l government hiring tribal · l government l markets & pricing vol. 4, no. 4 † publication of...

l G O V E R N M E N T

l M A R K E T S & P R I C I N G

Vol. 4, No. 4 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of May 31, 2015 • $2.50

Waiting for a train

The Bakken Oil Express terminal sits temporarily idle between load-ing unit trains at Dickinson, North Dakota in late April. Amid a weakoil market, North American production has declined and so toohave crude-by-rail volumes (see stories on this page).

VER

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Yl G O V E R N M E N T

page3

Notley brings Alberta smalleralbeit less experienced cabinet

Dealing with realityND legislature cautious with tax breaks but proactive with industry impacts

By MAXINE HERRFor Petroleum News Bakken

Though North Dakota Petroleum

Council President Ron Ness antici-

pated another “brutal” legislative session

to match the one in 2013, the oil price col-

lapse and subsequent rig drop within the

state made it a session more dominated

by circumstances.

“It was more of a reality check in

terms of, well, maybe they (industry) are not here no

matter what,” he told Petroleum News Bakken.

“Maybe we have to have some checks in our spend-

ing. Maybe it was a realization that we still need to

maintain that pro-business climate for industry.”

As desks cleared and legislators headed

home at the end of April, they left behind

“substantial” policy changes and invest-

ments, according to Ness. From gathering

pipeline regulation to infrastructure spend-

ing, he said there was no “feel-good” leg-

islation, but that the session was more

about finding solid solutions.

Reasonable rulesA significant piece of legislation that

emerged was House Bill 1358 which details new

regulatory requirements for gathering pipelines. It

requires leak detection systems, submission of con-

RON NESS

see LEGISLATIVE RECAP page 12

Scales tip in ‘standoff’US production, inventories decline as OPEC appears poised to ramp up output

By MIKE ELLERDPetroleum News Bakken

A s U.S. crude oil production continued through

an eighth consecutive weekly decline, domes-

tic crude oil stockpiles decreased in the third week of

May ― the first time there has been a net draw on

U.S. crude inventories in 17 weeks.

According to the International Energy Agency,

the decline in U.S. production is the result of a “sup-

posed standoff” between U.S. producers of “light,

tight oil” and the Organization for Petroleum

Exporting Countries, a standoff in which the U.S.

“appears to have blinked.”

And while at the same time crude oil prices have

been rising, West Texas Intermediate has made

stronger relative gains on the New York Mercantile

Exchange than has Brent on the Intercontinental

Exchange, a trend IEA attributes to the softening of

U.S. output.

“Slowing US LTO (light, tight oil) supplies

pushed Nymex WTI prices 14 percent higher in

April vs. March, roughly twice the increase in ICE

“Amid continued political turmoil in theMiddle East and North Africa, there is no

lack of upside risk to prices — anddownside risk to supply — in today’s oilmarket.” — International Energy Agency

see OIL MARKET page 10

Rails feeling oil market impactsNorth America’s oil-transporting railroads are feeling the

effects of the global crude oil price slump. As he was being

introduced at an investor conference in New York on May 20,

Canadian Pacific President and Chief Operating Officer Keith

Creel was asked to talk about what part

of his railroad’s business is doing better

than expected and what is not. ‟Let me

tell you what’s not,” he said. ‟Crude’s

not.”

Creel said the crude volumes CP is

moving are below expectations, espe-

cially heavy crude oil transport which

has been affected by price spreads.

‟We’re still moving pretty strong light

crude volumes ― the Bakken crude ―

but our guidance traditionally and our

expectations for growth is more heavily weighted as we shift

from a light railroad to a heavy railroad, and given the spreads

it’s obviously not supporting a lot of heavy movement.”

CP’s original guidance had its total 2015 crude transport at

200,000 carloads, but that guidance was subsequently down-

graded to 140,000 carloads in January. Now at mid-year,

Creel said 140,000 carloads may not be achievable, and some

ND O&G research council deniesgovernor’s request for advisors

North Dakota Gov. Jack Dalrymple gathered a list of

eight potential members of an advisory committee that he

wanted to guide a pipeline study, but the request failed due

to concerns that it added an “extra

layer” of bureaucracy.

The North Dakota Oil and Gas

Research Council heard a presentation

on May 26 from University of North

Dakota Energy and Environmental

Research Center’s John Harju on the

gathering pipeline study EERC was

commissioned to complete as part of

House Bill 1358. The state’s

Department of Mineral Resources

Director Lynn Helms spoke on behalf of Dalrymple asking

for approval of the committee, saying that the governor is

concerned that the public might view EERC’s study as

impartial since industry money and information is being

used to conduct it. Harju felt that the EERC has proven to be

an independent and objective organization and he was con-

cerned that there was some notion to the contrary.

KEITH CREEL

see RAIL VOLUMES page 9

Hiring tribalMHA Nation enforces cease and desist order on employment requirements

By MAXINE HERRFor Petroleum News Bakken

The Mandan, Hidatsa, and Arikara Nation’s

Tribal Employment Rights Office on the Fort

Berthold Indian Reservation cracked down on con-

tractors and consultants in violation of Indian

Preference laws by issuing a cease and desist order

May 26 to all contractors not meeting tribal employ-

ment requirements. TERO requires that companies

working on the reservation must give hiring prefer-

ence to contractors and subcontractors which are

either tribal-owned or employee tribal members, and

those not doing so must report themselves and come

into compliance.

“All entities that have used non-Indian services

including but not limited to roustabout services, con-

tract pumping services and flow testing services are

ordered to immediately self-report to TERO to come

into compliance,” the office announced on April 4 in

a notice to companies working on the reservation.

After some companies failed to comply, TERO

began seriously enforcing the law in May. Shawn

see ADVISORS DENIED page 9

see HIRING TRIBAL page 11

“It’s a simple fix. They’ve just got tofollow the rules and regulations we set

forth.”—Shawn Redfox, MHA TERO

JOHN HARJU

MA

XIN

E H

ERR

http://www.petroleumnewsbakken.com

2 PETROLEUM NEWS BAKKEN • WEEK OF MAY 31, 2015

Petroleum News Bakkencontents

BAKKEN STATS

3 UND uncovers truth about flare photo

NATURAL GAS

3 NDP brings ‘lean’ cabinet to Alberta

After abruptly ending 44 years of conservativedominance, Notley brings province a smalleralbeit inexperienced cabinet

4 Malloys ink new chapter in property law

Previous ruling in North Dakota involved spousesreserving interest; new case involves divorcedecree and after-acquired title

LEGAL COLUMN

GOVERNMENT

ND O&G research council deniesgovernor’s request for advisors

Rails feeling oil market impacts

ON THE COVERHiring tribal

MHA Nation enforces cease and desistorder on employment requirements

Scales tip in ‘standoff’

US production, inventories decline as OPECappears poised to ramp up output

Dealing with reality

ND legislature cautious with tax breaksbut proactive with industry impacts

5 ND sees lowest top 10 IP average so far in ‘15

5 Brent and WTI prices & spread, May 20-27

5 Bakken producers’ stock prices

6 North Dakota oil permit activity, May 19-25

7 IPs for ND Bakken wells, May 19-25

8 Montana well permits and completions, May 2–22

8 ND weekly county permit totals, May 19-25

8 Top 10 Bakken wells by IP rate, May 19-25

What's the big attraction?A. an industry institutionB. quality, accurate reportingC. attractive, readable designD. 93 percent market saturation

To advertise in Petroleum News Bakkencall Susan Crane at 907-770-5592, BonnieYonker at 425-483-9705, Renee Garbutt at 907-522-9469. or Raylene Combs at 209-290-5903.

