The Bakken Magazine - February 2015

FEBRUARY 2015

www.THEBAKKEN.comPrinted in USA

PlusManaging Crude

Conditioning Page 30

AND Breakeven,

Production PredictionsPage 36

Service, Equipment Offerings For Increased UtilizationPage 24

Flare Tech Trends

Mechanical Products Safer. Smarter. Tyco.TM

THEBAKKEN.COM 5

CONTENTS FEBRUARY 2015 VOLUME 3 ISSUE 2

6 Editor’s NoteFlare Reduction DirectionBY LUKE GEIVER

8 ND Petroleum CouncilNORM: North Dakota’s Solution For North Dakota’s Challenge BY TESSA SANDSTROM

10 Events Calendar

12 Bakken NewsBakken News and Trends

DEPARTMENTSIN PLAY

36 The NumbersSee production estimates, rig counts and yearly well totals based on various oil price scenarios, graphically. BY THE BAKKEN MAGAZINE STAFF

IN PLAY38 Top US Energy Sources Through 2040

The American Petroleum Institute’s leader speaks on the current, and future state of U.S. energy production. BY PATRICK C. MILLER

pg 40

Pg 24 PRODUCTS & TECHNOLOGY

Targeting Flare UtilizationAs mandated reduction efforts continue, new approaches and

technology aimed at flare capture are succeeding. BY EMILY AASAND

Pg 30 PRODUCTS & TECHNOLOGY

Moving Toward Crude ConditioningImpending crude conditioning regulations have emphasized the need for well site heat-based technology. Profire Energy represents one of many firms capable of exceeding the industry’s needs. BY LUKE GEIVER

ON THE COVER: A Torrent Energy Services gas compression unit on a Bakken well pad. PHOTO: TORRENT ENERGY SERVICES

The BAKKEN MAGAZINE FEBRUARY 20156

Oil prices, for better or worse, could be the main driver for Bakken growth this year. Flare-reduction targets—recently overshadowed by constant price and future production speculation amidst low-price per-barrel numbers—should also be considered a major element impacting growth in the Bakken, again, for better or worse. As of November 2014, roughly 775 Bakken pool wells were awaiting completion. Low oil prices are considered the main reason for the huge number of uncompleted wells, but North Dakota-imposed flare-reduction goals are also a large reason for the massive well backlog. In an ef-fort to meet the state’s overall flare-reduction percentages, many operators held off completing wells. Doing so eliminated the massive flare volumes associated with newly completed wells brought online and helped the operator community achieve the state’s flare reduction totals. The impact of well-completion hold-offs is yet to be deter-mined.

These flare-reduction efforts, combined with a unique tax trigger environment that could further cloud the timeline for the completion of new wells (plus this cur-rent backlog of wells), will eventually bring the topic of flaring back to the forefront, however. This month, our team focused on the new perspectives, technologies and strategies associated with flaring in the Bakken. Our findings indicate that the state of flaring is heading in a positive direction, thanks to innovative technology and gather-ing options and that, for new or backlogged wells, processes are in place to help opera-tors mitigate the difficulties of navigating the flare capture process.

The state of U.S. energy is in the midst of an unprecedented era, and is quickly becoming an energy producing superpower, according to Jack Gerard, president of the American Petroleum Institute. Gerard recently delivered his state of energy report, highlighting the mix of U.S. energy options and the role of oil and gas for the country. His report was not bias toward his constituents, however, as evidenced by his inclusion of detailed updates on several other energy sources, including wind, solar and biomass. Staff writer Patrick Miller wrote an in-depth summary on the state of energy, in “Top U.S. Energy Sources Through 2040,” on page 36.

Although our focus for February is on flaring, we couldn’t resist offering informa-tion on low oil prices and how they impact the Bakken. Armed with some incredible data from the North Dakota Department of Mineral Resources, we put our designers to work on an infographic that illustrates potential oil production outcomes at various oil prices. Sometimes, as most who have been to the Bakken can attest, it easier to understand the Bakken through visual experiences, so without a crystal ball filled with pictures from the future Bakken, we had to take a different approach.

Flare Reduction Direction

Luke GeiverEditorThe Bakken [email protected]

EDITOR'S NOTE

For the Latest Industry News:www.TheBakken.comFollow us:

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THEBAKKEN.COM 7

www.THEBAKKEN.com

VOLUME 3 ISSUE 2

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 [email protected]. 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 866-746-8385 or [email protected]. 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 [email protected].

