.222.7582

Bridgewell Mats 800.276.3404

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©2013 Bridgewell Resources LLC. All rights reserved.

BAKKEN OIL REPORT – SPRING 2013

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western edge aviation

Western Edge Aviation: the sky’s the limit!

Fly Smarter, Book Charter!

The sky’s the limit when it comes to Western Edge Aviation and what they have to offer today’s traveler.

From on-the-go business travelers to booming oilfield workers and executives, Western Edge Aviation flies every passenger safely, quickly and affordably to their destination.

Formerly known as Dickinson Air Service, Western Edge Aviation was established in 1994 by owner and founder Patrick Giese. Today, Western Edge Aviation offers service at locations in Dickinson and Williston, has eight aircraft in its fleet and employees more than 17 people. Western Edge Aviation can also boast that they are the only aviation company in North Dakota to have the longest tenure of a single owner.

Western Edge Aviation offers many attractive services to its customers. One of our most popular services is our charter flights. This service is time-saving, flexible, convenient and cost-effective. By chartering a flight through us you will not have to wait at large airports to make airline connections. You also don’t have to risk the chance of losing your luggage.

We fly on your schedule and can utilize airports that are not serviced or serviceable by bigger airlines. We also fly you direct with no connecting flights, which means no airport layovers. Shorter travel time, no lines, no

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hassle; we’ll bring you to your destination refreshed and relaxed. From one to eight passengers, we can get you to that two-hour meeting and back home in time for dinner, or we can hotshot your oilfield tools, parts and people wherever and whenever you need to have them go!

Another valuable service we offer is our flight instruction. We offer almost every rating available from the Federal Aviation Administration. If you’re looking to obtain your private pilot, instrument, multi-engine or commercial ratings, our professional, knowledgeable and friendly flight instructors will have you at the controls in no time at all!

In addition to charter and instructional services, Western Edge Aviation also provides pilot services, sightseeing flights, aircraft rental, aircraft fuel and fuel services, hangar rental space and aircraft maintenance.

Quality. Integrity. Service. Support. For almost two decades, Western Edge Aviation has been the trusted, reliable aviation provider customers and passengers turn to. Western Edge Aviation. The sky’s the limit!

For more information, please call our Dickinson location at 701-483-4221 or our Williston location (formerly Servair) at 701-577-3773. w

Farmers Union oil

The ‘Eighth Wonder of North Dakota’

By John J. Knox, Operations Manager

Construction on the new Tioga Travel Plaza which is owned and operated by Farmers Union Oil Company is scheduled to open in May or early June. Because of its size and what it will offer, it is being touted as the “Eighth Wonder of North Dakota”.

Farmers Union Oil Company also has its flagship store located in Stanley, North Dakota.

The Tioga Travel Plaza will complement the needs of the Bakken workforce. The store has a large fleet of Cenex-branded fuel at its diesel pumps to quickly fill the trucks and fleet vehicles in the Tioga area. The plaza also has enough gasoline pumps to handle the needs of locals, travelers, and the tourists who are starting to come out to the Bakken to see for themselves what we do out here.

Both stores (the Stanley and the Tioga Travel Plaza) will have plenty of parking for those drivers who need to rest, and most importantly, to grab a home-cooked meal.

The Stanley C-Store has always served the quick and ready-to-go pizzas, hamburgers, and other types of foods of this nature; the Tioga Travel Plaza will also have these options available for our customers. The other options which started in Stanley will also be available at our Tioga store – the fabulous home-cooked meals that our customers have enjoyed in the Stanley store. We are talking about meals such as meatloaf with mash potatoes, vegetables, and a nice dessert or smoke ribs. What enables us to provide these meals is our

executive chef and his kitchen staff; they put in a lot of hard work to provide these affordable meals. The new Tioga Travel Plaza will also offer these delicious meals and much, much more.

One of the unique attributes of the Tioga Travel Plaza will be the availability of a conference room that companies can rent for local meetings. Renting the conference room will also facilitate the availability of meals catered by our chef and his team. Another highlight will be the business center, which will offer options to receive and send mail and packages – a difficult service for oilfield workers to obtain currently. Faxing and copying services will also be available for those contractors who need these services. A unique service will be the ability to have blueprints printed or copied, or sent to the business center via e-mail. In addition to its five showers, the Tioga Travel Plaza will also feature a barber on-site to give haircuts to those who are just too busy to find a barber where they usually are located.

Farmers Union Oil Company has another valuable instrument in its tool box with a perfect use for Bakken oilfields: Farmers Union Oil Company’s Energy Department, which provides Cenex-brand fuels and lubrication, is accustomed to servicing the many oilfield sites that provide fuels for fracking and drilling demands in the region. Having the right tools is important especially when that

tool is needed. To meet the demands for proper oil-site service, we have just added six new trucks to our fleet in order to meet the growing demands of the Bakken region. To inquire about our energy products, call our energy department at 701-628-2982.

Since workers in the Bakken region require FR-certified clothing, both of our stores carry the top lines of FR clothing, which include footwear, coveralls, and gloves. The new Tioga Travel Plaza will also be offering the Carhartt line of FR clothing for customers’ needs. Also, just as with the Stanley store, the Tioga Travel Plaza will offer a large range of electronics for oilfield workers to choose from.

There are not that many places in North Dakota where a trucker or an oilfield worker, or even an everyday traveler, can get everything they might need under one roof, along with the best-branded fuels – Cenex and its assortment of different fuels and lubricants to meet the needs of the Bakken. Farmers Union Oil Company of Stanley and Tioga are locally owned cooperatives, owned by local area farmers and other members from the Stanley and Tioga areas of North Dakota. w BAKKEN OIL REPORT – SPRING 2013

195

hotsy equipment

Hotsy and drilling… a partnership that runs deep Hotsy pressure-washers are used to clean pumper trucks in central Texas.

Hotsy cleans a CRT in Texas.

Pressure-washers are a mainstay in many areas, their versatility and ease-of-use making them perfect for cleaning applications in industries such as oil and gas.

Your jobsites are some of the dustiest, dirtiest and most hazardous places on earth. To keep your sites clean, safe and running smooth, it takes a strong and rugged pressure-washer to handle the job.

Equipment will become magnets for oil, dirt and grime if not kept clean. Dust, dirt and oil build up fast, choking the life out your equipment. You can’t afford costly downtime with a deadline looming. As you know, safety is important to any project. A clean jobsite reduces exposure to the many hazards you and your employees face, day-in and day-out.

Hotsy pressure-washers provide a solution. Why? Because a Hotsy pressure-washer is built to hold up 196

BAKKEN OIL REPORT – SPRING 2013

extremely well in the harsh demands of the mining industry. Rugged and built to last in extreme conditions, Hotsy industrial-grade pressure-washers offer oil workers a cleaning solution both above and below ground.