Subscribe at:www.PetroleumNewsBakken.com

http://www.percheronllc.com

PETROLEUM NEWS BAKKEN • WEEK OF MAY 31, 2015 3

l G O V E R N M E N T

NDP brings ‘lean’cabinet to AlbertaAfter abruptly ending 44 years of conservative dominance,Notley brings province a smaller albeit inexperienced cabinet

By MIKE ELLERDPetroleum News Bakken

A fter her New Democratic Party was

elected to power in early May, Rachel

Notley was sworn in as Alberta’s 17th pre-

mier in Edmonton on May 24 along with

the other 11 members of her cabinet.

Notley’s cabinet is small by Alberta stan-

dards ― Jim

Prentice, the conser-

vative premier Notley

unseated on May 5,

had a 20-member

cabinet. And many

members, including

Notley herself, will

have multiple portfo-

lios. In addition to her

duties as premier,

Notley will also lead

the Ministry of International and

Intergovernmental Affairs.

“For the first time in many years we

have an efficient and lean cabinet to get

down to work and deliver results,” Notley

said in her inauguration speech, adding that

her cabinet “is built to work and to get the

job done.”

Not only is the cabinet unusually small

by Alberta standards, but collectively the

cabinet has little legislative experience with

eight of the 12 serving their first legislative

terms. And the two ministers who will most

directly affect the oil and gas industry have

no industry experience. Former educator

Marg McCuaig-Boyd will head the Energy

Ministry, and former economic policy ana-

lyst Shannon Phillips is the new Minister of

Environment and Sustainable Resource

Development, the two cabinet posts most

directly involved in oil and gas develop-

ment in the province.

But Notley appears to have an open

mind regarding the cabinet. “As the months

and the years unfold, we might review the

size of the cabinet, but I think at this point

in terms of focusing in on our priorities and

making sure we get the job done right, I am

very confident that this is a good cabinet,”

she said in the inaugural speech.

The new premier also sees challenges

ahead, including and perhaps especially

those posed by the depressed global crude

oil market. “The collapse in oil prices

reaches into every community in the

province,” she said. “Too many Albertans

are kept awake at night worried about

where their next paycheck is coming from.”

Notley’s left-center New Democratic

Party was swept into office in the May 5

election, ending the Progressive

Conservative party’s nearly 44-year reign

over Alberta politics. As Petroleum News

Bakken reported May 17, during the cam-

paign Notley voiced support for developing

new routes to markets for oil sands bitumen

and Bakken crude as well as exporting

refined petroleum products out of the

province. However, she also made it clear

she is not going to follow her predecessors

in lobbying for Keystone XL in the U.S.,

efforts she described as having “no realistic

objective.”

The 51-year old Edmonton native and

daughter of former NDP leader Grant

Notley earned political science and law

degrees and went on to careers in labor law

and occupational health and safety. She also

served as an advisor to British Columbia

Premier Mike Harcourt in the early 1990s.

Notley was first elected to Alberta’s legisla-

tive assembly in 2008 and reelected in

2012. She was elected leader of NDP in

October 2014. l

RACHEL NOTLEY

NATURAL GAS

UND uncovers truth about flare photoA satellite imagery map that went viral in recent years because it made western

North Dakota’s oil well flares appear like the night sky of New York City or

Chicago was an inaccurate depiction of flaring in the Bakken, according to

researchers from the University of North Dakota Energy and Environmental

Research Center and the John D. Odegard School of Aerospace Science’s

Department of Earth System Science and Policy.

UND scientists conducted a study using images available through the National

Oceanic and Atmospheric Administration and improved methods for identifying

flare images. The research was initiated because the satellite images from 2012 did-

n’t correlate with actual personal observations of flaring and emitted light in North

Dakota’s oil-producing counties. Although new regulations and better practices

see FLARE PHOTO page 4

Bakken Formation

Bismarck

Rapid CitySioux Falls

Minneapolis

Fargo

5a

Minneapolis

Chicago

Bakken Oil Fields

5b

Figure 5a. Realistic satellite images of associated natural gas flaring in the Bakken oilplay region of western North Dakota. Figure 5b. Inaccurately derived flare images thatare usually highly processed, manipulated and often amplified 100X.

CO

URT

ESY

UN

D E

ERC

http://www.bluetickinc.com

http://www.bcarch.org

By JANNELLE STEGER COMBSFor Petroleum News Bakken

The “Malloy Rule” in North Dakota just got a new

companion. On April 28, the North Dakota Supreme

Court issued an opinion in Hall v. Malloy, a case involv-

ing some of the same events and actors in an earlier dis-

pute but focusing on different aspect

of property law.

Facts of caseHarry L. Malloy owned 90 net

mineral acres in Dunn County. In

1982, Malloy, with Janet L. Holt

and Gordon O. Holt, quitclaimed

their interest in land, including the

90 acres, to Harry L. Malloy and

Janet L. Holt, as trustees for the

Harry L. Malloy Trust and Janet L.

Malloy Holt Trust (see table). In 1983, Harry L. Malloy

and his wife Lorraine divorced. The divorce judgment

stated that Harry owned 2,222 net mineral acres in Dunn

County, which included the 90 acres at issue. Lorraine

received one-half of the mineral acres, and Harry was set

to deed Lorraine her half of the minerals. Or if no deed

was provided, the judgment could be recorded to transfer

the rights. In February 1983 the judgment was recorded in

Dunn County. In November 1983, Harry recorded a quit-

claim deed of one-half of his interest at the time to

Lorraine.

In January 1995, Harry Malloy, individually, and Harry

with Janet L. Holt as trustees, executed a quitclaim deed to

themselves, individually. In September 1997, Harry and

Janet executed separate quitclaim deeds for the lands to

Edwin Hall, with the exception and reservation of 90 per-

cent of the minerals they then owned in the land.

In September 2004, Edwin and Jean Hall issued a con-

tract for deed to Todd Hall, which was completed with a

deed in October 2012. In September 2007, Harry and

Carol Malloy quitclaimed their minerals in Dunn County

to the Harry L. Malloy Irrevocable Family Mineral Trust.