TM

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COPYRIGHT © 2015by BBI International

EDITORIAL

Editor Luke Geiver [email protected]

Staff Writer Emily [email protected]

Staff Writer Patrick C. Miller [email protected]

Copy Editor Jan [email protected]

PUBLISHING & SALES

Chairman Mike Bryan [email protected]

CEO Joe Bryan [email protected]

President Tom Bryan [email protected]

Vice President of Operations Matthew Spoor [email protected]

Vice President of Content Tim Portz [email protected]

Business Development Manager Bob Brown [email protected]

Account Manager Ben [email protected]

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ADVERTISER INDEX3 ABUTEC LLC

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44 Quality Mat Company

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39 Wells Concrete

28 Wood Group PSN

18 Zeeco


NORTH DAKOTA PETROLEUM COUNCIL THE MESSAGE

NORM: North Dakota’s Solution For North Dakota’s Challenge By Tessa Sandstrom

Radiation or radioactivity: They are terms that evoke a certain sense of concern or anxiety among most. If you are a child of the 80s or 90s, we can’t help but think of Teenage Mutant Ninja Turtles or other mutations. Others may think of Spider-Man, the Fantastic Four or the Incredible Hulk—all superheroes who were transformed by radiation. Nearly every generation is familiar with Godzilla. Radiation is perceived as something unnatural created by humans.

What few people realize,

however, is just how common and natural radioactivity is, especially when we are discussing Naturally Occurring Radioactive Materials, or NORM. In truth, it is every-where—our air, water, soil and food. It’s about as natural and organic as it gets, and it’s not likely to infuse anyone (or thing) with special powers any time soon.

But that hasn’t stopped concern over NORM as it relates to oil and gas development. A few high-profile cases involving illegal dumping of filter socks elevated the discussion for appropriate

disposal of NORM, but it has also perpetuated the misconceptions about radiation.

So what is NORM? Naturally occurring radioactive materials are radioactive substances that exist in all natural media as mentioned. NORM as it relates to oil and gas development includes sediment, silt and other particulates that are brought from North Dakota’s formations up to two miles down to the surface during the drilling process. It is not something that is put into the ground by humans; it is simply bits of earth and water

taken out of the ground.These particulates can

become concentrated in pipes, holding tanks and filter socks. Be-cause this concentration is done by human activities, it then becomes called technologically enhanced naturally occurring radioactive materials or TENORM. Again, it is not something that is added by the industry, simply rocks taken from below the surface, brought up, before being filtered out or settled into equipment.

If this radiation is concentrat-ed, however, is it dangerous? The

*Several factors influence source of a company’s crude oil imports. Motiva, for example, is partially owned by Saudi Refining Inc.*Only company’s importing Persian Gulf crude are shown. In total, there are 69 crude companies. *Persian Gulf includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia and United Arab EmiratesSOURCE: U.S. ENGERGY INFORMATION ADMINISTRATION

NORM associated with oil and gas development includes silt, sediment, other particulates and water.

These are brought to the surface during the drilling process.

to catch sediment, silt, etc. Waste water can be injected into a disposal well.

This NORM can become concentrated in tanks, pipes, and

Something put into the ground by companies

Nuclear waste

Tank sludge Pipe Scale

OILFIELD NORM

X X This concentrated waste is then called technically enhanced NORM, or TENORM, and requires special treatment and disposal.

WHAT IT ISN’T

Particulates SiltSediment

THEBAKKEN.COM 9

NORTH DAKOTA PETROLEUM COUNCIL

short answer is no. Just because an object contains radiation does not mean it poses a risk. What matters is whether that radiation is absorbed.

This does not mean the industry does not want to properly dispose of its waste, however. In fact, it’s quite the opposite. Bad players that have illegally disposed of TENORM have given the entire industry a bad, undeserved reputation when it comes to NORM, and our hope is to level the playing field by putting clear, concise regulations in place that would allow for the proper dis-posal of TENORM from oil and gas development.

Currently, all waste above 5 picocuries must be hauled out of state to licensed facilities which actually may pose a greater hazard to the public because it requires a large number of trucks hauling this waste longer distances. This

may increase the potential for acci-dents, not to mention the stress on our infrastructure. Having disposal facilities within the state would also help cut costs at a time when oil prices are low. It also means being responsible for our own opera-tions and being a good neighbor. This TENORM is generated in North Dakota and it should be safely and responsibly disposed of in North Dakota.

The North Dakota Depart-ment of Health has proposed rules that will increase the limit for disposal in special waste landfills from 5 to 50 picocuries. At public hearings held in January, there were some concerns about this, but they were based mainly in myth.