Choose from over 100 hot- or cold-water pressurewashers as well as those suitable for oil rigs. Electric and diesel-fired units meet safety requirements. We also have units with no open flame, making them much safer to use than traditional diesel-fired burner models. Hotsy pressure washers are ETL certified to UL-1776 safety standards.

Hotsy pressure-washers are powerful and built to last.

On sites like yours, oil, tar, grease, dirt and dust build up, causing maintenance and safety issues you just don’t need.

Our pressure-washers clean deep and fast, keeping your equipment in good condition and running smoothly year after year, jobsite to jobsite.

hotsy equipment

Hotsy’s 5700 Series is ideal to install in a wash bay, where mining equipment and vehicles can be cleaned easily. Additionally, trailer- and truck-mounted models, such as the HSS Series, are excellent for mobile applications, while the all-electric HWE Series provides another option.

Cleaning equipment used in an inherently dirty environment, such as the oil industry, calls for safe, powerful equipment. Tapping into the knowledge and expertise of a seasoned expert – like your local Hotsy dealer – is not only a wise choice, but the best way to learn about Hotsy pressure-washers.

Workers position equipment for cleaning with a Hotsy 1800 Series hot water washer in the background.

You can locate your local Hotsy pressure-washer dealer by visiting www.hotsy.com. w

Nobody Understands Cleaning Like Hotsy has been providing Pressure Washing Equipment to the Oil & Gas Industry since 1970!

Hotsy is the brand leader...

• Hotsy manufactures industrial-grade washers - choose from over 100 hot or cold water pressure washers.

• Equipment suitable for oil rigs - electric and diesel fired units that meet safety requirements.

• No open flame - much safer to use than a traditional fired burner • Very little maintenance required - oil field ready!

• Heavy angle iron frame and chassis with durable powder coat paint resists years of corrosion and rugged use.

• ETL certified to UL-1776 safety standards.

• The best warranties in the industry!

Hotsy pressure washers are sold exclusively through our dealer network. To find your dealer, visit our website at www.hotsy.com BaakenOilReport_HalfPg_2013.indd 1

Scan to watch our video: Hotsy & the Oil Industry

1/31/13 2:00 PM

BAKKEN OIL REPORT – SPRING 2013

197

Pacific & mainE

Servicing the oilfields: Pacific and Maine focuses on customer service with broad range of safety and apparel items

By Melanie Franner

Thirty-five years ago – back in North Dakota when the oilfields were booming and seismograph crews were busy charting every inch of the western side of the state – a couple of young entrepreneurs opened a retail storefront in Mandan, North Dakota, selling music and T-shirts.

In time, this retail venture would take Brock Holbert and his eventual partner, Lucinda Miller, down two roads: one that would see a sizable company focused on decorated and promotional apparel and another specializing in servicing the safety needs of the hundreds and thousands of people teeming into the oilfields.

Today, Pacific and Maine may owe its humble beginnings to some eight-tracks and logo-emblazoned T-shirts but it has evolved well beyond this in its drive to be “outfitting America’s energy producers”.

A Winning Combination The Pacific and Maine of today (which is named after the street corner in Medora, albeit the company added the “e” to Main), offers an assortment of safety and apparel products that are currently sold at over 40 renowned retailers in the Bakken.

Servicing the oilfields currently demands the very latest in safety product knowledge and having the right people on hand who are ready to service customers seven days a week. Pacific and Maine delivers on both counts. It is the Bakken’s leading supplier of safety apparel and area pride merchandise. The company’s Fr apparel is featured at some of the larger area retailers, such as Alco, Home of Economy, Cenex, New Century Ag and Macs.

For people looking for a quick area pride gift of apparel or an Fr garment to go out in the field, they can find service 24/7 at some of Pacific and Maine’s convenience retailers. These retail customers include such well-recognized banners as Kum and Go, Super Pumper, Cenex, West Side Fuel – and others. From Mandan to Plentywood, Minot to Bowman, Pacific and Maine offers its broad line of products through an extensive network of quality retailers.

A Well-rounded Offering Pacific and Maine is also very proud to be the exclusive distributor for Spentex Fr Apparel in the Bakken. Spentex is doing for fire-resistant apparel what the moisture-wicking fabrics have 198

BAKKEN OIL REPORT – SPRING 2013

done for sports apparel. The company’s product line clearly demonstrates that Fr apparel no longer has to be thick and uncomfortable. Spentex makes the only 2112-certified Fr knits with an arc rating above 12. This ultra-light Fr fabric is designed to keep the wearer safe in the field in the summer – and cooler than anyone thought possible.

Pacific and Maine also distributes the full line of Honeywell Safety Products, Crossfire Safety eyewear, Tingley FR Rainwear, Baffin and Muck Boots, Utility Pro and Reeds Fr apparel, Majestic Gloves and apparel. Pacific and Maine stocks a full line of absorbent products in Williston to service company spill products such as booms, granule absorbents, roll pads, diapers, railroad roll pad and truck kits. Pacific and Maine also works with oilfield companies to make sure their on-site emergency connex is properly stocked. In the event of a spill emergency, Pacific and Maine can deliver anywhere in the Bakken 24/7.

To help highlight its extensive product offerings, Pacific and Maine has both a permanent showroom in Williston and a mobile showroom which can be brought anywhere in the Bakken by appointment. It also has warehouses in Williston and Mandan from which to quickly supply its customers’ needs.

Committed to the Future Throughout its long history, Pacific and Maine has developed a strict policy of listening to the needs of its customers. Its number one focus has been – and continues to be – delivering what the customer wants when the customer wants it. It is this core value of satisfying the needs of its customers that has helped Pacific and Maine become the large industry player that it is today.

For a company that owes its humble beginnings to a small North Dakota storefront, Pacific and Maine has since evolved well beyond this into a proud and quality supplier of safety products and apparel. With a goal to providing the highest level of service to best meet the needs of its customer base, Pacific and Maine will undoubtedly continue to remain steadfast and true in its commitment to “outfitting America’s energy producers” for many years still to come. w

Rainbow ceramics

Rainbow Ceramics enhances production in Bakken resource play Transloading in Houston.

Rainbow staff at another transloading facility in the Bakken.

One of Rainbow’s transloading facilities in North Dakota.

Rainbow Ceramics, based out of Houston, Texas, is a leading manufacturer and supplier of ultra-lightweight, lightweight, intermediate- and highstrength ceramic proppants. Rainbow is dedicated to developing, manufacturing, and supplying superior quality and costcompetitive proppants that are utilized in the fracturing process to enhance production from oil and gas wells in both vertical and horizontal completions.

Rainbow Ceramics has been a

companies with samples of ceramic

Rainbow operates more than a dozen

proppants for the shale gas and oil

production lines in China and distributes

The traditional products have various

development in North America. To better

products from numerous stocking points

industrial applications, such as catalyst

serve clients, Rainbow established a

and trans-loading facilities to provide a

carriers, support media, grinding and

product development and marketing

smooth and reliable delivery from the

blasting beads in petrochemical and

office in Duncan, Oklahoma. Duncan is

manufacturing plants to the well sites. In

refinery plants. In 2008, Rainbow started

an oil town with the slogan “The Buckle

these stocking points and trans-loading

to provide top-tier oilfield services

on the Oil Belt”.

facilities, Rainbow stocks millions of

manufacturer of ceramic sands, ceramic beads and ceramic balls for over 25 years.