In June 2013, Todd Hall sued the Harry L. Malloy

Irrevocable Family Mineral Trust and Lorraine Malloy to

quiet title to nine (9) net mineral acres. The Malloys

alleged that Hall owned 4.5 net mineral acres instead. The

district court found in favor of Hall, and the Supreme

Court affirmed.

After-acquired titleAt issue is whether the chain of title from the divorce

decree and quitclaim deed between Harry and Lorraine

was sufficient to qualify under the after-acquired title act

for those 4.5 net mineral acres. North Dakota Century

Code Statute 47-10-15 provides that when someone pur-

ports to “convey real property in fee simple and subse-

quently acquires any title or claim of title to the real prop-

erty, the real property passes by operation of law” to that

person or their successor.

The critical distinction in this case is that the language

of conveyance in the divorce decree was similar to that of

a quitclaim deed that only conveys the interest of the per-

son, not necessarily the interest of the property. There was

no language granting or warranting Harry Malloy’s title

to the minerals.

The other MalloyIt does not appear that the parties are any relation to

Loretta Jean Boettcher Malloy who was the plaintiff in

the 1983 Supreme Court decision in Malloy v. Boettcher,

which held that a spouse is not a stranger to title so that

an interest can be reserved in the non-owning spouse’s

name.

The new Malloy case has a fairly narrow ruling, inter-

preting general divorce decrees or similar court orders

with this type of language as more like a quitclaim deed

than a warranty deed for after-acquired title purposes. l

l L E G A L C O L U M N

Malloys ink new chapter in property lawPrevious ruling in North Dakota involved spouses reserving interest; new case involves divorce decree and after-acquired title


To advertise in Petroleum News Bakken

Call 907.522.9469 or visit petroleumnewsbakken.com

JANNELLE STEGERCOMBS

Kay Cashman PUBLISHER & EXECUTIVE EDITOR

Mike Ellerd EDITOR-IN-CHIEF

Gary Park CONTRIBUTING WRITER (CANADA)

Maxine Herr CONTRIBUTING WRITER

Steve Sutherlin CONTRIBUTING WRITER

Rose Ragsdale CONTRIBUTING WRITER

Jannelle Steger Combs LEGAL COLUMNIST

Eric Lidji CONTRIBUTING WRITER

Bighorn Engineering MAPPING/GIS

Mary Mack CEO & GENERAL MANAGER

Raylene Combs BAKKEN ADVERTISING EXECUTIVE

Ashley Lindly RESEARCH ASSOCIATE

Mark Cashman RESEARCH ASSOCIATE

Susan Crane ADVERTISING DIRECTOR

Bonnie Yonker AK / NATL ADVERTISING SPECIALIST

Steven Merritt PRODUCTION DIRECTOR

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Tom Kearney ADVERTISING DESIGN MANAGER

Heather Yates BOOKKEEPER

Renee Garbutt CIRCULATION MANAGER

Shane Lasley IT CHIEF

Dee Cashman RESEARCH ASSOCIATE

ADDRESSP.O. Box 231647

Anchorage, AK 99523-1647

NEWSMIKE ELLERD

406.551.0815

[email protected]

CIRCULATION 907.522.9469

[email protected]

ADVERTISING 907.522.9469

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FAX NUMBER907.522.9583

OWNER: Petroleum Newspapers of Alaska LLC (PNA)Petroleum News Bakken • Vol. 4, No. 3 • Week of May 31, 2015

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to: P.O. Box 231647 Anchorage, AK 99523-1647)

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www.PetroleumNewsBakken.com

Several of the individualslisted above are

independent contractors

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Northwest Linings has over 41 years of experience in the Oil & Gas industry, supplying & installing geomembrane liners for tanks, pits, pads, secondary containment, landfills, and ponds. In addition, we supply geotextiles, geogrids, erosion blankets, straw logs, gabions, and other geosynthetics throughout the United States.

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om

have continued to reduce flaring ― falling

as low as 20 percent as of March ― oper-

ators were flaring as much as 36 percent of

produced gas in 2011.

Researchers collected remote sensing

data throughout the Bakken using a system

that automatically finds and collects data

on heat sources around the world. UND

compared their own images, taken from

2013 and the first six months of 2014, with

data collected with the “day-night band”

used in the original photo and determined

the satellite image was easily skewed,

much like photographs taken of a candle

and light bulb from a highly sensitive cam-

era will make the candle appear to saturate

an area with just as much light as a 75-watt

incandescent bulb. Researchers concluded

that the sensor which took the images of

the emission sources included visible light

— but also heat sources.

“The infrared images were picking up

on heat as opposed to light and that’s how

they produce those very bright-looking

images of the western part of our state,”

EERC’s Associate Director for Research

John Harju told members of the Oil and

Gas Research Council on May 26.

Realistic satellite images show faint

flare light when compared to images using

highly process, manipulated and often

amplified photographs.

An EERC fact sheet about the images

says, “These images are misleading in that

they give the uninformed public the idea

that flares are literally lighting up many

square miles of prairie countryside, creat-

ing visible light similar to large metro

areas.”

—MAXINE HERR

continued from page 3

FLARE PHOTO“Infrared images were picking upon heat as opposed to light and

that’s how they produce those verybright-looking images of thewestern part of our state.”

—John Harju, EERC

http://www.northwestlinings.com

http://www.lounsburyinc.com


BAKKENStats● B A K K E N C O M M E N T A R Y

ND sees lowest top 10 IP average so far in ‘15

MIKE ELLERDPetroleum News Bakken

Between May 19 and 25, North Dakota

operators reported initial production data

for just 19 wells (see page 7), which is a tie

for the lowest number of IPs reported thus

far in 2015 and less than half the weekly

average of 43. And the average of this

week’s top 10 IPs ― 1,314 barrels ― is

the lowest weekly top 10 average in 2015

and nearly half the weekly average of

2,240 barrels.

Statoil had the top two IPs for the week

and the only IPs breaking the 2,000 barrel

mark, both from wells on a common 12-

well pad in the Banks field north-central

McKenzie County (see map). A first bench

Three Forks well topped the list at 2,879

barrels and a middle Bakken well came in

second at 2,232 barrels.

A Slawson Exploration middle Bakken

well in the Big Bend field in the Van Hook

peninsula in southwest Mountrail County

came in third at 1,747 barrels followed by

a Continental Resources first bench Three

Forks well in the Chimney Butte field in

northwest Dunn County with the No. 4 IP

at 1,088 barrels. Along with the Nos. 1 and

2 IPs, those were the IPs exceeding 1,000

barrels reported for the week (see page 8).

Hess Corp. had the No. 5 IP for the

week at 988 barrels for a middle Bakken

well in the Truax field south-central

Williams County. An XTO Energy first

bench Three Forks well in the Bear Den

field in eastern McKenzie County came in

sixth at 955 barrels. A Continental well on

the same pad as the No. 4 well but target-

ing the first bench of the Three Forks came

in seventh at 941 barrels. An EOG middle

Bakken well in the Parshall field in south-

ern Mountrail County came in with the

No. 8 IP at 799 barrels.