Just because the level is higher, does not mean the danger is higher. For starters, 50 picocuries is well below the level of radiation we might receive from everyday items, one of which may very

well be your own home. Second, radiation only poses a risk if it is absorbed. For this to happen, the TENORM associated with oil and gas development must be ingested or inhaled.

To put it into context, a donut contains 200 calories. Let’s liken that to radiation. Those calories cannot be absorbed by simply sitting next to the donut or touching it; it must be eaten. Once that donut is eaten, those calories are absorbed and you might gain weight as a result. This would be similar to radiation dose equivalent. Oil field TENORM is the same way.

The chances of a person, especially from the general public to ever eat or inhale TENORM is very, very unlikely, but we want to prevent that possibility from oc-curring and that starts with proper handling and disposal regulations.

In-state disposal of TE-

NORM will be a major benefit to both the industry and state. Trepidation about radioactivity still exists, however, primarily due to the misconceptions surrounding it. We encourage you to help correct these misconceptions by sharing this and other information avail-able at http://northdakotaoilcan.com/NDenergyfacts/NORM/ and encourage the North Dakota Department of Health to consider regulations that will allow for in-state disposal of waste and thus, a North Dakota solution to a North Dakota challenge.

Author: Tessa SandstromCommunications Manager,North Dakota Petroleum [email protected]

in excess of 5 picoCuries per gram (pCi/g), it cannot be

Idaho, Colorado or Texas, illustrating the need for licensed disposal sites within our state.

HANDLING OF TENORM

ON THE ROAD WITH TENORM TENORM IN OTHER STATES

UtahWashingtonColoradoCaliforniaIdahoIllinoisMichigan

MinnesotaMontanaNew Mexico

Wyoming

TexasNorth Dakota

Louisiana

10,000 pCi/g10,000 pCi/g2,000 pCi/g

1,800 pCi/g1,500 pCi/g

200 pCi/g

50 pCi/g

30 pCi/g

5 pCi/g

Several other states have higher limits for the safe

disposal of TENORM. North Dakota is moving in

that direction, too, using thorough and careful

new rules. These rules will help ensure that TENORM

generated by the state can be safely and properly

disposed of in the state.


EVENTS CALENDAR

The Bakken magazine will be distributed at the following events: DUG Bakken and NiobraraMarch 31-April 2, 2015Denver, ColoradoIssue: March 2015The Bakken magazine

Williston Basin Petroleum ConferenceApril 28-30, 2015Regina, SaskatchewanIssue: April 2015The Bakken magazine

Unconventional Resources Technology Conference (URTeC)July 20-22, 2015San Antonio, TexasIssue: July 2015The Bakken magazine

The Bakken Conference & Expo July 27-29, 2015 Grand Forks, North DakotaIssue: July 2015The Bakken magazine

2015 North Dakota Petroleum Conference Annual MeetingSeptember 21-23, 2015Fargo, North DakotaIssue: September 2015The Bakken magazine

Houston Oilfield ExpoDecember 9-10, 2015Houston, TexasIssue: December 2015The Bakken magazine

CARBO enables operators to build durable fractures with higher long-term conductivity that are proven to deliver increased production, EUR and return on investment.

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BAKKEN NEWS BAKKEN NEWS & TRENDS

Republic Services buys Tervita’s Bakken assets

An engineered landfill near Blue Buttes, North Dakota, capable of accept-ing nonhazardous solid waste from oil and gas exploration has caught the attention of Republic Services. The U.S.-based nonhaz-ardous recycling and solid waste handler has purchased Tervita LLC, the U.S. subsidiary of Tervita Corp., in a $485 million deal that includes the Blue Buttes facility. Republic Services now has service offerings in every major U.S. shale play.

For Republic Services, the oilfield waste market has attractive long-term potential. The industry sector is valued at

roughly $14 billion, according to the com-pany. The purchase of Tervita, along with its other oilfield waste assets will provide an annual growth of 6 to 12 percent.

“Tervita’s environmentally committed operations complement our core competen-cy and expertise in waste handling, recovery and disposal,” said Donald Slager, president and CEO of Republic Services.

Tervita has mainly focused on the treatment and recovery of solids in its North American operations, followed by solids control, landfill operations, trucking and saltwater disposal (SWD).

Along with the acquisition of the Blue Buttes facility in North Dakota, Republic Services will also acquire an SWD well in the same area as the engineered landfill, a treatment and recovery facility near Alexan-der and several onsite closed-loop systems designed for use on the well pad.

