The Bakken Magazine November/December 2015

NOVEMBER/DECEMBER 2015

2016:

The Pipeline Year Why regulators, policymakers are focused on pipelines Page 14

Plus

Multiparty Gas Utilization Project Results Page 20

AND

Step-By-Step: Bakken Gas Into Plastic Page 9

Iraqi Oil Delegation Tours, Studies Bakken Page 8

www.THEBAKKEN.com Printed in USA

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CONTENTS

NOVEMBER/DECEMBER 2015

VOLUME 3 ISSUE 11

Pg 20

PRODUCTS & TECHNOLOGY

The Case for New Gas Capture Tech

A partnership that pairs major oilfield entities and operators with a team of under-the-radar technology providers shows how a future Bakken well site could be run.

BY PATRICK C. MILLER

4 Editor’s Note

Pg 14

Beyond Rig Count, the Bakken is Busy

CONSTRUCTION & INFRASTRUCTURE

2016 Bakken Snapshot: Pipelines in Focus

BY LUKE GEIVER

6 ND Petroleum Council 2015 Review, 2016 Preview

BY ANSWERS BY NDPC STAFF

5 Events Calendar

When we asked state policy makers and energy regulators to talk 2016, new approaches to pipeline installation methods, standards and practices were the main topics.

BY LUKE GEIVER

ADVERTISER INDEX 28 AE2S

ON THE COVER: A pipeline lays ready for Caliber Midstream to install for a Bakken infrastructure project.

PHOTO: CALIBER MIDSTREAM

18 NAPE Denver

10 Braun Intertec

19 NCS Multistage LLC

17 Corval Group

23 New Prospect Company

16 Design Solutions & Integration

13 Port of Vancouver USA

12 Dunlop Protective Footwear

25 R360 Environmental Solutions

5 Hotsy Water Blast Manufacturing 26 iLevel Digital 22 ISCO Industries

27 The Bakken Oil Conference & Expo 24 United Piping, Inc. 2 Worthington Industries

11 J-W Energy Company

THEBAKKEN.COM

3

EDITOR'S NOTE www.THEBAKKEN.com

Beyond Rig Count, the Bakken is Busy

When people ask the Bakken’s top oil and gas regulation team if they are struggling to stay busy, they laugh and say no. That is what

Alison Ritter, the know-everything communications lead for the North Dakota Department of Mineral Resources Oil and Gas division told us when we asked what has Luke Geiver changed, or will change in 2016. Her response seemed Editor fitting for this issue because, as you’ll see, there is a lot The Bakken magazine lgeiver@bbiinternational.com going on in the Bakken––and the current activity will be instrumental in the positive evolution of the Bakken next year and for many years to come.

In line with the never-ending efforts of producers and tech providers to better utilize the associated gas produced during Williston Basin oil retrieval, a multistakeholder group including Hess Corp., Environmentally Friendly Drilling, ElectraTherm and Gulf Coast Energy combined resources for a unique project. EFD consists of some of the biggest oil brand names in the world—Shell, Chevron and Schlumberger, for example; ElectraTherm and GCE are established in their industry niches, and Hess is one of the largest-by-volume oil producers operating in the Bakken today. Staff Writer and photographer Patrick C. Miller followed the project aimed at turning associated gas into boiler-based power for several months before completing the story, on page 20, for print. As Miller explains, the concept for the project may have been simple, but the results were promising.

In the midst of covering the project, Miller also discovered that in the Bakken, one thing truly does lead to another. He found out about an Iraqi delegation that had chosen the Bakken as its destination to learn about a worldwide oilfield dilemma: flaring. We have the story of what the delegation took away from its visit. We also have an update on the efforts of an ethane-focused entity to turn a Bakken gas stream into plastic. Badlands NGL has made a choice on the technology it will someday deploy to convert ethane into common plastic. Through a 13-step process, Bakken gas can be turned into pelletized plastic, as our page-9 story details.

Drilling and completion activity has slowed, but the activities linked to greater oilfield development—from infrastructure protocol planning to well-site power option testing—make the Bakken as busy as ever. When we asked Ritter, and Todd Porter, a state representative well-known for his energy work, each pointed to new pipeline development activity as a reason to be positive about the Bakken in 2016. Next year, regulators and industry will have an unprecedented understanding on the best ways to install, design and test pipeline infrastructure. The importance of that work was best explained by Porter, and is proof that a busy Bakken in the midst of a well completion slowdown could be beneficial to future activity levels. The next time the Bakken ramps up to 2009 levels (200plus drilling rigs), Porter says, “Producing regions should be in a really good position to stay ahead of it.”

VOLUME 3 ISSUE 11 EDITORIAL Editor Luke Geiver lgeiver@bbiinternational.com Staff Writer Patrick C. Miller pmiller@bbiinternational.com Staff Writer Ann Bailey abailey@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

PUBLISHING & SALES Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com President Tom Bryan tbryan@bbiinternational.com Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Vice President of Content Tim Portz tportz@bbiinternational.com Marketing & Sales Director John Nelson jnelson@bbiinternational.com Business Development Manager Bob Brown bbrown@bbiinternational.com Account Manager Austin Maatz amaatz@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Lindsey Noble lnoble@bbiinternational.com

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States. To subscribe, visit www.TheBakken.com or you can send your mailing address and payment (checks made out to BBI International) to: The Bakken magazine/ Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee.

For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising The Bakken magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production.

To find out more about The Bakken magazine advertising opportunities, please contact us at 866746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/ or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to lgeiver@bbiinternational.com.