Rounding out this week’s top 10 list are

two common-pad XTO wells in the Tioga

field in northeast Williams County. A mid-

dle Bakken well on that pad was No. 9 at

797 barrels and a first bench Three Forks

well was No. 10 at 717 barrels.

ND permittingA total of 41 North Dakota well permits

were issued between May 19 and 25, all in

Dunn (five), Mountrail (29) and Williams

(seven) counties (see pages 6 and 8). That

number is up from the 33 permits issued

the previous week and is nearly on par

with the 46 issued two weeks ago.

Nearly half of the permits went to

Slawson Exploration for 18 wells in

Mountrail County. Also in Mountrail

County, Fidelity was issued seven permits

and Hess Corp. four. Oasis received seven

permits in Williams County. And in Dunn

County, QEP Energy received four permits

and Enerplus one. ●

BIG

HO

RN

EN

GIN

EER

ING

Company Exchange Symbol Closing price Previous Wed.

Abraxas Petroleum Corporation NASDAQ AXAS $2.87 $3.25

American Eagle Energy Corporation NYSE AMZG $0.04 $0.05

Arsenal Energy USA, Inc. TSE AE I $3.70 $4.08

Baytex Energy USA Ltd. NYSE BTE $16.58 $17.92

Burlington Resources Co., LP (ConocoPhillips) NYSE COP $63.82 $65.41

Condor Petroleum TSE CPI $0.19 $0.17

Continental Resources, Inc. NYSE CLR $45.35 $46.72

Crescent Point Energy US Corporation TSE CPG $28.19 $29.62

Denbury Onshore, LLC NYSE DNR $7.26 $7.40

Emerald Oil, Inc. NYSEMKT EOX $6.10 $10.80

Enerplus Resources USA Corporation NYSE ERF $9.65 $10.92

EOG Resources, Inc. NYSE EOG $89.00 $91.60

Fidelity Exploration & Production (MDU) NYSE MDU $20.87 $20.01

Halcon Resources NYSE HK $1.06 $1.28

Hess Corporation NYSE HES $67.22 $70.24

Legacy Reserves Operating LP NASDAQ LGCY $10.63 $11.75

Marathon Oil Company NYSE MRO $27.58 $28.15

Mountain Divide, LLC (Mountainview Energy) CVE MVW.V $0.03 $0.03

Newfield Production Company NYSE NFX $37.38 $35.34

Northern Oil and Gas NYSE NOG $6.96 $6.94

Oasis Petroleum North America NYSE OAS $17.04 $17.62

Oxy USA, Inc. (Occidental Petroleum) NYSE OXY $76.82 $76.19

PetroShale Inc. CVE PSH $1.44 $1.30

QEP Energy Company YSE QEP $19.11 $20.21

Samson Resources Company (KKR & Co.) NYSE KKR $22.98 $22.77

SM Energy Company NYSE SM $53.20 $58.40

Statoil Oil and Gas LP NYSE STO $18.79 $21.31

Triangle USA Petroleum Corporation NYSE TPLM $5.03 $5.71

Whiting Oil and Gas Corporation NYSE WLL $32.83 $34.66

WPX Energy Williston, LLC NYSE WPX $12.99 $14.10

XTO Energy, Inc. (ExxonMobil) NYSE XOM $85.11 $86.58

Bakken producers’ stock pricesClosing prices as of May 27 along with those from previous Wednesday

Brent and WTI prices & spreadMay 20-27, 2015

5/20 5/21 5/22 5/26 5/27 ChangeBrent $65.03 $66.54 $65.37 $63.72 $62.06 $2.97WTI $59.98 $60.72 $59.72 $58.03 $57.51 $2.47

Delivery Month: July

WTI $59.98 $60.72 $59.72 $58.03 $57.51 $2.47Spread $5.05 $5.82 $5.65 $5.69 $4.55 $0.50

$18.00$19.00$20.00

$66.00

$67.00

Weekly Summary

$9 00$10.00$11.00$12.00$13.00$14.00$15.00$16.00$17.00

$62.00

$63.00

$64.00

$65.00

TISp

read

(US$)

rBarrel(US$)

$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

$58.00

$59.00

$60.00

$61.00

Bren

t/WT

Pricepe

r

Source: CME Group

$0.00$

$57.005/20 5/21 5/22 5/26 5/27

Brent WTI Spread


North Dakota oil permit activityMay 19-25, 2015

Abbreviations - Following are the abbreviations used in the report and what they mean:FNL = From North Line | FEL = From East LineFSL = From South Line | FWL = From West Line

see ND PERMITS page 7

*


IPs for ND Bakken wellsMay 19-25, 2015

This chart contains initial production rates, or IPs, for active wells that were filed as completed with the state of North Dakota from May 19-25, 2015 in the Bakken petroleum system,which includes formations such as the Bakken and Three Forks. The completed wells that did not have an available IP rate (N/A) likely haven’t been tested or were awarded confidential(tight-hole) status by the North Dakota Industrial Commission’s Department of Minerals. This chart also contains a section with active wells that were released from confidential statusduring the same period, May 19-25. Again, some IP rates were not available (N/A). The information was assembled by Petroleum News Bakken from NDIC daily activity reports and othersources. The name of the well operator is as it appears in state records, with the loss of an occasional Inc., LLC or Corporation because of space limitations. Some of the companies, ortheir Bakken petroleum system assets, have been acquired by others. In some of those cases, the current owner’s name is in parenthesis behind the owner of record, such as ExxonMobilin parenthesis behind XTO Energy. If the chart is missing current owner’s names, please contact Ashley Lindly at [email protected].

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GDV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL: McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams

—Ashley Lindly | [email protected]

ND PERMITS continued from page 6

see ND PERMITS page 8


Top 10 Bakken wells by IP rateMay 19-25, 2015

ND weekly county permit totalsMay 19-25, 2015

Note: Note: This chart contains initial production rates, or IPs, from the adjacent IP chart for active wells thatwere filed as completed with the state of North Dakota from May 19-25, 2015 in the Bakken petroleum sys-tem, as well as active wells that were released from tight- hole (confidential) status during the same period.The well operator’s name is on the upper line, followed by individual wells; the NDIC file number; well name;field; county; IP oil flow rate in barrels of oil.

North DakotaThe best list for North Dakota is updated daily by the North Dakota Oil and Gas Division at www.dmr.nd.gov/oilgas/riglist.asp

SaskatchewanWeekly drilling activity report from the government of Saskatchewan: www.economy.gov.sk.ca/Daily-Well-Bulletin-Weekly-Drilling-Reports

ManitobaWeekly drilling activity report from the government of Manitoba: www.manitoba.ca/iem/petroleum/wwar/index.html

Looking for a rig report?

ND PERMITS continued from page 7

* Note: The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the following fields produce from the Bakken pool; Alkali Creek, Big Bend, East Fork, Heart Butte, andSanish.