Tervita recently earned an innovation award from the American Petroleum Insti-tute for its management and construction of the Blue Buttes landfill.

BAKKEN

DJ Niobrara

Permian

Barnett

Eagle Ford

Haynesville

Marcellus/Utica

LEGENDRSG - LF (23)Tervita - LF (4)Tervita - TRD (4)Tervita - SWD (14)Tervita - Field Office/Other (8)

REPUBLIC, TERVITA E&P SITES IN MAJOR BASINS:

THEBAKKEN.COM 13

BAKKEN NEWS

Ending the U.S. oil export ban should be a “no brainer” that both President Barack Obama and the U.S. Congress can agree upon, says a pair of scholars at Texas A&M University who co-authored a policy brief on the topic.

“They both claim that they support free trade. Here’s a really good example of a case where we’re not promoting free trade like we claim,” explains James Griffin, pro-fessor of economics and public policy.

Griffin and F. Gregory Gause, profes-sor and head of the International Affairs Department at Texas A&M, believe that the Energy Policy Conservation Act of 1975 was poor policy when enacted and makes even less sense today given America’s status as an “energy giant.”

They contend that because energy security is a global problem, permitting exports of U.S. crude and natural gas would create a more shock-resistant world economy, counter Russian nationalism, help reassure America’s allies, and retain the strength of the U.S. energy industry.

“When oil supply disruptions occur anywhere, world oil prices spiral and world-wide recessions routinely follow,” they write.

Griffin says refiners generally oppose ending the export ban because they can buy crude at artificially low prices, turn it into gasoline or diesel fuel and then export it to global markets. He says it’s a circuitous and profitable way for the refineries to avoid the export ban.

“Why not be able to just export it directly?” Griffin asks. “The refineries are basically the gatekeepers. They don’t want to see this end. It’s worked to their benefit

and they, as a group, are lobbying against the relaxation of the ban.”

Griffin argues that the export ban policy hurts crude and LNG producers in the U.S.

“The people that ought to be rewarded here are not the refiners,” he says. “The people that ought to be rewarded are the risk-takers who have gone out and devel-oped the Bakken and the Eagle Ford, the Wolfberry and the Permian Basin. They should reap the benefits of it. The existing regulations work against that.”

As the policy brief notes, the U.S. has the potential to add 8.7 million barrels per day to the global “crude oil bath tub” and compete in East Asian markets where the Saudis have increased prices.

“Returning American oil to the global

bathtub also gives the U.S. more leverage in the market with the world’s largest oil exporter, Saudi Arabia,” Griffin and Gause write.

Griffin says that lifting the export ban is by no means a panacea for world energy problems.

“If anything, what will happen is that it’ll bring in sharper competition between crudes like the Bakken and crude out of the Eagle Ford,” he explains. “These effects are of second-order importance. The big effect is that by eliminating the export ban, it will give a little more relief to the domestic industry.”

Texas A&M policy brief calls for end to US crude export banU.S. Field Production of Crude Oil

Billi

on B

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ls

1954 1956 1974 1984 1994 2004 2014

4.0

3.0

2.0

1.0

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SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION


BAKKEN NEWS

Dropping oil prices have many companies formulating more disciplined 2015 budgets. One such company, Canada-based Crescent Point Energy Corp., announced a $1.45 bil-lion capital expenditures budget for 2015 to generate an average daily production of 152,500 barrels of oil equivalent per day (boepd), totaling a 9 percent increase over 2014 guidance.

“In this commodity price environment, our 2015 budget plans are disciplined,” said Scott Saxberg, president and CEO of Crescent Point. “We’ve reduced our capital expenditures from 2014 guid-ance by 28 percent and we have increased our 2015 oil heads to greater than 50 percent at prices averaging above CDN$90 per barrel. We’re fore-casting nine percent production growth over 2014 and we are starting the year strong, as we exited December with produc-

tion ahead of our 155,000 boepd guidance.”

Crescent Point is taking a more conservative approach to 2015 production targets. The company says it is well-hedged for this year and is poised to produce reliable cash flows, even in a low commodity price environment. “The company has more than 50 percent of its 2015 oil production hedged, net of royalties, with an average price above CA$90 per barrel. Crescent Point has additional hedges in place for 2016, 2017 and into 2018.”

The company has plans to manage its balance sheet and dividend if lower oil prices should persist. Some of those plans include strong inventory depth, which allows the com-pany to continue high-grading drilling projects for additional capital efficiencies, the flex-ibility to further reduce capital expenditures in the second half

of the year, while still achiev-ing annual average production guidance levels, and the option to shift more capital to its re-frac inventory and production optimization initiatives and to reduce facilities spending, ac-cording to the company.