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The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

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NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

QA 2016 Preview & 2015 Review,

The Bakken's most recognizable North Dakota team explains its 2015 accomplishments, 2016 goals and the mood of the play.

What was your team’s greatest accomplishment this past year?

Ron Ness, president

Ness: Passing landmark oil tax reform that creates a predictable flat and more competitive long-term oil tax structure for industry, the state and Three Affiliated Tribes.

Cutting: Testifying before Congress on the value of allowing the export of crude oil globally.

Crude oil is the only made-inthe-USA commodity that has a Kari Cutting, vice president federal constraint on its ability to capture new markets. There is so much value to allowing U.S.-produced crude oil to be exported, including providing energy to Europe rather than forcing them to rely on Russian energy; working within the NDPC Regulatory Committee to develop mitigation solutions for endangered or threatened species, and, working with the Department of Health, Department of Mineral Resources, the Governor's' office and landowners and industry to develop the North Dakota remediation resource manual to enhance communication between industry and landowners and provide a decision tree to effective remediation.

Tessa Sandstrom, communications manager

6

Sandstrom: From an overall perspective, despite low oil prices, we’ve maintained a very strong membership and our events continued to be

very well attended. I’m very proud of our companies for stepping up to help South Heart recently with its football field. The members of the community there were generous hosts of one of our Bakken Rocks CookFest and allowed us to use their field. When it came time to do some upgrades to the field, some of our members helped pay for the seeding.

Outside of oil prices, what are the main factors that will drive the continued success of the Bakken?

How would you describe the Bakken in 2015?

Ness: Technology will drive the Bakken, not only in terms of making the Bakken economic at lower oil prices but in terms of efficiency of operations and resource recovery.

Ness: 2015 was a market correction year in which everything related to the Bakken and oil industry was focused on efficiency and cost-reductions.

Sandstrom: Infrastructure and pipelines remain the key in capturing more natural gas and helping reduce traffic on our roads. Infrastructure build-out continues today, but more needs to be done.

Sandstrom: The silver lining in the market correction is that it allowed for a time of progress in western impacts. The slow down offered a bit of a breather for the western counties to catch up, and the surge funding appropriated during the session was a huge help in this. One word that could also be used to define the Bakken in 2015 is resilient. The industry figured out ways to continue producing oil at low prices surprising everybody.

Unfortunately market corrections also mean lost jobs and tax revenue for the state, but we’ve also seen companies do what they can to keep their best people during this downturn.

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

What are the NDPC’s 2016 goals, and why?

Ness: The Bakken and other U.S. shale plays are in an energy war, and the NDPC has to sustain our presence and assist our members with the challenges of today and tomorrow.

Sandstrom: Our goal is to continue working with western leaders, landowners and other stakeholders to develop relationships and address some of the challenges we continue to face. This includes looking into the latest science and processes for mitigating and remediating spills and getting more infrastructure built.

NORTH DAKOTA PETROLEUM COUNCIL

Brinkman-Baxley: I think our goal is always to maintain our presence and voice as a facilitator of solutions, relationships and cooperation beAlexis Brinkman-Baxley, government relations manager tween industry, landowners, regulators and other interested parties. At the end of the day, it’s our job to make sure the industry is as successful as possible while taking care of this state we love.

The Bakken has bred an incredible range of stories. In 2015, which storylines were overtold, and, which were undertold?

What segment of the oil industry (technology, strategies, investments, research, etc.) has your team excited?

Ness: The media’s desire to tell the story about the North Dakota oil “bust” was overplayed. This is not a bust—all markets and industries have corrections. The under-told story is the incredible strides we made in gas capture. The efforts and progress in the past 15 months have been truly amazing.

Ness: In 2015, the NDPC and others focused our efforts on new technologies for improving salt-water remediation. That’s a huge issue for the industry and landowners, and we are at the forefront of a mindset change in how to remediate the soil.

Cutting: The Bakken is still a hotbed for innovative technologies. Currently, industry is able to recover up to 7 percent of the resource that exists two miles below the surface. The potential to innovate and recover an additional 1 percent means 1 billion barrels of recoverable oil, so industry will develop the means to harvest more of the resource. In addition, in this low-price environment, industry has adapted to reduce the cost of drilling and completing a well by as much as 20 to 50 percent, depending on the company and the location. This is quite remarkable and proves how resilient the industry is to price change and the strength of its ability to adapt.

Brinkman-Baxley: I’m excited to see our company’s relationships with landowners grow. In 2015, NDPC worked with the Department of Agriculture to help pass legislation creating a pipeline reclamation program. As I traveled the state to attend events promoting the program, it became really clear that the biggest issue we face when working with landowners is communication.

Sandstrom: Spills have also been over-reported. Yes, unfortunately spills happen, but more than 76 percent of them happen on the well site with no environmental impact whatsoever. Those that occur off of a well site are resolved within 30 to 180 days, but there hasn’t yet been a story on the many successful remediation cases that have finished or are taking place. There also isn’t much attention given to the role industry plays in our communities. I’m speaking not just in terms of jobs and tax revenues, but how companies and their employees volunteer and give time and money to their communities. It’s easy to talk about “big oil,” but never do they look beyond that and at the more than 60,000 people who are supported by the industry.

How has the view of the Bakken changed in any way for those outside of the play?

Ness: I’m hopeful that more people across North Dakota will grasp the incredible economic driver the Bakken has become. It has driven our economic growth creating highwage opportunities, which allows our sons and daughters to move back home, and, when partnered with agriculture it created an amazing statewide economy.