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BAKKEN OIL REPORT – SPRING 2013

Rainbow ceramics

Rainbow’s patent-pending ReaLite® product. pounds of ceramic proppants to meet customers’ immediate demands. With a well-trained operation team, Rainbow is dedicated to providing excellent customer service and technical support.

Rainbow proppants have been widely utilized by oilfield services companies across major shale plays, including Bakken, Eagle Ford, Haynesville and Greater Green River Basin since 2009. The E&P companies who have recognized and pumped Rainbow proppants include, but are not limited to, ExxonMobil (XTO), ConocoPhillips, Hess, OXY, EOG, WPX, Kodiak Oil & Gas, Statoil (Brigham), Pioneer Resources, Ultra Petroleum, Anadarko, and more.

In 2012, an operator in the Bakken formation in North Dakota needed to complete 11 9,600-foot lateral wells.

Rainbow teamed up with an oilfield services company, and convinced the operator to run field trials for three wells. After completions, the three wells’ average 24-hour IP rate was 2,578 Boe/d, and 90-day daily production rate 795 Boe/d. The operator continued using Rainbow proppant. The average 24-hour IP rate was 2,501 Boe/d for the remaining eight wells.

“Rainbow has well-positioned itself during the last several years to

provide superior ceramic proppants to the Bakken oil industry,” says Kyle Hu, Rainbow’s corporate development manager. “We’re looking forward to vast expansion in this rapidly growing area. One of our main goals in 2013 is to increase the supply of our proppants by adding more trans-loading facilities and warehouses in the Bakken region, to meet both the immediate and future demands of our customers,” Hu states.

Rainbow has four distinct proppant products – namely ReaLite®, PropLight®, PropMaster® and PropRaider®. ReaLite® is Rainbow’s patent-pending ultralightweight ceramic proppant, and the most cost-effective. ReaLite® provides 50 percent higher strength, improved conductivity and thermal stability compared to resin-coated sand. The lower specific gravity of 2.40 g/cc and bulk density of 1.30 g/cc makes it a desirable solution for slick water fracturing.

PropLight® is Rainbow’s lightweight ceramic proppant, also cost-effective and of high-quality performance. It provides high fracture conductivity for wells with moderate depths and is available in three standard sizes: 20/40, 30/50 and 40/70.

PropMaster® is intermediate-strength sintered bauxite with superior

conductivity in moderate- to high-stress down-hole environments. Designed for high performance in tough conditions with closure stresses up to 14,000 PSI, it is available in four standard sizes: 16/30, 20/40, 30/50 and 40/70. Both PropLight® and PropMaster® are very popular in Bakken.

PropRaider® is Rainbow’s highest strength proppant for applications in environments with highest closure stresses and temperatures frequently encountered in the deepest wells. Its high-strength sintered bauxite makeup provides maximum conductivity, high crush resistance and excellent thermal stability practically possible in the hostile down-hole conditions.

Quality is not just the cornerstone of Rainbow’s culture, but also the covenant with customers. All of Rainbow’s ceramic proppants have exceptional sphericity and roundness, resulting in decreased pumping costs and reduced wearand-tear. Rainbow’s key to success is providing consistent quality ceramic proppants and excelling in customer services.

For further information, please visit http:// www.rainbowproppants.com. w BAKKEN OIL REPORT – SPRING 2013

201

Tank west

Tank West:

Your partner in all your tank trailer needs

By Gloria Taylor

202

If you work in the transport industry in

its second expansion in as many years.

respond to a niche market opportunity.

Saskatchewan’s burgeoning oil sector,

It’s an exciting development for Dean

“There was a demand for the kind of

chances are you may already have

Andres, general manager, who says the

services we offer,” he says simply.

worked with Tank West Corp., located in

company was in dire need of more space.

As owners of a trucking company

the Village of Windthorst, 125 kilometres

“We were growing out of our current

themselves, it was only natural that the

north of Estevan.

plant and needed more facilities,” says

family would recognize the need for

The private family company has grown

Andres, noting the expansion will double

comprehensive tank services in southeast

quickly since the Andres family founded

its shop space to 25,000 square feet

Saskatchewan and they moved to meet

the tank repair, sales and rental company

and add four new tank trailer repair and

that demand by starting Tank West.

two years ago. Thanks to its expertise

testing bays, a dedicated sandblasting

In addition to tank trailers, the company

and ability to offer a comprehensive and

bay, a coating/painting and insulating bay

also repairs, coats and insulates all types

versatile range of services to transport

and a dedicated bay for Saskatchewan

of oilfield tanks and others, thanks to the

companies that operate tank trailers

Government Insurance safety

company’s high level of expertise. Tank

to haul crude oil and other corrosives

certifications.

West is CSA-B620-certified, meaning it

and private and public bodies that use

Andres credits the company’s

is certified by Transport Canada to work

stationary tanks, Tank West is undergoing

aggressive growth to being able to

with tanks that can transport the most

BAKKEN OIL REPORT – SPRING 2013

Tank west

dangerous goods on Canadian highways.

The comprehensive standard sets out requirements for design, construction, certification, assembly, modification, repair, testing, inspection, periodic re-testing, maintenance, and marking of highway tanks (tank trucks) and TC portable tanks for the transportation of dangerous goods. The standard also specifies Transport Canada registration requirements for facilities, design review agencies and design engineers for conducting the activities within the scope of the standard.

What it means is that Tank West’s customers can rest assured their work is being done by a company that knows how to do it right.

Services and facilities are comprehensive and include tank trailer repair and certification; tank trailer sales and rentals, gas scrubber installations and maintenance; tank lining and lining repair; all types of heavy truck and trailer repairs and product pump repairs and installations.

Owners who don’t want to buy their own tank trailers can rent them from Tank West, offering a convenient method of doing business for some.

Meanwhile, specialized equipment called a scrubber allows the company to remove sour gas from crude oil in the tanks; tank linings protect the tanks’ interiors, while pumps must be kept functional in order to move the crude oil or produced water in and out of the tank trailer.

Other Tank West services include parts sales of such top names as T&E Pumps; mobile truck emergency service in a twohour radius; a 24-hour truck wash on-site with two 100-foot wash bays and one 38foot bay; custom washing; tank steaming and cleaning; sandblasting; tank coating and application of spray foam.

Andres points out that steaming and cleaning is a sensitive and important operation because noxious gases must be purged from a tank before a shop can safely work on it.

“There are people killed every year when tanks are not properly steamed and purged because gases can build up in the confined space,” explains Andres.

Sandblasting is done prior to lining or painting a tank, and spray foam insulation

is applied to tanks such as stationary tanks on well sites or those used in buildings.