Along with improving its capital efficiencies, Cres-cent Point is also working on various drilling and comple-tion technologies that can potentially add to production and reserves in a cost-efficient manner.

“When the prices fell dra-matically in 2008 to 2009, we were able to realize a 30 per-cent reduction in our Bakken drilling and completions costs,” said Saxberg. “We’ll be working hard with our service provid-ers and fully expect to see rates come down even more than they already have.”

Of Crescent Point’s $1.45 billion, approximately $1.27 bil-

lion is expected to be allocated to drilling and completions, including the drilling of 616 net acres. The remaining budget is expected to be put toward in-frastructure, undeveloped land and seismic testing across all core areas, the company said.

Crescent Point also said it will continue to remain focused on technology this year, as it has the potential to both increase production and reduce costs.

“Our commitment to technology is a key value-driver for the company,” said Saxberg. “Technological advancements such as our 25-stage cemented liner completion techniques, waterflood programs across all major plays, and the use of coil tubing units provide us with a clear advantage that has direct impact on our cash flows and, ultimately, our bottom line.”

Crescent Point Energy’s 2015 plans: $1.45 billion

North Dakota outlookIn Crescent Point’s Flat Lake oil resource play, which

is located in western North Dakota, the company plans to spend $188 million (roughly 13 percent) of this year's budget, drilling approximately 44 net wells.

In the Torquay play at Flat Lake, Crescent Point is generating strong rates of return even at the current oil prices, the company said. It also, “plans to initiate its first waterflood pilot in the area targeting the Torquay zone in mid-2015.”

In 2015, Crescent Point plans to spend roughly $135 million of the capital development budget to the company’s other properties in Canada and North Dakota.

NEW PLAY>1 BILLIONBARRELS OOIP

4.6 BILLIONBARRELS

TORQUAYBAKKEN

THEBAKKEN.COM 15

BAKKEN NEWS

IHS recently compiled a report regarding crude-by-rail in both the United States and Canada, as part of a series from the IHS Canadian Oil Sands Energy Dialogue. The in-depth report looks at the history and outlook for crude-by-rail, the safety of moving crude oil by rail and the evolving policies for crude-by-rail transportation.

Bakken production expanded nearly 500 percent—from 170,000 barrels of oil per day (bopd) to roughly 850,000 bopd—between 2009 and 2013, and by the end of 2014, produc-tion is expected to have exceeded 1.1 million bopd, the report says. According to North Dakota cal-culations, those numbers issued by IHS are correct.

“With limited access to pipelines and major refining centers, most of this incremen-tal growth has ended up on the rails,” says the report. “In

2013, just over two-thirds of all North American crude-by-rail movements came from North Dakota.”

Although crude-by-rail transportation is on the rise, the report found that from 2004 to 2013, train accidents in Canada and the United States fell 40 percent from 4,462 to 2,660. “Freight rail accounted for nearly three quarters of these accidents, with the remainder involving passenger trains and railroad equipment.”

IHS says it currently ex-pects crude-by-rail movements originating in the U.S. to peak between 2015 and 2017, with volumes hovering around 1.1 million bopd before beginning to subside in 2018. This plateau would be a result of planned pipelines for the regions, includ-ing the Sandpiper, Pony Express, Line 9 reversal, and Energy East.

In July, the U.S. Department

of Transportation announced proposed rules to phase out rail cars in the form of a Notice of Proposed Rulemaking and a companion Advanced Notice of Proposed Rulemaking.

“Safety is our top prior-ity, which is why I’ve worked aggressively to improve the safe transport of crude oil and other hazardous materials since my first week in office,” said U.S. Secretary of Transportation Anthony Foxx. “While we have made unprecedented progress through voluntary agreements and emergency orders, today’s proposal represents our most significant progress yet in devel-oping and enforcing new rules to ensure that all flammable liquids including Bakken crude and etha-nol, are transported safely.”

Both Canadian and U.S. governments have announced plans to phase out 72,000 tank cars currently in crude and etha-

nol service, set to begin in 2017. The United States has proposed phasing out all DOT-111, includ-ing CPC-1232, for crude and ethanol service by packing group beginning in October 2017 for goods classified in Pack Group I (high-hazard goods). The phaseout of Packing Group II, where most crude and ethanol fit, is expected in October 2018, the report says.