Sandstrom: Because of the reporting on the oil prices, I think many people are now picturing tumbleweeds and boarded-up main streets when, in fact, many communities are still bustling. Things have slowed down, yes, but we’re far from a bust.

What is the mood of your membership heading into 2016?

Ness: Pretty somber and a bit amazed, but focused on the task of competition. There are many who relish a breather but this has gotten excessive.

What should the greater Bakken community—from oilfield firms to individuals somehow linked to the play keep in mind during what appears to be a lower for longer oil price scenario?

Ness: The onslaught of federal regulations is beginning to take its toll on the energy industry. At some point, consumers must rise up and oppose the federal actions, which are going to substantially increase their energy costs and choices.

Sandstrom: The impacts of the slow down aren’t just isolated to the industry and their employees. The slowdown impacts each and every single one of us. Tax revenues are down, which impacts every North Dakotan.

As production slows, so will the retail and service sectors from Williston to Wahpeton and beyond.

Brinkman-Baxley: We still need to make sure we have adequate permanent and temporary housing, build up our infrastructure, and maintain that quality of life. If we don’t do those things, we’re going to be back where we started when it is time to ramp-up again.

THEBAKKEN.COM

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

POWERED BY FLARE: A well site outfitted with flare-fed steam boiler technology was a stop for the Iraqi delegation.

PHOTO: ELECTRATHERM

Iraqi delegation visits Bakken operations looking for technology, flaring solutions The Iraq Ministry of Oil has turned to the Bakken for answers to its own oilfield challenges. Each year, Iraq flares 1.2 billion cubic feet of associated gas produced during oil production due to the lack of infrastructure required to gather and transfer the product to centrally located stations.

Hamed Younis Saleh, Iraq’s deputy minister of gas affairs, and Hillal Ali Ismaeel Mushtaq, director of Iraq’s general studies directorate, joined members of the U.S. Department of Energy and regional delegates for a tour of the Bakken. Also in the group were Julio Friedmann, DOE principal deputy assistant secretary for fossil energy, 8

and Josh McKearin, a DOE international affairs specialist and American capital investor based in Iraq.

The tour, first initiated by the DOE a year and half ago, helped the Iraq group study and see firsthand gas technologies and gas-powered electrical generation facilities in the region. “I proposed to them that North Dakota’s experience with capturing gas near the wellhead and generating power might help them,” Friedmann explained. “The Iraqis are serious about reducing flaring, serious about getting gas to market and they have serious needs for power generation.”

During their stay in North Dakota, the Iraqi delegation

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

heard presentations from the University of North Dakota’s Energy & Environmental Research Center, the Department of Mineral Resources Oil and Gas division, the Trade Office, the Department of Commerce and the Department of Health.

Basin Electric Power Cooperative, a power supplier in North Dakota that utilizes natural gas, also presented.

Tour stops included a gas capture research site operated

by Hess Corp. in Blue Buttes, along with Basin Electric’s Pioneer Generation Station near Williston. After visiting North Dakota, the Iraqi group stopped in Washington, D.C., where they met with DOE and other federal officials.

They also attended an industry roundtable that included GE, Siemens, Alstom, Exxon Mobil and Occidental Petroleum Corp.

“I know that the vice minister and his team were pleased and impressed,” Friedmann said. “It was clear that they learned a lot, that they got value out of it and, hopefully, this experience will accelerate progress in both flaring reduction and power generation in Iraq.”

The hope for Friedmann is to identify technologies available for rapid deployment in Iraq in partnership with their government.

BAKKEN NEWS

How To Turn Bakken Gas Into Plastic

4

Badlands NGL has formed an agreement with a Bakken pioneer, Continental Resources, for supply of ethane to produce polyethylene at a future North Dakota-based facility. The long-term agreement with Continental has helped the Badlands team progress on its planned $6.5 billion plant in more ways than one, according to William Gilliam, Badlands CEO. “The interesting thing is that the Continental announcement is leading to very serious dialogue with other producers in North Dakota. We are also pursuing very serious discussions in Canada,” he said.

In October, Badlands also announced it chose technology from Univation Technologies LLC, a whollyowned subsidiary of The Dow Chemical Co., for four polyethylene reactor lines. Badlands chose the technology because of its production capacity. “Univation is the only technology licensor with demonstrated capability in plants larger than 600 kta in operation,” Gilliam said. “This was critically important to us given the size of our planned facilities.”

Polyethylene is the most 1 common form of plastic in the world and is used in products ranging from bags to bottles.

1. Raw materials pass through purification beds 2. Mixture enters circulation loop 3. Raw materials enter reactor and react with catalyst 4. Gases leave reactor and pass through compressor 5. Gases pass through heat exchanger 6. Resin leaves reactor through discharging system 7. Unreacted raw materials seperated from resin 8. Unreacted raw material compressed 9. Unreacted raw material cooled and liquified 10. Resin moves towards additive systems 11. Additives introduced into product 12. Resin mixture enters feed hopper towards extruder 13. Processed pellets to resin storage / loading facility

8

Reaction System

5

Raw Material Handling

UNIPOL PROCESS

Vent Recovery

9

3

Catalyst

7

6

11 Additive Addition

10

2

12

Pellet System

To Resin Storage & Loading

13

THEBAKKEN.COM

9

THIRD-QUARTER 2015 EARNINGS 2015 CAPITAL PROGRAM EVOLUTION

BAKKEN NEWS

2015 Capital Budget and Domestic Drilling Rigs

Oxy executives brief on Bakken exit

Occidental Petroleum Corp.’s role in developing the Williston Basin will be nonexistent by year’s end. The globally focused oil and gas producer has agreed to sell its 303,000 net acres of oil producing and unconventional properties in the Williston Basin to Lime Rock Resources, a Houston-based oil and gas developer. Once the sale is complete, Oxy will receive roughly $600 million for its Bakken assets.