The company repairs all types of tanks: aluminum, steel and stainless steel. And, in appreciation of its loyal customer base, it offers special pricing on some services such as its $349 heavy truck oil change and service special.

Finally, Andres is proud of the company’s track record and the skilled tank services it provides to its clients. Customers have responded enthusiastically, growing Tank West to where it can meet the demand in southeast Saskatchewan for years to come. This summer, it will also have brand-new expanded facilities in which to offer those services. w

BAKKEN OIL REPORT – SPRING 2013

203

unit liner company

Unit Liner Company: ‘Protecting you and the environment’ Unit Liner Company, established in 1967, provides innovative solutions for oilfield challenges. We offer the industry the leading secondary containment system with the Enviro-Guard metal containment system. The Enviro-Guard metal containment system is available either galvanized or powder-coated. We also provide oilfield pit liners, location liners, tank battery containment liners, spray-in polyurea liner, walkovers, tank rings, load-line containment, foam and snap-up berms, foam interlocking tank pads, cone bottom tank pads, and cattleguards/gates/panels.

With our large inventory, the Enviro-Guard complete containment systems are in stock and ready to Cone-bottom tank pads.

4

ship because prompt service is our priority. Quality installations are very important to us, and so is safety.

RIG LEVELING AND JACKING CRANES • TRUCKING • DOZERS

STATES

ENERGY 204

BAKKEN OIL REPORT – SPRING 2013

LLC

JON L. WILCOX “BIG JON” Cell #1: 307-350-6565 Cell #2: 307-705-6565 Office: Fax:

307-273-3043 307-273-3044

4StatesEnergy@gmail.com 186 EAST HWY 28 FARSON WY

WESTERN US

24 -7-365

unit liner company

“Unit Liner Company is committed to meeting challenges and creating solutions. Our promise is to meet or exceed our commitments to the customers we serve, and in doing so, lead our industries in quality and innovation.” ~Unit Liner’s Mission Statement Our safety program is one of the best in the industry and meets or exceeds major energy companies’ requirements.

Unit Liner Company always provides quality workmanship in a timely manner. From lining pits for drilling to metal

Powder-coated containment with walkover.

secondary containment for production sites, our innovative liner and containment products are only a phone call away.

Let us bring peace-of-mind to your operation with products that offer low-cost maintenance.

To learn more, visit www.unitliner.com or call (800) 633-4603. w

PROTECTING YOU AND THE ENVIRONMENT A Divis ion of Unit Liner Company

Enviro-Guard Containment Systems

Load Line Spill Boxes

Interlocking Tank Pads

Polyurea Spray-In Liners

Enviro-Guard Galvanized Metal

Secondary Containment Structures Containment Systems

Oilfield Liners & Installation

Complete Secondary Containment Structures Heavy-Duty Walk-Overs

WWW.UNITLINER.COM Call For A Quote Today!

(888) 748-5463

Flexible Spill Containment

Dennis Campbell Secondary Containment

Jeremiah Jordan (405) 481-8076

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gm petroleum distributors

GM Petroleum:

southeastern Montana’s largest full-line petroleum distributor

GM Petroleum Distributors (“GM”), located at 2100 First Avenue South in Billings, Montana, was founded in 1964 by R. M. “Rollie” Grunstead. GM is southeastern Montana’s largest supplier of diesel, gasoline, lubricants, propane, aviation fuels, and also VP race fuel, and an authorized marketer for ConocoPhillips, Sinclair and Cenex fuels. We also offer loaned petroleum equipment, including portable skid tanks up to 12,000 gallons for commercial contractors.

Our transport division is one of the largest in southeastern Montana. We operate our own fleet of trucks, which gives us the flexibility to accommodate short notice deliveries. GM Petroleum’s 206

BAKKEN OIL REPORT – SPRING 2013

fleet operates 24 hours per day, seven

convenience we can split them between

days a week, with the capability to

locations.

transport up to 12,000 gallons.

GM operates four discount fuel

Truck maintenance and safety is

centers in the Billings metro area,

top priority for our company. GM

including fuel centers at the bulk

Petroleum works very hard at being

plants in Forsyth and Miles City. Our

an environmentally conscientious

Discount Fuel Centers are clean,

company. We have an excellent CSA

well-lit and accessible to any size of

2010 rating with the DOT and have GPS

vehicle, including tractors and trailers.

tracking on all our trucks. We can locate

They accept all major credit cards and

your delivery at anytime and estimate

Fleet cards including Wright Express,

its arrival. Our trucks can accommodate

Comdata, Fuelman, Gascard, T-check

multiple products, and for your

and Voyager.

EASTERN MONTANAâ&#x20AC;&#x2122;S LARGEST, FULL-LINE DISTRIBUTOR OF FUELS AND PROPANE.

GM Petroleum Distributors, celebrating 48 years, locally owned and operated in Billings, Montana. Our fleet of transport, tank wagon and bobtail trucks, operates 24/7 with GPS tracking technology and has the ability to transport up to 12,000 gallons. GM Petroleum is Eastern Montanaâ&#x20AC;&#x2122;s largest, full-line distributor of Conoco, Sinclair and Cenex fuels and propane. We offer loaned petroleum equipment, including contractor skid tanks. GM Petroleum is an authorized Marketer of Conoco, Kendall and Chevron lubricants. Our bulk oil repackaging facility was awarded Top Tier Marketer status, from ConocoPhillips. Six discount fuel centers are available in Billings and Eastern Montana. GM Petroleum services the Montana, Wyoming, North and South Dakota areas.

Since 1964.

Toll Free: 877-808-4661 www.gmpetroleum.com

gm petroleum distributors

GM Petroleum may also serve your business needs, with the GM Petroleum-issued charge card. This card works only at our Discount Fuel Centers. Your invoice is customized to your needs; you may choose to list employees’ names, truck numbers, and odometers. Limit the type of fuel accessible at the pump and choose individual PIN numbers. Manage your fleet with the GM Petroleum card; call for your special pricing today.

Propane is a very important part of GM Petroleum’s business.

GM supplies agricultural, residential and commercial customers from our bulk plant locations in Billings, Forsyth, and Miles City in quantities from 200 to 11,000 gallons. Propane services provided include bottles for barbeque grills, travel trailers, motor homes, and forklifts. GM Petroleum offers prefilled barbeque bottles, on an exchange basis, at most of our locations, including the Conomart Super Stores.

If you are looking for residential or commercial propane tanks, GM Petroleum sells and installs above and underground tanks. Owning your own propane tank allows you to take advantage of GM’s competitive pricing. Please give us a call and we can discuss the size of tank best-suited for your needs.

Fleets, farmers and factories have depended on GM Petroleum for quality lubricants since 1964. We have supply contracts with Chevron, Conoco and Kendall. Together, these lubricant product lines allow us to supply for even the most 208

BAKKEN OIL REPORT – SPRING 2013

demanding specifications. Our sales staff has a combined 56 years of training and experience in lubrication technology.