** Note: The geologic target for these wells was not listed in its well file because they are tight (confidential) holes, but the Antelope field produces from the Sanish pool.


Re-issued locations

Oasis Petroleum North AmericaBrewer 2759 43-10 4T; Wildcat; SWSE 10-27N-59E;294’FSL and 2,147’FEL; N/A; SESW 22-27N-59E;200’FSL and 2,140’FWL; 21,249’; N/A; N/A; N/A;Bakken; Roosevelt; 5/4/15; N/ABrewer 2759 14-15 5B; Wildcat; NENE 15-27N-59E;224’FNL and 734’FEL; N/A; SESE 22-27N-59E;200’FSL and 1,320’FEL; 20,560’; N/A; N/A; N/A;

Bakken; Roosevelt; 5/19/15; N/ABrewer 2759 11-15-3T; Wildcat; NWNW 15-27N-59E; 376’FNL and 340’FWL; N/A; SWSW 22-27N-59E;200’FSL and 1,130’FWL; 20,450’; N/A; N/A; N/A;Three Forks; Roosevelt; 5/19/15; N/AMary Wilson 2759 11-15 2BX; Wildcat; NWNW 15-27N-59E; 376’FNL and 274;FWL; N/A; NWNW 3-27N-59E; 200’FNL and 0’FWL; 21,007’; N/A; N/A; N/A;Bakken; Roosevelt; 5/19/15; N/AMary Wilson 2759 14-15 6T; Wildcat; NENE 15-

27N-59E; 224’FNL and 767’FEL; N/A; NWNE 3-27N-59E; 200’FNL and 1,360’FEL; 21,075’; N/A; N/A; N/A;Three Forks; Roosevelt; 5/19/15; N/AMary Wilson 2759 14-15 7B; Wildcat; NENE 15-27N-59E; 224’FNL and 701’FEL; N/A; NENE 3-27N-59E; 200’FNL and 680’FEL; 20,853’; N/A; N/A; N/A;Bakken; Roosevelt; 5/19/15; N/AMary Wilson 2759 43-10 4B; Wildcat; SWSE 10-27N-59E; 281’FSL and 2,117’FEL; N/A; NENW 3-27N-59E; 200’FNL and 2,560’FWL; 20,442’; N/A; N/A; N/A;Bakken; Roosevelt; 5/4/15; N/AMary Wilson 2759 43-10 5B; Wildcat; SWSE 10-27N-59E; 268’FSL and 2,087’FEL; N/A; SWSE 3-27N-59E; 200’FNL and 2,040’FEL; 20,340’; N/A; N/A; N/A;Bakken; Roosevelt; 5/4/15; N/A

Whiting Oil and GasStickville 34-7-1H; Wildcat; SWSE 7-25N-59E;280’FSL and 1,870’FEL; N/A; NWNW 6-25N-59E;980’FNL and 660’FWL; 20,628’; N/A; N/A; N/A;Bakken; Richland; 5/4/15; N/A

Completions

Continental ResourcesCharlie 2-5H; Wildcat; NWSW 5-25N-54E; 2,610’FSLand 260’FWL; N/A; N/A; N/A; N/A; NESW 5-25N-54E;2,022’FSL and 2,290’FWL; 11,437’; Bakken; NESE 4-25N-54E; 2,047’FSL and 236’FEL; 19,535’; Bakken;Richland; 11/14/14; 543 bblCharlie 3-5H; Wildcat; SWNW 5-25N-54E; 2,611’FNLand 260’FWL; N/A; N/A; N/A; N/A; SENE 4-25N-54E;2,008’FNL and 238’FEL; 19,544’; Bakken; Richland;11/14/14; 690 bbl

Kraken OperatingGeorge 29 1H; Wildcat; NWNW 32-26N-51E;300’FNL and 330’FWL; N/A; N/A; N/A; N/A; NWNW29-26N-51E; 211’FNL and 714’FWL; 13,313’; Bakken;Richland; 4/16/14; 226 bblThree C 7 1H; Wildcat; SWSE 6-26N-51E; 230’FSLand 1,354’FEL; N/A; N/A; N/A; N/A; SWSE 7-26N-51E;205’FSL and 1,323’FEL; 12,933’; Bakken; Richland;6/22/14; 616 bbl

Oasis Petroleum North AmericaMcCracken 2758 34-9 #3B; Wildcat; NESE 9-27N-58E; 1,352’FSL and 285’FEL; N/A; N/A; N/A; N/A;NESE 11-27N-58E; 2,002’FSL and 306’FEL; 20,640’;Bakken; Roosevelt; 7/25/14; 802 bbl

Montana well permits and completionsMay 2–22, 2015

ABBREVIATIONS & PARAMETERSWith a few exceptions, the Montana weekly oil activity report includes horizontal well activity in theBakken petroleum system in the eastern/northeastern part of the state within the Williston Basin. It alsoincludes the Heath play and what is referred to as the South Alberta Bakken fairway innorthwestern/west central Montana, which is at least 175 miles long (north-south) and 50 miles wide(east-west), extending from southern Alberta, where the formation is generally referred to as the Exshaw,southwards through Montana’s Glacier, Toole, Pondera, Teton and Lewis & Clark counties. The SouthernAlberta Bakken, under evaluation by several oil companies, is not part of the Williston Basin.

Following are the abbreviations used in the report and what they mean.

BHL: bottomhole location | BOPD: barrels of oil per dayIP: initial production | PBHL: probable bottomhole locationPD: proposed depth | SHL: surface hole location | TD: total depth

And public land survey system abbreviations: FNL = from north line | FEL = from east line | FSL = from south line | FWL = from west line

LEGENDWell name; field; SHL location; SHL footages; PD;PBHL location; PBHL footages; PBHL depth; BHLlocation; BHL footages; BHL depth; pool; county;approved/completion date; IP rate



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analysts are even expecting the number to be less than

100,000.

‟Let me say this: the 140,000 number is a question

mark. I’ll just be honest about it.” And while Creel

doesn’t know what the final number will be at year’s end,

he doesn’t believe it will be as low as 100,000. ‟The

world has changed around all of us and I don’t think any

of us (at CP) know exactly what the number is. I can tell

you it’s not going to be a hundred (thousand),” he said.

‟Our model has always been with 140 ― or even 200 ―

it was more backend loaded and it was, again, more

loaded to the heavy side.”

But CP has two heavy crude-loading facilities in devel-

opment ― an ExxonMobil facility at Edmonton and a

Plains All American facility at Kerrobert, Saskatchewan

― both of which will be coming online in the second half

of the year. ‟So with those two headwinds, is 140 possi-

ble? Maybe ... but to me it’s not going to be south of 100.”

CP’s other commodity segments are looking strong for

the year, including coal, potash and grain.