“It is safe to assume the phaseout will not be without cost,” the report notes. “From the perspective of the shippers (crude and ethanol producers), it is uncertain who will bear these costs (whether tank car owners, shippers or the railroads, or all three to various degrees), as well as whether additional efficiencies could offset or even overcome any cost pressures.”

IHS releases report on crude-by-rail transportation

1.1 MILLION BOPD BEING PRODUCED IN ND

CANADA & THE U.S. PLAN TO BEGIN

PHASING OUT RAIL CARS IN 2017

20172/3 OF ALL

NORTH AMERICA CRUDE-BY-RAILCOMES FROM ND

TRAIN ACCIDENTS DECREASED BY 40%BETWEEN 2004-2013

CRUDE-BY-RAIL

BAKKEN NEWS

The U.S. Census Bu-reau recently announced that North Dakota’s population has reached an all-time high of 739,482 residents, an increase of roughly 15,600 from last year’s count, largely due to the increased activity in western North Dakota.

“Our economic growth over the last decade continues to keep North Dakotans home, and we are attracting new

residents who come for good jobs, a stable community and a quality of life that is second to none,” said North Dakota Gov. Jack Dalrymple.

According to the U.S. Cen-sus Bureau, the state’s popula-tion has increased 2.2 percent since last year, the largest percent increase in the nation. North Dakota’s state popula-tion has become the fourth youngest behind Utah, Alaska

and Texas. Census data shows that the median age of a North Dakota resident is 35 years of age, compared to the average age of 37 in 2008.

A recent KLJ study pro-vided insight on the population increase and projected outlook for western North Dakota. Based on predictions over the 2014-2019 period, the Williston region could have a total popu-lation potential of 97,000 at the end of 2014, which includes permanent residents, shift workers, seasonal construction workers, and dependents and spouses of workers living in nonpermanent lodging arrange-ments. The total population potential in 2019 could reach 130,000 in the Williston region “assuming housing is supplied and occupancy rates remain valid.”

The KLJ study projected that the Minot, North Da-kota, region has a population potential of 137,000 in 2019 and found the Dickinson region to have an estimated popula-tion potential around 77,000 in 2019.

“Permanent population will be largely driven by the supply of permanent housing in the region,” the study says. “Due to a lack of housing, the region will continue to have a total (service) population that is substantially larger than the per-manent population measured by the U.S. Census.”

North Dakota population reaches record high

GROWTHRATE

2.2%

TOTAL POPULATION

739,482MEDIANAGE

35

THEBAKKEN.COM 17

BAKKEN NEWS

PERATIONS AE2S

ND proposes new TENORM limitsNorth Dakota’s policy on techni-

cally enhanced naturally occurring radioactive material––TENORM––could soon be changing. In January, the N.D. Department of Health proposed rule changes applicable to industrial and oilfield special waste landfills. The proposed rule changes would allow industrial and oilfield special waste landfills to accept TENORM contain-ing up to 50 picocuries per gram. The state currently has a limit of 5 picocu-ries per gram, a limit that has forced many oilfield waste handling firms to move material generated in the North Dakota-portion of the Bakken out of the state to sites as far away as Idaho.

The proposed N.D. DOH limit changes were issued following the completion of an Argonne National Laboratory study commissioned by the DOH. The new rules would also require material to be tracked from cradle to grave, and companies that transport material would need to meet five requirements.

-Obtain a license from the state’s Radiation Control Program

-Register with the Secretary of State.

-Acquire hazardous material endorsement.

-Keep a trained radiation safety officer on staff.

-Submit quarterly load reports that include waste manifest number, load weight, pickup and delivery dates. Information would have to be signed at each step.

The new limits are based on the best available science, according to Dave Glatt, environmental health sec-tion chief for the DOH.

The new rules would also prohibit landfills from accepting more than 25,000 tons of TENORM waste per year. TENORM would need to be buried at least 10 feet below the top of the landfill, and municipal solid waste landfills would be allowed to accept TENORM.

PROPER DISPOSAL: The state's new requirements would require oilfield waste employees working in proximity to materials to obtain the proper certification. PHOTO: NEXT GENERATION SOLUTIONS


BAKKEN NEWS

Oil tax incentives and price-induced trig-gers have become a prominent topic in the Bak-ken. In an unprecedented move in mid-January, Lynn Helms, director of the state’s Depart-ment of Mineral Resources, presented next to North Dakota’s State Tax Commissioner, Ryan Rauschenberger, to explain the basics of the state’s two main oil taxes and the accompanying tax triggers, which begin based on predeter-mined oil prices.