Details of the asset sale were discussed briefly by several Oxy executives during a third-quarter investor call. During the hour-plus call, the subject was discussed sparingly. Low oil prices are forcing the Oxy team to shape its business to operate profitably, a process that has pushed the company’s focus to core assets with long-term development options and infrastructure already in place. Regardless of Oxy’s acreage potential in the Bakken, the exploration and production entity is now focused on the

100% Permian Basin, where it is the largest oil Capital producer in the play.

Budget A reduced 2016 budget means Oxy Domestic can only invest certain assets. “We just Drilling Rigs 75% can’t see a situation where we would invest in it [Williston Basin], given what we have in the Permian,” said Steve Chazen, Oxy CEO. The $600 million can be used 50% to run four rigs in 2016, an investment that would yield more Permian-based hydrocarbon production than it would in 25% the Bakken, he added.

Vicki Hollub, executive vice president of oil and gas, offered more color on Oxy’s exit from the Bakken during 0% the call. Curtailed spending in the Bak1Q15 2Q15 3Q15 4Q15E ken resulted in a production decline of SOURCE: OCCIDENTAL PETROLEUM CORP. roughly 25 percent quarter over quarter reports from earlier in the year that listed Oxy’s when annualized, she said. “We expected the production to continue to decline given our Bakken asset value in the billions.

The Bakken isn’t the only region Oxy will limited capital investments in the basin,” Hollub exit or perform an activity reduction in. The said.

Chazen said the company felt comfortable company said it will also work to pull back acwith the sale price of the Bakken assets, despite tivities from the Middle East and North Africa.

Seeing Through to the End &Žƌ ŵŽƌĞ ƚŚĂŶ ϲϬ LJĞĂƌƐ͕ ǁĞ ŚĂǀĞ ƉƌŽǀŝĚĞĚ ĞŶŐŝŶĞĞƌŝŶŐ ĂŶĚ ƚĞƐƟŶŐ ƐĞƌǀŝĐĞƐ ƚŽ Ă ǀĂƌŝĞƚLJ ŽĨ ŝŶĚƵƐƚƌŝĞƐ ŝŶĐůƵĚŝŶŐ Žŝů ĂŶĚ ŐĂƐ͘ tĞ ŽīĞƌ ƚŚĞ ĨŽůůŽǁŝŶŐ ƐĞƌǀŝĐĞƐ͗ ŐĞŽƚĞĐŚŶŝĐĂů ĞŶŐŝŶĞĞƌŝŶŐ͕ ŶŽŶĚĞƐƚƌƵĐƟǀĞ ĞdžĂŵŝŶĂƟŽŶ͕ ĞŶǀŝƌŽŶŵĞŶƚĂů ĐŽŶƐƵůƟŶŐ͕ ŵĂƚĞƌŝĂůƐ ƚĞƐƟŶŐ ĂŶĚ ŵŽƌĞ͘ dŽ ůĞĂƌŶ ŵŽƌĞ͕ ǀŝƐŝƚ ǁǁǁ͘ďƌĂƵŶŝŶƚĞƌƚĞĐ͘ĐŽŵ

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10

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

BAKKEN NEWS

USGS, DOI nominees share thoughts on Bakken assessment, federal fracking laws The nomination of Suzette Kimball for the director’s position at the U.S. Geological Survey could increase activity and interest in the Bakken. During a Senate hearing for the Energy and Natural Resources Committee, Sen. John Hoeven, R-N.D., asked Kimball if she would revisit and revise the USGS oil assessment of the Williston Basin.

The USGS last provided an updated Williston Basin assessment in 2013, which Hoeven said was, “tremendously helpful in attracting infrastructure investment along with KIMBALL energy development.”

Kimball said, if nominated, she would work with Hoeven and other states in updating their respective assessment of oil or gas reserves. According to the USGS, the Williston Basin currently holds roughly 7.4 billion barrels of technically recoverable oil—more than twice the previous USGS estimate, but less than state oil regulators and industry experts believe is present in the Williston Basin petroleum system.

In addition to questions for Kimball on the possibility of an updated Williston Basin oil assessment, Hoeven also grilled Kristen Sarri, nominee for the position of assistant secretary for policy, management and budget at the U.S. Department of Interior. Hoeven specifically asked Sarri about hydraulic fracturing regulations on federal and tribal lands.

“Why is it necessary to have duplicate regulations?” he asked. “Why not work with the states that already have those regulations in place? We do that in many other aspects of energy oversight and regulation.”

Sarri said that if nominated she would

work with all states that have duplicative regulations to remedy the situation. “I think you’re right, when you look at regulations, you have to look at what the state rule is and what the states have in play and HOEVEN also what the federal rule is,” she said.

The Bureau of Land Management’s hydraulic fracturing rule, released earlier this year, includes several key elements that some states are already utilizing or have implemented into their own respective regulatory frameworks, including: well-integrity validation proven through cement logging tests; disclosure of chemicals used in well stimulation to the BLM within 30 days of well’s completion; standards for interim storage of flowback and produced water; submittal of detailed information used in well design, including geology, depth and location of preexisting wells.