BNSF layoffsOn the U.S. side of the border, the Grand Forks Herald

reported May 23 that BNSF Railway has furloughed more

than 140 employees in Grand Forks, Mandan and Minot

and another 40 in Dilworth in western Minnesota just

across the state line from Fargo. While not discussing in

what sectors volumes have declined, BNSF spokesperson

Amy McBeth told the Grand Forks Herald that the rail-

road has had to adjust its workforce in response to a

decline in shipping volumes below prior estimates. ‟As

part of that, we are reducing the hiring plans for the next

several months and are, unfortunately, having to tem-

porarily furlough some of our employees at different loca-

tions across our network,” McBeth said in a written state-

ment.

In Montana, BNSF has furloughed employees in

Whitefish, Shelby and Havre according to information

provided by BNSF to the Flathead Beacon. All three com-

munities are on BNSF’s mainline route through northern

Montana which is the main rail route for Williston Basin

crude oil to refineries and terminals in western

Washington. In a similar written statement, BNSF

spokesperson Matt Jones told the Beacon that the railroad

plans to hire back furloughed employees when the busi-

ness environment permits.

While BNSF, which is privately held by Berkshire

Hathaway, doesn’t release freight data to the public, the

Beacon said data available through the state of Montana

indicate that in September 2014, up to 18 crude oil unit

trains were crossing through the Flathead Valley in north-

west Montana per week, but in early May, BNSF

informed the state that only between eight and 12 trains

per week were traveling through the area.

As Petroleum News Bakken reported May 17, rail-

roads’ market share of Williston Basin crude oil exports

fell to 54 percent in March, down from a peak 73 percent

in December 2013. Pipelines gained market share in

March accounting for 40 percent of all Williston Basin

crude oil according to the latest data available from the

North Dakota Pipeline Authority.

North American rail volumesThe American Association of Railroads released first

quarter rail statistics on May 20 showing that the number

of crude oil carloads originated by U.S. Class I railroads

was down 13.7 percent in the first quarter at 113,089.

Total combined U.S. rail traffic for the first 19 weeks

of 2015, which includes all commodity rail carloads and

intermodal units, stood at 10,272,271, a decrease of 0.3

percent from the same period in 2014.

AAR reported cumulative North American rail traffic

in the U.S., Canada and Mexico totaled 13,401,930 car-

loads and intermodal units in the first 19 weeks of 2015,

an increase of 0.8 percent over the same period in 2014.

For the same period, Canada’s cumulative rail traffic was

2,627,089 carloads and units, an increase of 4.9 percent

over the same 2014 period.

—MIKE ELLERD


RAIL VOLUMES

“I would ask the council, the

Legislature, and the governor’s office to

give us the room,” Harju told members

of the OGRC and guest legislators.

“Continue to extend that trust to do a

good job and provide a useful product for

everyone.”

No time for added meetingsThe idea of an advisory committee

raises a problem in that EERC has only

until Dec. 1 to analyze past pipeline rup-

tures in the state, and evaluate materials

and construction standards in order to

provide a solutions-based recommenda-

tion to the North Dakota Industrial

Commission on which it will base new

pipeline rules. Since EERC is on a fast

track to complete the study, Harju was

not in favor of having to find meeting

dates and times in order to include an

advisory committee. Several legislators

attended the meeting to discuss the gath-

ering pipeline bill, including Chairman

of the House Energy and Natural

Resources Committee Todd Porter who

insisted that the House worked very hard

on the bill and felt it does what the

Legislature wanted it to do, so additions

are not necessary.

“We went right to our experts at

EERC for a North Dakota solution to the

problems,” he said. “I’m not overly com-

fortable with the extra layer.”

Porter questioned where additional

money would come from to pay the pro-

posed advisory committee members,

anyway.

“I look at EERC as being that inde-

pendent body and research facility that is

going to come back to policymakers and

the NDIC with that information,” he

said. “That model out of EERC has

always been a very successful model ―

that the industry has always stepped for-

ward to partner with those dollars to

come up with solutions,” he continued.

“There’s not a single company that I’ve

talked to that wants a leak … that doesn’t

want a state of the art system.”

Helms said once the study is released

to the NDIC and new rules are proposed,

the governor wants to avoid having one

of the proposed advisory committee


ADVISORS DENIED

see ADVISORS DENIED page 11

“The world has changed around all of us and Idon’t think any of us (at CP) know exactly

what the number is.” —CP President and COOKeith Creel on the railroad’s 2015 crude

transport volumes

http://www.urtec.org

Brent,” IEA said in its monthly oil market

report in mid-May.

After reaching record production of 9.42

million barrels in the third week of March,

U.S. crude oil output has been decreasing

― falling to 9.26 million bpd on May 15

according to the latest data available from

the U.S. Energy Information

Administration.

And following a short lag period,

domestic crude stocks have followed suit

declining from 1.181 billion barrels on April

24 to 1.178 billion barrels on May 1, the

first time domestic stocks have declined

since December 2014. Through the first half

of May, U.S. crude stocks have continued to

decline standing at 1.173 billion barrels on

May 15.

“Expectations that the market would

start tightening by mid-year seem to be

coming true ― or so would have it the bulls

who over the last month have given WTI

crude a 14 percent price lift, and counting,”

IEA said.

The battle goes onEven though U.S. light, tight oil produc-

tion has declined as OPEC has maintained

its production, IEA believes it would be

“premature” to conclude the cartel has won

the battle for market share. “The battle,

rather, has just started.”

IEA said OPEC’s decision in November

2014 to maintain its output of approximate-

ly 30 million bpd was only the first step in a

larger plan which includes actually increas-

ing the cartel’s production along with

“aggressively” investing capital in future

production capacity. “Bucking the global

trend, Kuwait, Saudi Arabia and the UAE

(United Arab Emirates) are all raising their

rig count and expanding their drilling pro-

grams. Iraq and Libya, meanwhile, continue

to raise production against all odds.”

OPEC’s production averaged approxi-

mately 31 million bpd in April, which rep-

resents a slight increase of approximately

18,000 bpd from March, most of which

came from Iran and Iraq.

Reuters reported May 24 that Iran’s Oil

Minister said OPEC is unlikely to lower its

production ceiling at its next meeting in

Vienna on June 5 according to the Tehran

news agency Mehr.

But IEA also notes that there is much

uncertainty in the market. “Amid continued

political turmoil in the Middle East and

North Africa, there is no lack of upside risk

to prices ― and downside risk to supply ―

in today’s oil market.”

Impact on product stocksAs more crude oil is drawn from sup-

plies by refiners, IEA expects stocks of

refined products to rise. The Paris-based

intergovernmental organization cites data

indicating that product stocks among

Organization for Economic Cooperation

and Development Countries began growing

in April.

“More such builds may follow as global

demand goes through a seasonal soft patch

and refining activity increases worldwide.”

Global demand predictionsAccording to the U.S. Energy

Information Administration’s May short-

term energy outlook report, global crude oil

consumption is expected to grow by 1.2

million bpd ― 2016 growth is forecast at

1.3 million bpd. EIA estimates 2014 global

consumption averaged 92 million bpd,

which puts the agency’s 2015 projected

global oil consumption at 93.2 million bpd

and 2016 consumption at 94.5 million bpd.