Their knowledge can help you design a cost-saving preventive maintenance program. The payoff: less downtime and longer equipment life.

GM Petroleum’s bulk-oil packaging facility, at 1819 Montana Avenue, was recently awarded “Top Tier” status

by ConocoPhillips. This program is for marketers who have achieved Top Tier status for exceeding quality, safety and environmental operation standards. The elite recognition is awarded to a select number of ConocoPhillips lubricant marketers who exceed the company’s rigorous Marketer Operations Standard guidelines set by the company. GM Petroleum has continuous inspections of this facility by lubrication specialists and ConocoPhillips lubricants engineers.

GM owns and operates a chain of eight convenience stores located in and around the Billings area. Conomart Super Stores pride themselves on “Top Tier” Conoco gasoline and diesel, cleanliness with competitive prices. Check out their large product assortment, propane bottle exchange and fast friendly shopping experience.

Whether you’re coming to Billings, Forsyth or Miles City, or looking for a supplier in the Bakken area, GM Petroleum is certain you will be satisfied with our products, and our courteous, professional, certified, knowledgeable staff. w

brock white

Causes and prevention of edge-lifting (curling) of epoxy grouts

What can happen to epoxy grout if the proper measures are not taken to ensure the edges do not lift.

03732), followed by a sandblast of the foundation to ensure that all loose and any fracture aggregate have been removed.

2. The edges of the epoxy grout should be chamfered at a 45-degree angle.

Where possible, the edges of the concrete foundation should also be chamfered at least two to four inches at a 45-degree angle.

3. Use dowels or wickets to help pin the edges of the epoxy grout on the shoulders and corners. Minimize shoulders of epoxy grout as much as possible; two to four inches where possible.

4. DO NOT DEVIATE from our product data sheet instructions for placement temperature limits.

5. DO NOT DEVIATE from leaving out more aggregate than is recommend by

XNLV46431

Edge-lifting or curling are terms generally used to describe horizontal cracks around the edges and corners of grouted foundations (see first photo).

This type of cracking is usually seen in larger foundation epoxy-grout pours (petroleum pumps, gas compressors).

The cracking is usually accompanied by slight upward movement at the shoulder’s edge of the grout, at the bond-line to the concrete foundation.

This type of cracking can occur when the shear stress near the concrete/grout bond-line exceeds the strength of the concrete. The potential for edge-lifting is increased by the following factors: 1. High curing temperatures can increase the stress that cause edgelifting.

2. Dramatic swings in temperatures while the epoxy grout is curing. In cold weather, the grout will tend to curl as it tries to shrink more than the concrete.

3. Wide shoulders and long grout-pour lengths will have a greater tendency to curl.

4. Low foundation strength of the concrete and poor surface prep.

5. Grout that has not been placed with a sufficient amount of aggregate as per our product data sheet.

The following measures can be taken to minimize edge-lifting from occurring: 1. Proper surface preparation of the concrete foundation should be done.

The concrete surface should be prepared by using a chipping hammer to sound concrete and achieving a CSP 7-9 (as per ICRI – Guide No.

the product data sheet. w BAKKEN OIL REPORT – SPRING 2013

209

acl Manufacturing inc.

ACL Manufacturing Inc. – the industry leader in combustion safety controls

ACL Manufacturing Inc. is a privately owned Canadian company that was established in 1991. ACL has been involved in the burner control business and the oil and gas industry for over 20 years, and has been developing combustion-related products for industrial heating appliances since its inception.

Through years of experience, ACL has been an innovator in providing safe and reliable control equipment for industrial

heaters, incinerators and flare ignition systems. Its background in the instrumentation and electrical field has allowed them to provide combustion solutions for some extremely difficult and unusual applications. From developing the first CSA combustion safety controls for hazardous locations, to patenting the most efficient burners in the industry, ACL has become the “go-to” company for addressing difficult applications.

ACL has always kept safety and reliability at the forefront, while achieving great success in creating environmentally conscious products. Our products have proven themselves through many years of safe and reliable operation and have earned world-wide recognition for its quality performance.

Today, ACL’s products can be found all over the world, in places such as South America, Africa, Europe, Asia, Southeast Asia, the Middle East, and of course North America, just to mention a few places.

With our strong team of professionals, we are continually creating new products to serve our growing industry while keeping true to our strong values of safety, reliability and the environment.

For more information, please visit our website: www.aclmfg.com 805 Main Ave. West, Box 2002 Sundre, Alberta T0M 1X0 Tel.: 877-638-5234 Fax: 403-638-4973 Email: aclmfg@telus.net w

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WE PROUDLY SERVE THE SASKATCHEWAN & MANITOBA OILFIELDS. We are available to travel in any parts of Canada & U.S. to meet your needs.

CAT-TEK’S SMART CATHODIC PROTECTION FOR WELL CASINGS & PIPELINES

NACE Accredited

(National Association of Corrosion Engineers)

PROTECT YOUR INVESTMENT...AVOID RUST, CORROSION AND DETERIORATION OF YOUR ASSETS

THE ISSUES Corrosion of well casings is a serious concern. When well casings are exposed to surrounding soil, electrochemical cells form which leads to active corrosion sites and eventually to penetration of the external casing, leading to expensive repairs, environmental damages and production downtime.

THE ANSWER CAT-TEK’s cost effective well casing cathodic protection program is a fraction of the cost of the work-over of a well casing and/or flow line leak into the environment and loss of production. We base our CP systems on your needs and your environment.

CALL US TODAY FOR A FREE ESTIMATE

CAT-TEK Ca thodic Ser vices | 601-6th Street, Estevan, SK S4A 1A5 Ph: 306.634.1917 | Fax: 306.634.1918 | Web: www.CAT-TEK.com Quality. Control & Reliability With over 30 years of combined experience in the Oil Field...We offer superior service to our clients’ needs.

Committed to Health, Safety and our Environment CAT-TEK Cathodic Service is committed to health and safety and minimizing the impact of our activities on the environment.

CAT-TEK provides a “one-stop shop” for provision of construction CAT-TEK Cathodic Services is headquartered in an integrated workshop and office facility in booming oil community of Estevan, Saskatchewan, Canada Competitive Rates Many of our clients consider us lower than the competition, because of our efficiency, experience and our world-class equipment.

We go where you want us We are available to travel in any parts of Canada & US to meet your needs.

CAT-TEK Cathodic Services 601-6th Street Estevan, SK S4A 1A5 Canada Ph: 306.634.1917 Fax: 306.634.1918 Web: www.CAT-TEK.com

CONSTRUCTION Division Oil Field & Commercial Construction “Over 30 years of combined oil field experience” No job is too big or too small...we’ll do them ALL! • BACKHOE SERVICES • CHAIN/PLOW TRENCHING (year round) • PILES & POSTHOLE DRILLING (up to 18” diameter to 12’ depth) • WATER WELLS/DEEP HOLE DRILLING (drill to 2000’)

CAT-TEK Cathodic Services was established to meet the demand of the Oil & Gas industry for the construction needs. Today, CAT-TEK offers a complete competitive construction package from initial investigative survey through engineering design, site installation and commissioning of systems with subsequent planned operational inspection and maintenance.