BAKKEN NEWS

Schlumberger invests $75 million for long-life pressure pump The typical time line before maintenance of a pump used in the pressure pumping process—known as hydraulic fracturing—is roughly 6,000 to 8,000 hours. For $75 million, Schlumberger has purchased the exclusive licensing rights to run a high-pressure pump that can run for roughly 50,000 hours before maintenance downtime. Created by Californiabased Energy Recovery Inc., the VorTeq pump could drastically impact the global energy service company’s approach to fracking and the coordination of its fleet and pumping requirements.

Earlier this year Energy Recovery worked with Liberty Oilfield Services to test the pump at the wellsite over a six-month trial. Now, thanks to those efforts, Energy Recovery has been able to prove its unique pump design. In addition to the $75 million Schlumberger will pay up front, the company will also pay annual

royalties during the life of the 15-year contract and up to $50 million in 2016 if certain milestones are met.

“Harnessing pressure energy the way we have in our other technologies, our solution ratchets frack fluid up to the required treating VORTEQ TRAILER: Mounted on a flatbed trailer, the VorTeq pump system can be easily transported from site to site. In some cases, the trailer may need maintenance before the pressure, as high as 15,000 pumping unit does. psi, without requiring the PHOTO: ENERGY RECOVERY INC. high-pressure water pumps ing abrasive proppants away from the high to handle sand,” said Joel Gay, president and pressure pumps to ensure only pure water CEO, when The Bakken magazine first spoke touches the pump. with the Energy Recovery team during its “For a company in this market who testing period. “This prevents the regular ocwants to keep producing but needs to be currence of pump failure, and has several immediate and profound impacts for operations, mindful of costs, this technology tackles these challenges and delivers meaningful results,” not the least of which is a dramatic reduction Gay said. in maintenance.” The pump works by rerout-

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INFRASTRUCTURE & CONSTRUCTION

2016 BAKKEN SNAPSHOT: Pipelines in Focus Policymakers and regulators say a new approach to infrastructure monitoring and installation standards will usher in a new era of pipeline quality.

By Luke Geiver

PIPELINE PATHWAYS: New installation standards and design requirements will help ensure that the miles of pipeline yet to be installed will be safe and secure for years to come. To stay competitive with other plays, policymakers believe pipelines are crucial to the Bakken.

PHOTO: CALIBER MIDSTREAM

14

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

INFRASTRUCTURE & CONSTRUCTION

Todd Porter was fixing fence at his central North Dakota cattle operation on a foggy November morning when we called to talk about energy issues and policies that will impact the Bakken in 2016. Although Porter—like many regula-

tors and policymakers in the North Dakota— doesn’t live or work in the Bakken play, he has become an expert on the operations of the oilfield and policy creation. Porter serves as vice chairman for the Energy Development and Transmission Committee and as the chairman for the Energy and Natural Resources Committee through his role as a state representative. For Porter, the insight and expertise he and many of his colleagues have gained on the Bakken started to take shape after oil-related policies were first developed in 2007 and ’09.

“The knowledge we had to come up with to keep up with this play was unbelievable,” he says. “We had a steep learning curve to make sure we weren’t chasing the industry out of sight.”

Following a historic year for energyrelated policy in North Dakota that included a one-time surge of funding to oil development-impacted areas along with a broad funding bill designed to improve the state’s ability to monitor and regulate oil infrastructure, Porter is excited for the year ahead and the new policies it will usher in. The most important variable guiding future policy for Porter and many others, he says, is the results of multiple studies the state funded through House Bill 1358.

Pipelines Are Top of Mind

“HB 1358 will set the stage for the next session for policies regarding gathering lines, saltwater disposal systems, flow monitoring systems, installation standards, best practices and engineering,” he says. “Those are going to be big going forward.”

Through the University of North Dakota’s Energy & Environmental Research Center, the state will learn how to properly monitor and maintain current and future oilfield related infrastructure ranging from crude

pipelines to salt water disposal (SWD) facility pressure vessels. Porter is particularly focused on the installation standards that could come from the studies. “If we have really good installation standards, we won’t have to worry as much about the leak side,” he says of pipelines and SWD facilities. Results from the study could be released as soon as December.

Porter isn’t the only one focused on HB 1358 study results. Alison Ritter, public information officer for the North Dakota Oil and Gas Division’s Department of Mineral Resources, says that the DMR team is excited for the opportunity to play a larger role in the state’s oilfield-related infrastructure developments. Through HB 1358, the DMR is now authorized to require bonds on gathering pipelines, as well as request pipeline engineering design drawings, a list of independent inspectors and the inspector’s pressure-testing certificate (which now must be filed within 60 days of performing the test). “I think the pipeline program is the future of this department,” she says. The team has already outlined future goals and tasked a specific team member to head the infrastructure efforts, Ritter adds.

Temporarily Abandoned Well Policy

The DMR’s current reality also includes a new addition to its work on drilled but uncompleted wells. Earlier this year, the DMR was given the go-ahead from the North Dakota Industrial Commission to continue its rules and regulations related to putting a well on temporarily abandoned (TA) status. Under current rule, a well has one-year to be completed after the well reaches total depth. If the well is not completed with in that time, it may be placed on TA status and avoid certain service and fiscal penalties. The TA process has its own servicing requirements and fiscal penalties. As the number of drilled but uncompleted wells grew and talk of policy change towards TA status grew, Ritter said her team wanted to check on the confidence of the NDIC on how the DMR was handling the situation.