Those forecasts are both up by 200,000 bpd

from EIA’s April projections “as lower

prices stimulate demand growth more than

previously expected.”

In its May oil market outlook, IEA proj-

ects global oil demand will average 93.6

million bpd in 2015, a 1.1 million bpd

increase over that agency’s previous 2015

forecast.

OPEC also increased its prediction for

2015 global oil demand in May and the car-

tel now predicts demand will grow by 1.2

million bpd over the year and average 92.5

million bpd. OPEC puts 2014 global

demand at 91.3 million bpd, slightly lower

than EIA’s estimate of 92 million bpd.

Oil prices?After hitting a six-year low in January,

average monthly West Texas Intermediate

and Brent prices rebounded in February,

then held moderately steady in March and

rebounded again in April.

WTI averaged $54.44 per barrel on the

New York Mercantile Exchange in April, a

15 percent increase since January and a 12

percent increase over March. Nymex Brent

averaged $61.14 in April, a 23 percent

increase over January and up 7 percent from

March.

Crude prices made additional gains in

the first three weeks of May with WTI aver-

aging $59.62 and Brent averaging $66.02

through May 22.

EIA is forecasting Brent to average $61

throughout 2015 and $70 in 2016. That is a

$1 per barrel increase for 2015 over EIA’s

April forecast, but a decrease of $5 for the

2016 forecast.

For WTI, EIA forecasts a discount from

Brent of $6 in 2015 and $5 in 2016, putting

WTI at $55 in 2015 and $64 in 2016.

As Petroleum News Bakken reported

May 17, Scotia Bank Economics and

Commodity Market Specialist Patricia

Mohr is looking for WTI to rise to $65 by

the end of 2015 and to average $58 for the

year. Mohr also expects WTI to remain at

$65 in 2016.

Rig countThe domestic oil drilling rig count is

showing signs of stabilizing. After hitting a

recent high of 1,609 in October 2014, the

U.S. oil rig count has been in steady decline

standing at 659 rigs as of May 22. However,

the May 22 U.S. oil drilling rig count was a

decline of only one from the previous week,

the smallest weekly decline since October

2014 and a fraction of the average decline

of 30 oil rigs per week since October. The

largest recent weekly decline in the U.S. oil

rig count was in the last week of January

when the number of rigs declined by 94

from the previous week.

As of May 22, North Dakota has 78

operating rigs, down one from the previous

week according to Baker Hughes data.

Montana has not had any operating rigs

since the rig count from one to zero between

May 1 and May 8.

As of May 22, Canada had 72 drill rigs

operating, 24 drilling oil wells and 48

drilling gas wells. Of those 72 rigs, 48 were

land rigs drilling in Alberta, 14 in British

Columbia and seven in Saskatchewan with

the remaining three drilling offshore

Newfoundland.

Bottomed out?Looking at a slight increase in projected

global demand coupled with at least a short-

term stabilization in crude oil prices and a

possible leveling of the domestic rig count,


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the question becomes: has the domestic oil bust bot-

tomed out? Unfortunately that’s a question nobody can

answer. But with the rates of decline in oil prices and

drilling activity having slowed, and with some positive

signs in crude oil prices, the upstream sector has at least

been given a chance to catch its breath after six months

of a depressed global crude oil market. l

Redfox, a compliance officer at TERO told Petroleum

News Bakken that his office did not see many violations

when oil activity was booming, but the slowdown due to

low oil prices has left some tribal members looking for

work.

“With work being slow, that’s what we’re looking out

for,” Redfox said. “So these Native contractors ― we don’t

want their trucks and equipment sitting. They’ve got a lot

invested into their companies so we want to help them out

so we’re not losing them.”

Violators of TERO requirements can face a variety of

penalties that range from denial, suspension or termination

of business on the reservation to civil fines of $500 per day

per violation.

Getting into complianceThe ordinance requires any contractors that are “100 per-

cent owned and controlled by members of the Three

Affiliated Tribes get first preference on all contracts and

subcontracts in connection with oil and gas exploration and

production, including ancillary services.”

Enforcement of the TERO ordinance has historically

been limited to crews such as roughnecks and truck drivers,

said North Dakota Petroleum President Ron Ness, but now

it is hitting companies that have been working on the reser-

vation for years. KLJ, an engineering firm headquartered in

Bismarck, works for some of the companies that received

the cease and desist orders. Government Relations Director

Sandy Tabor told Petroleum News Bakken that KLJ is will-

ing to help contractors get into compliance, particularly

since her office has developed good relationships with tribal

government.

“We’re trying to make sure, if any way, we can help our

contractors to get into compliance, however that may be,”

she said.

She anticipates the cease and desist orders will slow the

progress of projects on the reservation until the violations

are resolved with individual companies.

Questioning safety and expertiseIn most cases, Redfox said, the violations occurred when

companies didn’t go through the proper bid process to allow

tribal companies the opportunity for employment.

According to TERO rules, jobs need to be bid to tribal com-

panies, and if the bids are within 2 percent of the low bid

and the qualifications fit, operators are required to hire

them. Redfox said there are approximately 140 tribal com-

panies working in the oil and gas industry on the reserva-

tion. Most of the violations can be easily remedied by work-

ing with the TERO office, he said, to bid the work properly

and obtain a necessary license.

Ness told Petroleum News Bakken that the industry has

attempted to employ as many tribal companies as possible,

but it isn’t always feasible. He adds that the highly qualified

companies being forced off the reservation due to the viola-

tion has raised some concerns.

“It starts getting into the safety and technical expertise

issues,” he said. “They (operators) have to ensure they have

competitive opportunities to bid work in terms of the quality

of work and available expertise.”

But Redfox stands behind the work of tribal companies.

“Usually when someone puts in a bid they have the men

or equipment to handle something like that,” he said.

“When we do a pipeline or even a big project, we have all

these bids and they’re going to take a closer look at what

they’re capable of handling, and if they’re not up to par, that

would disqualify them.”

Redfox said companies operating on the reservation who

have contracted with a tribal company can continue to hire

that tribal company for additional work without re-bidding.

He reiterated that the cease and desist order is to get tribal

members back to work, but “it’s not like we’re going to shut

things down, unless it’s something major,” he added. He

said that Sacagawea Pipeline Co., an affiliate of Paradigm

Energy Partners, was one company working on a large proj-

ect that was in violation of the ordinance but the TERO

office has since resolved those issues with the company.

The pipeline is being built to send crude oil from various

points south of Lake Sakakawea in and around Johnson’s

Corner and Keene in McKenzie County to rail and pipeline

destinations in Palermo and Stanley.

“It’s a simple fix,” Redfox said. “They’ve just got to fol-

low the rules and regulations we set forth.” l


HIRING TRIBAL

members contend that it is a flawed study. Proposed

members included Justin Kringstad of the Pipeline

Authority, a member of the Northwest Landowners

Association, a legislator and one member each from the

PSC, the Oil and Gas Division, the agriculture depart-

ment, the North Dakota Petroleum Council, and the

governor’s staff.