• Competitive Rates • Experienced • Reliable • Prompt Service

“Call us today for a FREE Estimate”

stopsensor

Innovation in transportation safety

Safely positioning equipment in the Bakken

A young company on the eastern edge of the Bakken has a mission: to solve the numerous problems associated with the transportation of commodities in the Bakken region and beyond, whether it be oil, water, frac sand, cement or the numerous other materials needed in the region.

Since winning the Idea Champion and Value-Added Ag and Advanced Manufacturing categories in the InnovateND competition with StopSensor, put on by the state of North Dakota and the N.D. Dept. of Commerce and their many sponsors, Larry M. Mosbrucker, founder of LaurusTech Industries LLC. and the developer of StopSensor, a truck and equipment positioning device, has been busy promoting and putting together a team of investors, engineers, and suppliers and the manufacturing capability to solve these problems.

StopSensor was originally designed and built to solve the problems associated with the loading and unloading of grain and fertilizer in the agriculture industry, but has since blossomed into grain elevators and agronomy applications, sugarbeet piling stations, cement plants, asphalt machines, sand and gravel and “who knows what else” says Mosbrucker. “Farmers even tell me they want to put it on their airseeders in the spring, for loading with hopper trailers.”

“Positioning problems are pretty universal across many industries,” says Mosbrucker, who has a lifetime of experience working in agriculture, coal mines, powerplants, and the heavyequipment industry.

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BAKKEN OIL REPORT – SPRING 2013

Mosbrucker believes the state of N.D., legislative body and the companies involved have striven to solve the problems with housing, roads, congestive traffic, and infrastructure needs in the small towns and cities of western and central N.D. regions of the Bakken.

So, is there room for improvement in efficiency and safety on the sites themselves? To do that, we spoke with people in the field who have first-hand knowledge of the problems involved with the transportation of commodities and the welfare of the people who work there.

William Grigg of CS Consulting, a safety training and consulting company in Casper, Wyoming who works with companies and trains personnel in the oilfield and other industries, knows the problems and situations faced every day in the industries in which he works. “All too often, working personnel have been injured or killed while ‘spotting’ heavy equipment back into position,” Grigg states. “Through personal experience and incident investigations, it has been proven true that the human ‘spotter’ is the one most at risk in these situations. When you add up the hazards of repetition, multiple pieces of equipment, weather issues, complacency and other dynamic issues, it begins to be apparent that there must be a better way. The StopSensor device can be utilized in many of these situations to significantly reduce or eliminate exposure to the hazards that our employees are exposed to,” he explains.

“The Stop Sensor is a device that has a large range of possible applications in many industries. While its initial design and intent

stopsensor

may have been to help safely and accurately position vehicles in a backing situation, mostly in agriculture, the possibilities for other uses continue to grow and are limited only by imagination and need,” Griggs says.

So can the StopSensor, or similar devices, gain interest and adoption by the oilfield industry?

Joshua Holwell of J. Holwell Consulting Co. and an owner and partner in five saltwater disposal wells, is standing on a site, drilling one of the wells that supply their thriving saltwater disposal efforts in the Bakken region. “If we can decrease our off-load times by 15 minutes, keep the trucks contained on the concrete pads, control potential spills, run more trucks through our facilities every single day without safety violations or incidents, I think we are onto something big,” Holwell says.

Does StopSensor technology have anything to offer the drivers or transportation companies themselves? According to Holwell, “It doesn’t take an accountant to figure out that if a truck runs at $155 an hour and has a wait time of eight hours to unload, you can save 15 minutes per truck. It’s less work for the truck driver to get positioned, is a major convenience, with less wear-and-tear on the driver and equipment. Everybody benefits in this scenario!”

In talking with companies and the people in the field in numerous industries, Mosbrucker has discovered a need for devices that solve numerous other positioning problems faced when loading and unloading a vast array of commodities. “I don’t think I have been to a trade show or spoken to the guys in the field where they haven’t suggested a new product or variation of StopSensor, or a new application that can solve a major problem,” Mosbrucker says, who has been told this could work for water, frac sand and at transload facilities. “I am also talking with other inventors of unique products that solve a safety or positioning issue, that we can offer this product for those industries’ needs.”

A couple of products StopSensor is looking at offering customers include a device that warns the driver if his dump box is in the air after he dumps and is leaving a site, and if their dump traps are open, thus causing lost product or dangerous situations for other drivers. “I personally have witnessed both situations,” says Mosbrucker. Another device applies the brake lights automatically when a semi-truck driver applies the Jake brakes, warning drivers following the truck who are unaware the truck is slowing down and thus preventing possible rear-end collisions.

Larry believes that with the right team of incredibly talented individuals in their respective field of expertise, there is no problem that can’t be solved.

Larry can be contacted at info@stopsensor.com, by calling 701-425-2774 or by visiting the website at www.stopsensor.com. w BAKKEN OIL REPORT – SPRING 2013

213

petroleum services

Locally owned Petroleum Services offers many products and services to Bakken clients “Never Quit!” It’s a motto that has described Mike Palmer Petroleum Services from the beginning, and it’s one that serves a business and an owner well.

Petroleum Services, a locally owned oilfield service company established in 2003, is built on integrity, honesty and a strong work ethic.

Mike Palmer, company owner, has been in the oilfield since the late ‘70s. He well remembers the oilfield before the Bakken. Mike often quips, “I’m painting my picture,” meaning that he has a plan and a vision for how this company will look. We at Petroleum Services have built a team of employees who take pride in the work they do

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Our welding team has 50 years of combined experience. each day; we believe that how you work is a large part of who you are.

Service is what we are all about. Petroleum Services operates fairly, with the willingness to do what it takes to get the job done professionally. Service is in our name and we proudly earn our name every day.

Petroleum Services has much to offer clients in the oil industry. We provide safe and dependable hot-shot

petroleum services

Service is what we are all about. Petroleum Services operates fairly, with the willingness to do what it takes to get the job done professionally. Service is in our name and we proudly earn our name every day. and trucking services throughout the United States and Canada. There are bed trucks and winch trucks for rig moving services, as well as vacuum trucks, available.

Our welding team has 50 years of combined experience, and can fabricate to meet most clients’ needs. We offer a full line of new drilling bits in addition to our retipping services.

We are proud to bring Petroleum Services’ Mud Motors to the Williston Basin, which can cut many hours and costs off the average drilling time. The motors are adjustable and one motor can drill both the vertical and the curve sections of the hole.

Petroleum Services has float equipment as well as equipment for downhole stabilization. Our breakout machine can torque and breakdown connections up to 30,000 psi. Drilling pipe can be straightened at our shop or on location. We also supply rental equipment including pipe racks and other drilling rig necessities.