THEBAKKEN.COM

15

INFRASTRUCTURE & CONSTRUCTION

45

PRO-ENERGY POLICY PRODUCTION IMPACTS

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Pro-energy policies over the next 20 years could create 2.3 million jobs, add $443 billion to the U.S. economy, increase tax revenue by $1.1 trillion and save the average household $360 per year in energy expenses, according to a study by Houston-based Wood Mackenzie. To complete the study, the company analyzed the likely outcome of U.S. energy policies that remain unchanged, become more constraining or become favorable toward oil and gas development.

25 20 15 10 5 0 2015

Baseline

2020

2025

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2030

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SOURCE: WOOD MACKENZIE

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INFRASTRUCTURE & CONSTRUCTION

“Sometimes things get done just because they have always been done that way and it doesn’t mean that is the right way to do it,” she says. “We wanted to make sure that just because it is the way we have always been doing it that it was the right way. The commission said they approved of the way we were approaching this issue.” Nothing has changed on the DMR’s approach to regulating TA well proposals, other than the emphasis the DMR has placed on taking comments and concerns from vested parties for each individual well that is undergoing review to be, or not be, placed on TA status.

The DMR has created a new well classification, however. Prior to the increase in

drilled but uncompleted wells that started in early 2015, the DMR had only two well classifications, one for a well that is drilled or in the completion process, and another for a well that has been put on production. Now, there is an NC well status for wells drilled by not yet complete.

2016 Quick Takes

Just as Porter and Ritter highlight the importance of HB 1358 and its role in shaping how oilfield infrastructure will be developed and regulated, each also points to several federallylinked policies as major pieces of the 2016 Bakken puzzle. Ritter believes that her team will continue to track several regulatory related energy policies in

2016, ranging from fracking on federal lands to regulating particular bodies of water. Each has the potential to impact how the industry operates in the state and how state regulators can regulate the energy industry.

Porter says the state needs to continue to be proactive on regulation, but not overreach.

“We don’t want to be the place they [oil producers] come because they have too,” he says.

“We have to watch the world oil price to make sure we are competitive. We also have to watch the transportation of our crude to make sure we can get it to markets.”

Although Porter believes North Dakota’s Bakken play will never return to activity levels seen two years ago without

oil at $90 per barrel, he does believe the state has positioned itself well for an increase in activity. “The surge bill was meant to help the state play catch-up to what happened in ’07 through ’09,” he says. Passed earlier this year, the one-time funding mechanism was timed perfectly for the current down-turn, he adds. “The next time the Bakken ramps up the industry and the communities within the oil producing regions should be in a really good position to stay ahead of it.”

Author: Luke Geiver Editor, The Bakken magazine 701-738-4944 lgeiver@bbiinternational.com

ATTEND EXHIBIT 18

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

W W W. N A PEEX P O.COM

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PRODUCTS & TECHNOLOGY

THE CASE FOR NEW GAS CAPTURE TECH ElectraTherm and Gulf Coast Energy worked with Hess and the Environmentally Friendly Drilling program to demonstrate a unique gas-capture technology in the Bakken.

By Patrick C. Miller

When it comes to getting gas flaring under control in the Bakken, the idea that opposites attract might provide the best solution to what has become a constant issue for the oil and gas industry. An

unlikely coalition of organizations has completed a successful test of a waste-heat-to-energy system that marries an old technology with a new one.

In mid-November, a demonstration project conducted by 20

Environmentally Friendly Drilling—a Texas-based organization that includes major oil producers, research entities and environmental groups—was completed at a Hess Corp. well site in McKenzie County. The test system combined a low-tech industrial boiler with a high-tech generator that used produced gas to generate electricity.

The system was developed by ElectraTherm Inc. of Reno, Nevada. The equipment was set up at the North Dakota well site and op-

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

erated by Gulf Coast Green Energy, an ElectraTherm distributor headquartered in Bay City, Texas.

Project funding was provided by the U.S. Department of Energy’s Research Partnership to Secure Energy for America program and the Houston Advanced Research Center through its EFD program.

Although the concept of using well-site gas to generate electricity isn’t new, ElectraTherm’s approach of using an industrial boiler paired with its Power-plus Gen-

TECHNO DEMO: ElectraTherm's Power+ generator was unloaded in 90 minutes and running the same day using captured gas to produce electricity.

PHOTO: ENVIRONMENTALLY FRIENDLY DRILLING

erator is unique and has helped other industries such as landfills and waste water treatment facilities deal with their waste-gas problems.

John Fox, ElectraTherm CEO, says the North Dakota test was the first time the company’s system was used in a gas-flaring operation.

“Lots of businesses have this same problem,” he says. “They don’t know what to do with waste methane gas. We can do something that’s not capital intensive by using industrial boilers to handle

PRODUCTS & TECHNOLOGY

untreated gas. If there are fluctuations in the gas content or flow, the boiler doesn’t care.”

ElectraTherm applies the Organic Rankine Cycle and proprietary technologies to generate power from low-temperature heat ranging from 170 to 252 degrees Fahrenheit. At the oil well, natural gas that would otherwise be flared is used to fuel an industrial boiler.

The boiler heats water to run the Power-plus Generator, and produces clean energy that is used for on-site processes, offsetting the cost of electricity from the grid or expensive diesel generators.

In addition, Fox says, “The emissions profile of the site is greatly improved, the power is con-

sumed on site and the equipment is easy to install and maintain.”

Richard Haut, HARC program director for energy production, considers the demonstration a complete success.

“I’m amazed at how well it’s gone,” he says. “The little amount of downtime we’ve had, for this being a pilot project and how well it’s functioned, it’s been first-class all the way through.”