North Dakota has two oil tax types directed toward oil producers: the gross produc-tion tax (5 percent) and the extraction tax (6.5 percent). It also has what Rauschenberger calls a small and large tax trigger.

The small trigger was adopted in 2009 and has only been active once. With the decline in current oil prices, Raushenberger said, “It looks as if January will be our first one (small) trigger month because we will be well below the

Bakken Oil price tax trigger breakdownaverage of $57.50, so we are planning on that happening.”

When activated, the small trigger allows for a 4.5 percent reduction—from 6.5 percent to 2 percent—on the first 75,000 barrels produced or the first $4.5 million of gross value during the first 18 months after completion. Should Janu-ary be the first trigger month, it would begin to impact state revenues in either March or April.

“This does sunset June 30, 2015, if the legislature does not take any action,” Raushen-berger said. “Under current law, the small tax trigger would be in place February through June and applies to new wells drilled during that time.”

If the trigger takes effect from February (revenue month of March) to June, assuming 650 wells currently waiting for completion are completed—excluding new wells— it would total more than $120 million. On top of that, oil producers, as a whole, would be saving another $85 million on new wells if 100 wells per month are completed from February to June, or, an esti-mated impact of $170,000 per well if a company is getting 75,000 barrels at $50 at a 4.5 percent rate savings.

The large trigger begins after a five-month period during which West Texas Intermediate trades at or below $55.09 per barrel on NY-MEX. If the pricing standard is met, all wells—both existing and new wells completed during the lifespan of the tax trigger—would receive a tax break. Wells drilled within 24 months of the tax trigger would pay a zero percent tax rate on the oil extraction tax. Wells completed 24 months prior to the start of the trigger would pay 4 percent. The full oil extraction tax exemp-tion (zero percent) will only be granted for 24 full months. “If you had a well completed three months before the trigger kicked in, you’d still have 21 months left of full exemption of the extraction tax,” Rauschenberger said. The large trigger is turned off when WTI trades above $55.09 per barrel for five consecutive months.

According to both Rauschenberger and Helms, the triggers could create a unique situa-tion with the Bakken. Operators, they said, could be faced with a decision to drill and, or, complete wells within a time frame offering the most advantageous tax incentives.

THEBAKKEN.COM 19

BAKKEN NEWS

Small Tax Trigger: 1 WTI < $57.50 average for single month.2 Takes effect first day of following month.3 Ends first day of month following a single month with

average price of $72.50 or more.4 Only applies to wells completed after incentive is

triggered.5 Oil Extraction Tax decreases from 6.5 percent to 2

percent on first 75,000 barrels or $4.5 million of grossvalue.

Large Tax Trigger: 1 WTI < $55.09 for 5 consecutive months.2 Takes effect first day of month following five

consecutive months below trigger.3 Ends first day of month following five consecutive

months of pricing above trigger.4 Applies to all wells, even if drilled prior to tax trigger

turning on.5 Wells completed after April 1987 but 24 months prior

to trigger start receive 4 percent OET reduction.6 Wells completed within 24 months of tax trigger start

receive OET rate of zero percent for up to 24 months.

THE TAX TRIGGER SCENE

BAKKEN NEWS

SM Energy’s sale of assets in Oklahoma, east Texas and northern Louisiana are part of the company’s ongoing efforts to focus on the Bakken and Eagle Ford shale plays.

The Denver-based com-pany made its largest monetary acquisition by purchasing $330 million worth of Bakken/Three Forks acreage in Divide County, North Dakota. The acreage was located adjacent to SM Energy’s own acreage block known as the Gooseneck.

“We just picked up a fair amount of acreage in Divide County in the fall,” said James Edwards, manager of inves-tor relations. “That’s really the reason for selling that piece.”

The nonoperating as-sets produced roughly 3.4 net mmboe in 2014, 98 percent of which was gas. If acceptable bids are received by the explora-tion and production company, the sale of the assets could be complete by mid-2015.

“We’ve spent a lot of time in the last seven or eight years trying to focus the company,” Edwards said “We had a smat-tering of assets around the country—small non-op type stuff. We spent a lot of time trying to quarter those up into a few big assets. The two big ones that have landed are the Eagle Ford and the Bakken.”

Edwards said it’s too early to predict SM Energy’s level

of activity in the Bakken in the coming year because the company’s budget hasn’t been finalized.

“It’s more of trying to core up the company and get rid of some of the small non-op, noncore assets so that we can continue to focus the strategy,” he says.