Please check us out on the web at www.PetroleumServicesAndTools.com.

Thank you for the opportunity to serve you! w

► ► ► ► ► ► ► ► ► ► ► ►

Hot Shots & Trucking Drill Bits Super Vac Truck Pipe Racks Stabilizers & Reamers Bed and Winch Truck P.S. Mud Motors Breakout Machine Float Equipment Welding & Fabrication Pipe Straightening Rental Equipment

BAKKEN OIL REPORT – SPRING 2013

215

SEI industries

Collapsible FRAC tanks better for the environment and cheaper to transport With increased interest from the public around the role of fracking, a new product is making that task a little easier on the environment.

Since most frac jobs require millions of gallons of water that is typically delivered by trucks making hundreds of trips, the carbon footprint and cost of transportation can be prohibitive.

In addition, large, heavy, expensive steel storage tanks are often used which, in turn, can damage the ground they sit on and be as costly to remove as they were to purchase. Steel tanks can also have a long wait time – from purchase to delivery – depending on the inventory available which can hold up well site exploration and development.

Collapsible Tank Advantages Collapsible tanks ensure complete isolation from surface soil and water and significantly reduce truck traffic to and from the site (and its related carbon footprint). In fact, one semi-truck can transport 24 tanks with a combined storage capacity of an astounding 1,200,000 USG (28,800 BBLs [U.S.] or 4,560 m3). It would take 57 trucks to transport the same storage capacity in standard 500 BBL steel tanks.

Leading manufacturer, SEI Industries, offers a collapsible pillow-style FRAC Tank designed specifically for oil and gas industry that is easy to set-up and can be used immediately with almost no site preparation required. The tanks are lightweight, fully collapsible, environmentally-friendly and don’t 216

BAKKEN OIL REPORT – SPRING 2013

damage the ground beneath them. One individual FRAC Tank can store 50,000 USG (1,200 BBLs [U.S.] or 190 m3). In a day, using a manifold system, multiple tanks can be set-up to provide whatever volume of storage is required. Even better, SEI’s FRAC Tank can be acquired in half the time it takes to get a steel tank.

Punishing Conditions and Frequent Relocations It all sounds great, but can collapsible FRAC tanks stand up to frequent moves and harsh field conditions?

Fortunately, the answer is yes. SEI’s FRAC tanks are constructed from a proprietary industrial fabric that is high-strength and high abrasion and chemical-resistant. Colored in highvisibility safety orange, it’s ideal for use in winter temperatures as low as -58 F where it can be folded and unfolded in extreme cold. The FRAC Tank can also be used constantly with heated fluids up to +161.6 F (with limited exposure to +179.6 liquids). In addition, the tank’s

low-profile design helps to maintain its fluid temperatures better compared to vertical steel tanks.

Another feature of this unique fabric is its high resistance to abrasion – an important aspect when tanks are continually moved from site to site.

Common tank fabrics have abrasion resistance of 6,000 to 13,000 cycles while SEI’s FRAC Tank fabric has a 73,000-cycle abrasion resistance to handle the wear-and-tear of continual movements. Recently, SEI also launched its optional mechanized Frac Tank Deployment System (FTDS) which allows the quick unroll and roll-up of tanks while also significantly reducing the staff required.

For more information: Nancy Argyle, marketing coordinator SEI Industries, Remote Site Division 7400 Wilson Ave. Delta, B.C. V4G 1H3 T: 604.946.3131 Ext.152 F: 604.940.9566 www.sei-ind.com w

gravel products

Gravel Products:

rock-solid for 43 years Gravel Products Incorporated is a Minot, North Dakota-based supplier of construction and landscaping aggregates. The company currently operates three commercial pits in Minot and two in Williston. Gravel pits have also been opened in Stanley, Ray and other areas of western N.D. Contract work has always been a key part of the business. In fact, Gravel Products has been providing asphalt and concrete aggregates for NDDOT, federal, and county projects for more than 40 years. High production rates, skilled employees, modern well-maintained equipment, and uniform quality products have helped the company establish itself as one of state’s most capable operators.

Areas of Specialization Crushing and sizing: several high-output portable crushing plants travel throughout the state of North Dakota. Each plant is capable of producing a variety of sizes, types and classes of materials including: • Base and surface gravel (NDDOT CL5 & CL13) • Oilfield spec gravel (BRIGHAM, HESS, OASIS) • Aggregates for asphalt pavements (NDDOT CL27, CL29, CL31, CL33 and SUPERPAVE) • Aggregates for concrete pavements (NDDOT, AASHTO & ASTM) • Aggregates for airport projects (P154, P209, P409) • Railroad ballast (AREMA) Washing and sizing: Gravel Products has two stationary wash plants and one portable wash plant. The stationary plants are located on the east and west sides of Minot. These plants scrub, rinse, and separate raw material into several sizes of washed rock and washed sand. Pea-rock, roofing rock, sewer rock, and concrete rock, as well as mason and concrete sand, are all produced by these quiet, smooth-running machines.

Hauling: Whether it’s a short city delivery, a longer run to the oilpatch, or a journey to Fargo, Gravel Products’ large fleet of modern reliable trucks can transport materials where and when they’re needed.

For more information contact Joel Schriock – President, Gravel Products Inc. Office: 701.852.4751 • Direct: 701.857.4900 Mobile: 701.720.2059 Email: joelgpi@srt.com • www.gravelproductsinc.com w BAKKEN OIL REPORT – SPRING 2013

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Index to advertisers

4 States Energy LLC......................................................204 A-1 Evans Septic Service................................................85 ACL Manufacturing Inc.................................................117 AE2S...............................................................................12 Allstate Peterbilt of Williston........................................185 Alutiiq Oilfield Solutions LLC..................................70, 173 AmeriTest Inc.................................................................69 Apegs............................................................................49 Arctic Oilfield Services..................................................126 Aspen Air.......................................................................18 Atigun Inc......................................................................52 Baranko Bros. Inc.........................................................109 Beaver Creek Archaeology Inc......................................169 Bismarck-Mandan........................................................123 Blue Cross Blue Shield of North Dakota..........................25 BNSF Railway.................................................................17 Breitling Oil And Gas Corp....................................110, 111 Bridgewell Resources LLC.............................................193 Brock White Company...................................................IBC C&J Energy Services.....................................................155 CalFrac Well Services Corp............................................191 Camex Equipment Sales & Rentals Inc.........................189 CanElson Drilling Inc....................................................147 Cat-Tek Cathodic Services Ltd.......................................211 Cirrus Aircraft.................................................................89 Continental Resources....................................................40 Crowley Fleck PLLP.......................................................187 D. Hughes Construction and Concrete Pumping, Inc.......43 Dakota Gasification Company......................................179 Dakotaland Homes.......................................................164 Dan’s Tire Service..........................................................103 Diamond B Oilfield Trucking, Inc..................................108 Do All Industries Ltd.....................................................161 Ebel Integrators..............................................................83 Edgen Murray Corporation...........................................121 EideBailly LLP...................................................................9 Enbridge........................................................................16 Environmental Materials, Inc.........................................44 Essential Coil Well Service..............................................46 Farmers Union Oil..........................................................75 Ferguson Enterprises........................................................6 Flexsteel Pipeline Technologies Inc..............................125 Franz Construction Inc..................................................130 Frontier Energy Group, Inc............................................153 GM Petroleum Distributors...........................................207 Golder Associates Ltd...................................................113 Graham Construction.....................................................82 Grand International Hotel..............................................56 218