Loy Sneary, CEO of GCGE, says that from his company’s perspective, the demonstration of ElectraTherm’s technology proved that it could work with Bakken gas with few problems and minimal involvement by the well-site operator.

“What surprised us is how little we needed to learn about what we’re doing,” he explains. “It’s not a complicated process; it’s fairly straightforward. The good news is that we didn’t find any issues that we weren’t able to remedy very quickly.”

Aside from a few minor problems such as tuning the boiler to work with the gas, a failed sensor and electrical power fluctuations in the local grid, Fox says the technology demonstration worked as expected.

“We weren’t being challenged in any way,” he says. “The fuel we’re giving the Power-plus Generator is hot water and it’s doing all the hard work. As long as the hot

water’s supplied to the generator, we don’t know we’re in this semichallenging environment. That’s what I like about the project. It proves that using 100-year-old boiler technology and some newer technology married together is a good simple offering.”

The research project took place at a Hess well site in the Blue Buttes area on the south side of the Missouri River, northwest of Mandaree and east of Watford City. The remote location was in the heart of the Bakken where it makes the most economic sense to drill during the low-oil-price environment. But as Lynn Helms, director of North Dakota’s Division of Mineral Resources, notes,

THEBAKKEN.COM

21

PRODUCTS & TECHNOLOGY

increased oil production also comes with higher gas production in an area of the Bakken not well supported by gas-gathering infrastructure.

“Not only is northeastern McKenzie County and southeastern Williams and northwestern Dunn County the best area for producing oil, but it also has more gas associated with the oil,” Helms said during one of his monthly reports this fall. “As rigs have migrated and completions have migrated into that area, there’s been a lot of upward pressure on gas volumes.”

During the summer, three critical pieces of infrastructure that could ease the volume of flaring in the Bakken had yet to come online.

Helms says the completion of ONEOK’s gas plants at Lonesome Creek (first quarter 2016) and Bear Creek (third quarter 2016), as well as a Hess gas pipeline crossing of the Missouri River will help significantly.

However, as a result of the likely failure

of the industry to meet the state’s gas capture goals, the North Dakota Industrial Commission in September moved the 85 percent gas capture goal from Jan. 1, 2016, to November of next year.

Helms has expressed disappointment that some of the well-site technologies being deployed have underperformed, both in terms of capture rates and operating time. He’s also noted that the economics aren’t currently favorable for building gas-processing facilities and infrastructure. That’s why the successful demonstration of ElectraTherm’s technology could be a significant development.

Haut says his team at HARC looked at various technologies that would make sense for a scalable pilot project in the Bakken. GCGE’s experience with using ElectraTherm’s technology in the energy industry appeared to be a good fit.

EXPERIENCE IN THE FIELD: Richard Haut, HARC program director for energy production, used his industry experience and ties with industry pioneers to lead the North Dakota efforts.

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PRODUCTS & TECHNOLOGY

ENVIRONMENTALLY FRIENDLY DRILLING COMES TO NORTH DAKOTA In 2005, Rich Haut thought he was going to retire after many years working in the oil and gas industry. He was part of the Houston Advanced Research Center founded 35 years ago and today continues to serve as its program director for energy production.

But a conversation over a beer with Todd Mitchell with the Mitchell Development Co.—the business instrumental in starting the shale fracking boom—got him involved with the Environmentally Friendly Drilling program under HARC, which was established by Todd’s father George.

Haut teamed up with Tom Williams, former vice president of technology for Noble Drilling, and Dave Burnett of Texas A&M with the university’s Global Petroleum Research Institute. They formed what—on the surface—appears to be an unlikely mixture of industry, science, academia and environmental organizations working to develop energy in an environmentally friendly manner.

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EXPERIENCE MAKES THE DIFFERENCE

etal issues are being addressed throughout oil and gas operations—everything from site selection all the way through gas compression and beyond,” Haut explains. “We get funding from state, local and federal governments, from foundations, from industry and from environmental organizations.”

Of the 20 field operations being conducted by EFD, two are in the Bakken. One is the recently completed demonstration of ElectraTherm’s gas capture technology with Gulf Coast Green Energy at a Hess Corp. well site in McKenzie County and the other is a case study for a compressed natural gas project.

The EFD program creates a partnership between national laboratories and key university partners to develop and disseminate critical new technology to accelerate development of domestic reserves in a safe and environmentally friendly manner. Its sponsors and advisors not only include major energy and oilfield services companies, but also environmental groups such as the Environmental Defense Fund, The Nature Conservancy and Ducks Unlimited.

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THEBAKKEN.COM

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PRODUCTS & TECHNOLOGY

“We thought about all the flaring going on and thought that if we could take that natural gas and burn it in a boiler—no moving parts like a turbine or anything else—just something real simple, we could then take that heat and put it through an Organic Rankine Cycle and generate electricity,” he says.

Hess, one of EFD’s industrial sponsors, offered a well site in western North Dakota for the project. Montana-based GTUIT, a Hess partner, was already at the site with its gas capture and natural gas extraction units when the EFD team arrived to install and commission the ElectraTherm test unit. GTUIT allowed them to tie into a gas line that provided the test system with 10 percent of the gas.

“GTUIT was already taking the flared gas and stripping out the natural gas liquids, then giving us the dry gas,” says Satish Ravindran, HARC research associate and energy engineer.

24

“We were secure from the gas surges because we were downstream from GTUIT.” Sneary believes the simplicity of the ElectraTherm technology makes it attractive to operators, and results of the demonstration project helped further reinforce his belief. He says it took about 90 minutes to unload the equipment and less than a day to get it running. In addition, he says it would take less than a day to move the entire system to nearby site with a large forklift.