“I can see what the governor’s doing,” Porter said,

“but I think the transparency is there in the bill already

… and quite frankly having this just to give the impres-

sion that this study is even more independent is not

necessary.”

Harju explained that as a matter of good practice,

the research already includes engaging all stakeholders,

and any bias on the part of researchers would be fatal

for EERC. Porter agreed and said the Legislature fast-

tracked the study “on purpose” and sees EERC as an

independent voice representing the citizens of the state

while working with the industry to develop a solution.

“There is no tilt or lean in any of this,” Porter said.

“If there were even ever an inkling of someone being

able to say you showed favoritism as a research facility,

you’re out of business.”

—MAXINE HERR


OIL MARKETcontinued from page 9

ADVISORS DENIED

http://www.dwwtitles.com

struction designs and greater inspections.

Ness said the industry typically opposes

more rules governing their operations, but

in this case, the legislation made sense.

“At the end of the day, it came out with

a pretty reasonable, science-based approach

to address problems and identify the root

cause of why we’re experiencing leaks and

putting it into perspective instead of a knee-

jerk reactionary approach,” Ness said.

The legislation also invests in pilot proj-

ects and studies by the University of North

Dakota’s Energy and Environmental

Research Center regarding reclamation

issues and pipeline standards. Ness said the

NDPC developed a saltwater remediation

task force in July 2014 and its members are

“fired up” about being involved in the pilot

programs as there are some new processes

they are excited to try. He said a representa-

tive of Statoil will present new technology

at the upcoming NDPC annual meeting in

September that utilizes a flushing agent

process on saltwater spills.

“It’s kind of like cleaning up wine on

carpet,” Ness explained. “If you allow it to

sit there it begins to soak into plant matter,

but if you strip the surface vegetation off

and flush it with an agent, that breaks it

down a little better. It’s in lieu of the old

‘scoop it and fill.’ It’s pretty spectacular,

actually.”

He’s also happy with what he calls

“proactive legislation” from Senate Bill

2271 that provides an ombudsman through

the state’s Department of Agriculture to

assist with right-of-way concerns. He said

the policy is already taking shape as the first

ombudsman was already working with

landowners by May 20. The Legislature

also made a proactive move with House Bill

1432 which created a federal environmental

law impact review committee to examine

any new federal laws ― including endan-

gered species lists ― to define impacts on

the energy industry and whether to inter-

vene.

Revenue distributionHouse bill 1377, referred to as the “buck-

et bill,” determined how oil and gas produc-

tion tax revenue would be distributed. A key

change was to give political subdivisions

additional dollars within the biennium if

revenue exceeds $10 million in the strategic

investment and infrastructure fund. The bill

included a Legislative Management study

of truck permitting systems and fees and a

moratorium which prevents county com-

missioners and other local authorities from

imposing additional fees for using county

roads other than those established by the

North Dakota Association of Oil and Gas

Producing Counties’ uniform county truck

permit program.

“It makes sure fees are reasonable and

more uniform in terms of spring road con-

struction,” Ness said. “Particularly with sig-

nificant road closures ― it looks at those

things which were a big heartburn issue for

industry.”

The oil extraction tax bill (House Bill

1476) was introduced late in the session,

leaving stakeholders scrambling to find

common ground. Concerns are still high

regarding potential action by the Three

Affiliated Tribes which was not in favor of

the bill. The tribes could pull out of or revise

the agreement it has with the state which

provides a percentage of tax revenue. Ness

said legislators worked hard to appease the

tribes, so he hopes the issue will be put to

rest and oil development on the Fort

Berthold Indian Reservation will not be at

risk. The industry was “not thrilled” with

the bill either, Ness said, as it removed the

tax incentives and implemented a flat 5 per-

cent extraction tax. If oil prices rise to $90 a

barrel, the tax rises to 6 percent. Despite the

industry’s failed efforts to raise the trigger

price, Ness said the overall tax change helps

with long-term planning.

“It is a much better, understandable, pre-

dictable tax structure,” he said. “In uncer-

tain times it may not be as advantageous to

us, but the predictability factor of it has a

tremendous value.”

No infrastructure strategistNess was disappointed when a bill that

would have provided an Infrastructure

Authority Director for the state failed. The

Infrastructure Authority would have coordi-

nated various infrastructure projects such as

road, hospital and airport construction to

ensure similar standards are in place

statewide so that, for instance, when a Dunn

County road is built to a specific weight

standard that a connecting Stark County

road is equivalent.

“It’s always been an industry position

that we need to think big and think of han-

dling this traffic long-term instead of just

fixing potholes,” Ness said.

Legislators voiced their concerns that the

position was redundant with entities like the

state’s Department of Transportation, but

Ness disagrees. He would like to see some-

one who has an overarching view of all

infrastructure not just roads or water.

“There is no one daily looking at it all,”

Ness said. “Take it back to what the Pipeline

Authority’s done by having a focal point for

everything related to that. We’ve always

had the best information on that, and it’s

continual,” he added. “Now, we fund these

(infrastructure) studies, they get presented

to an interim committee, and if there’s not

somebody that’s following through, what

good have they done us?”

Tax exemptionsThe Legislature didn’t pass many sales

tax exemption bills but it did give a nod to

Senate Bill 2035 which provides the tax

break for developers of chemical or fertiliz-

er plants derived from natural gas, natural

gas liquids, or crude oil components as part

of a value-added energy incentive. The bill

also gives the North Dakota Industrial

Commission up to $100,000 for a natural

gas production study.

Though a sales tax exemption on materi-

als used for collecting, storing and injecting

carbon dioxide for use in enhanced oil

recovery (Senate Bill 2318) passed, the con-

cept was revisited in House Bill 1476 and

now limits the tax exemption to wells

drilled and completed outside the

Bakken/Three Forks formation. The House

failed to pass Senate Bill 2034 which would

have given sales tax exemptions for gather-

ing pipeline construction materials. And

House Bill 1390, which allows pilot proj-

ects for recycling waste, particularly drill

cuttings, passed but the final version did not

include an extraction tax reduction for oper-

ators who recycle. Ness said he likes the

drill cuttings bill because it allows pilot

recycling projects to operate and new state

regulatory rules will be based on those

pilots.

Additional fundingLegislation to increase funding to the

abandoned oil and gas well plugging and

site reclamation fund from $5 million to $10

million per year and move the cap from $75

million to $100 million made its way

through both chambers. House Bill 1032

was signed into law to include a bump in

funding, but only to $7.5 million, although

it did allow the cap at $100 million. Senate

Bill 2033, a bill to provide supplemental

funding to oil and gas counties if oil tax rev-

enues exceeded the legislative forecast by

20 percent in the first six months, didn’t

even make it out of the Senate after a 10-3

do-not-pass committee vote. l


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