BAKKEN OIL REPORT – SPRING 2013

Gravel Products, Inc........................................................31 H. & L. Rentals and Well Service...................................127 Halliburton Artificial Lift................................................79 Haws Integrated..........................................................139 HB Rentals.....................................................................24 Hess Corporation............................................................21 Hotsy Equipment.........................................................197 Huesker Inc..................................................................151 Hydro Hotshots..............................................................28 ITW Polymers Coatings North America...........................88 Jasper Engineering & Equipment Co...............................39 JBLS Montana, Inc..........................................................67 Keltek Safety Apparel...................................................203 KLJ.................................................................................55 Kotana Communications Inc........................................135 Larson Electronics........................................................167 Legacy Oil + Gas Inc.......................................................98 Legacy Steel Buildings.................................................145 Lightower Johnson Associates.....................................129 Logan International Inc..................................................19 Lower Yellowstone Rural Electric Assn. Inc.....................96 Lufkin...........................................................................119 Lynden.........................................................................101 M Space Modular Buildings............................................64 Manger Insurance........................................................144 MBI Energy Services.......................................................71 McJunkin Red Man Corp.................................................13 MDU Resources Group Inc..............................................37 Mid-Plains Distributing................................................192 Millennium Directional Services....................................72 Miller Architects & Builders..........................................115 Miller Insulation Co., Inc.................................................73 Missouri Valley Petroleum Inc......................................131 Montana Energy............................................................87 Mountainview Energy Ltd..............................................97 MVTL Laboratories, Inc.................................................183 Nabors Well Services......................................................65 Neset Consulting Service..............................................141 Nexus Security Solutions..............................................176 Nomadic Land Camps....................................................78 Nore’s Auto & Trailer Sales..............................................33 Northern Lights Welding................................................57 Northland Securities......................................................77 Oasis Petroleum...........................................................163 Oilfield Integrators...........................................................5 Pacific & Maine............................................................199 PCS Brokers LLC..............................................................11

Petroleum Services Inc.................................................215 Phillips & Jordan, Inc......................................................80 Polymer Services, LLC...................................................143 Portal Service Company.................................................59 Precision Drilling Corporation..................................27, 29 Presto Geosystems.........................................................10 QMC Hydraulic Cranes....................................................63 Quality Mat Company....................................................23 R&R Contracting Inc.........................................................7 Rainbow Ceramics............................................................4 Rapid City Economic Developement Partnership.........107 Reliant Energy Services / Tank West Corp.......................53 Reynolds French & Company........................................177 Richland Pump & Supply.............................................209 Rig Mats of America Inc.................................................52 Riley Bros. Construction.................................................90 Rocky Mountain Rod....................................................156 RPM Consulting, Inc.....................................................159 RPM Geologic, LLC........................................................120 S/L Services, Inc...........................................................133 Secur Screen................................................................102 Shale Exploration LLC...............................................33, 34 Sonda’s Solutions...........................................................98 Souris Valley Suites......................................................113 Steamboat Energy Consultants......................................30 Steve’s Sprayfoam Insulation.........................................51 Sund Mfg.....................................................................181 Synergy Station............................................................105 Target Logistics..............................................................93 TCA Marketing...............................................................99 Thawzall LLC..................................................................62 Thru Tubing Solutions......................................................3 Titan Machinery.............................................................45 Top Line Engineering.....................................................38 Triple B Pipeline & Trucking..........................................171 Unit Liner Company.....................................................205 Value Place Williston......................................................22 Vehicle Mounted Air Compressors................................214 Veit USA........................................................................41 Wanzek Construction Inc................................................15 Warren Transport Inc......................................................44 Warrior Energy Services.................................................81 Western Edge Aviation, LLC............................................47 Whiting Petroleum Corporation....................................IFC Xylem, Inc................................................................... OBC Z&S Dust Control............................................................61

Tensar® TriAx™ Geogrids

Geotex® Woven Geotextiles Geotex® woven geotextiles have superior capacity for filtration and load distribution, reducing rutting and extending the life of paved and unpaved surfaces.

With Geotextiles

Without Geotextiles

Geotex® 350ST was used at an Oil Drilling pad near Stanley, North Dakota. Work done by Harris Construction. Even with the aggregate saturated, the base handled the load of the truck just fine.

Flexamat

With its unique triangular structure, TriAx™ Geogrid represents a revolutionary advancement in geogrid technology. Its multi-directional properties leverage the triangular geometry, one of construction’s most stable shapes, to provide a new level of in-plane stiffness.

Tensar® TriAx™ Geogrid with Scoria

NAG S150® Blanket • 100% straw-fiber matrix • Photodegradable thread • Lightweight, photodegradable polypropylene • Designed to be used up to 12 months • Double-net construction provides greater structural integrity • Use on steeper slopes and in channels with moderate water flow

Flexamat is a tied concrete block mat, and consists of concrete shapes, locked together with a high strength, polypropylene geogrid.

• Shipped in rolls - easy & efficient installation • Multiple uses: erosion prevention, roadside, drainage, & more • Environmentally friendly • Capable of handling high flow water runoff Photos Courtesy of Summit Energy Services, ND

• Tensar® Geogrids • Propex® Geotextiles • NAG® Erosion Control Blankets • SiltSoxx • Steel Culverts

• Straw Wattles • Bird Netting • Conwed Safety Fence • Rufco LLDPE • Grouts

Serving the Bakken Oil Fields & Western North Dakota for over 30 Years

(C) 2010 Brock White. S150 is a registered trademark of North American Green.

• Concrete Accessories • Sonotubes • Chemical Anchors • Mat Inc Hydromulch • ENCAP Pam 12 • Flexamat

Bismarck

Minot

701-222-3010 1-800-932-8829 701-839-0509

www.BrockWhite.com/OilandGas

Xylem’s dewatering pumps can help you manage your frack site, from water supply to flowback and drilling mud.

We maintain an industry-leading rental fleet that includes Godwin Dri-Prime® pumps, Godwin Heidra® hydraulic and Flygt electric submersible pumps, as well as pipe, fittings, and accessories. Our 24/7 service and world-class engineering support will help keep your operation running smoothly. Great Pumps. Great People.

For more information, call the location nearest you: Helena, MT – 406.495.1335 Billings, MT – 406.373.3700

godwinpumps.com