A 65-kilowatt generator was used to generate electricity that could either be used at the well site or sent back into the electrical grid through a connection provided by McKenzie Electric.

To emphasize the simplicity of the technology and its ease of operation, Fox says his technical support team never needed to visit the test site during the 90-day demonstration. When remote monitoring indicated that a sensor had failed, “We had a spare part there and someone

The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

who didn’t even know our equipment went out and changed that in about an hour’s worth of work.”

Fox notes that power fluctuations from the local electrical grid sometimes tripped the entire well site offline or could cause the Power-plus Generator to shut down. However, even that proved to be a relatively easy problem to solve.

For Hess employees at the site, it was as simple as pressing a button to restart the generator.

The ability to remotely monitor and control the equipment also meant that there was often no need to contract anyone at the site for assistance.

“Sometimes the site would go down and we would remotely restart the machine in Reno or Loy would start it from Texas,” Fox says. “As long as we knew the boiler was making hot water, we’d just turn it back on. One of the Hess employees said that we weren’t intrusive at all.”

Sneary stresses another advantage of ElectraTherm’s technology.

“The neat thing is that I can call up that machine on my phone,” he notes. “With the right pass codes, I can control it.

“Whoever the owner is, their field personnel can check it any time and see what the status is,” he continues. “If it’s gone down for some reason such as a power grid problem, they just punch a button on their phone to start it up again and then go on about their business. It’s just amazingly simple.”

It’s the ease of operation that has attracted other industries dealing with waste gas problems to GCGE customers.

“When we turn the keys over to the customer, they really like the simplicity,” Sneary says.

“Operators have been pleased with lack of time they’ve had to spend on the equipment.”

Fox emphasizes the ability of ElectraTherm’s technology to scale up to meet the needs of new wells with high IPs and—because of its mobility—the option to quickly move units to well sites as they become more mature and gas production is reduced.

“If we went after those mature sites with one or two of our units, we could knock those flares completely out,” he says. “I think that would be a great statement on the simplicity and deployability of the equipment.”

Haut, Fox and Sneary had nothing but

PRODUCTS & TECHNOLOGY

praise for Hess and the on-site workers who assisted them.

“The Hess employees have been a big help to us,” says Sneary. “I would suspect that we haven’t taken more than an hour to an hour and a half of their time in the three months we’ve been up there. They’ve been very good to work with. They’re always energetic and eager to go check on how the thing’s running or make sure the boiler’s running.”

“Hess is wonderful to work with,” Haut adds. “They are on top of this issue and want to do the right thing. They’ve got good people and they recognize that they need to get it right. It’s a great organization.”

Fox says, “Without Hess, we wouldn’t be doing this project. Unlike the public perception of the oil and gas industry, every Hess person that I spoke to wants to reduce flaring.”

Fox and Sneary say that although the project opened the door for discussions with Hess, at this point it’s difficult to predict if or how ElectraTherm’s technology will be used in the Bakken.

“I feel optimistic that someone in the oil and gas industry is going to recognize this as a viable solution,” Sneary says. “It could compliment other technologies that have been proven to do flare reduction. I’m confident that companies are going to pick this up and see that it’s a good, viable solution.”

Fox hopes that the oil and gas industry will look at the big picture when evaluating ElectraTherm’s technology.

“What we truly want to offer—and what our primary goal is—is a clean-burning utilization of an improved emissions profile and some on-site generation,” he says. “We’re sitting here hopeful, but the proof is in the pudding of what these oil and gas companies are going to do at the end of the day to meet their regulatory requirements.”

The value of the research project in the Bakken, Fox says, is that it successfully demonstrated that the technology is easy to install, is non-intrusive and mobile. However, it’s ultimately up to industry to decide if the economics make sense.

“We don’t know what the economic value comparison is,” he says. “We’ve heard things are tough; they’re complex. Other approaches producers have tried aren’t as available as they’d like and can be maintenance intensive. We’ve heard all those things. We haven’t heard those things about us, which is great.”

Sneary notes that because of the project’s DOE funding, the contract with HARC and EFD requires the business entities involved to engage in technology transfer.

“Part of our responsibility is getting the technology transferred out into the oil and gas industry so they know about it,” he explains.

Time will tell if the demonstration leads to a technology breakthrough that enables the oil and gas industry in the Bakken to acceptable levels. But the groundwork has been laid to scientifically analyze the results and determine its value to industry.

Author: Patrick C. Miller Staff Writer, The Bakken magazine 701-738-4923 pmiller@bbiinternational.com

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The BAKKEN MAGAZINE NOVEMBER/DECEMBER 2015

&216758&7,21 DEPENDABLE & RESPONSIVE SERVICE www.ae2sconstruction.com

PROJECT/PROGRAM MANAGEMENT DRILL & PRODUCTION PAD INFRASTRUCTURE WIRING/INSTALL ELECTRICAL INSTALLATION & UPGRADES INSTRUMENTATION & CONTROLS

SITE/FACILITY LIGHTING, SAFETY, & SECURITY ENERGY EFFICIENCY & PREVENTATIVE MAINTENANCE MAINTENANCE & SERVICE

AE2S

PERATIONS www.ae2sOperations.com

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24/7 Operations & Maintenance Performance Coaching System Optimization Customized Web-Based Operator Logs/Reporting System Integration with SCADA Technology Application & Piloting Regulatory Compliance & Agency Coordination Process & Technical Support