Tony Best, SM Energy CEO said “We had a strong 2014 driven by outstanding well results across the company. This was particularly true in our core Eagle Ford and Bakken/Three Forks development areas where, as previously disclosed, we have economic drilling inventory equating to over 20 years of current company production

and 10 years of gross locations at our current pace.”

“Our balance sheet is strong, we have ample liquidity, and we are confident that after costs adjust to the current com-modity pricing environment, we will continue to generate strong, industry-leading returns on capital employed,” Best said.

SM Energy is an indepen-dent energy company engaged in the acquisition, exploration, development and production of crude oil, natural gas, and natural gas liquids in onshore North America.

SM Energy selling Mid-Continent assets to focus on Bakken

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As mandated reduction efforts continue, new approaches and technology aimed at flare capture are succeeding By Emily Aasand


VALUABLE SERVICE: Torrent offers modular gas processing equipment that allows companies to recover and remove valuable natural gas liquids that would otherwise be flared.PHOTO: TORRENT ENERGY SERVICES LLC

Flare Utilization

Bakken producers may have met the first of several North Dakota-is-sued flare-reduction targets, but the challenges of continued crude produc-tion in the midst of impending new state-imposed, flare-reduction targets remain. Failure to comply with the state-is-sued flare regulations will result in restricted production volumes of 200 barrels per day. To remain in compliance with current goals while working to meet future restrictions, exploration and production firms, mid-stream gas gatherers, and flare-capture tech-nology providers continue to deploy unique and innovative solutions, well development timelines and gathering methods.

Torrent Energy Services is well-versed on the Bakken gas capture opportunity and challenges. The company offers modular gas processing equipment and services that allow oil and gas producers along with mid-stream companies to recover valuable natu-ral gas liquids (NGLs) while reducing overall flare volumes, intensity and emissions.

Torrent Energy Services has found suc-cess in a short time span. After forming in 2012, it became fully operational in 2013.

The core management team came from a company called Zephyr Gas Services—a gas treating company that specialized in amine plants focused on removing carbon dioxide from natural gas streams.

While in development stages, the Tor-rent team realized that the oil and gas liq-uids market was underserved. Mike Chiste, executive vice president of Torrent, says the underserved market became Torrent’s initial focus, and it began to focus on ways to provide gas processing solutions to oil companies. To do this, Torrent established a gas-processing rental fleet that would not only have low-maintenance operations, but have increased run times to maximize prof-itability.

Torrent’s primary piece of equipment is a mechanical refrigeration unit (MRU). Natural gas is gathered and sent from the well head through a compressor into the MRU, where the gas is chilled to roughly 20 degrees Fahrenheit below zero. The NGLs are recovered or captured from the gas stream. The NGLs are then taken out of the plant and stored in NGL storage tanks until trucks come to remove the NGLs from the well site.

TARGETING


HARVEST SEASON: Torrent specializes in harvesting NGLs which can save oil producers between $5 and $10, which is an incremental value amid declining oil prices. PHOTO: TORRENT ENERGY SERVICES LLC

“The stripping of the liquids greatly reduces the volatile organic compounds,” Chiste says. Doing so helps to reduce the total volume of flared gas and the amount of harmful components released.

In addition to its MRU, Torrent has natural gas-powered generators that utilizes the processed residue gas stream that comes off the back of the MRU to power various pieces of production equipment needed at well pads.

Hot BusinessWith North Dakota’s flaring regula-

tions now in place, the Torrent team says it has more than doubled the size of its busi-ness in the past two months. By the end of February, Torrent expects to have 23 units deployed.

“We’ve recently raised private equity capital to accelerate our manufacturing pro-gram because we had more demand than we did inventory,” Chiste says. “We have embarked on a fairly ambitious program to build two to four units every month for the foreseeable future so we can meet current demands.”

Torrent rents its equipment to oil com-panies, which helps decrease overall capital expenditures incurred by the operator. Pro-vision of operations and maintenance ser-vices also eliminates the operator having to operate additional equipment.

“We’ll put a unit on the well pad, rent it out for a year and then as the gas volumes decrease, we’ll rent them a smaller unit and move the larger unit to a different location for them or rent it to a new customer alto-gether. This saves them from having to go out and buy equipment that, over time, will be oversized for their location,” Chiste says.

Flaring NicheThe Dallas-based company is focused

on the higher-flowing well pads, according to Chris Czuppon, CFO of Torrent. The company’s units can handle 4 to 6 times more gas than its competitors, Torrent be-lieves. Competing companies tend to be more focused on serving the under-500,000

Continued on page 26


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Flare-Tech Integrator

While some companies are focusing on harvesting natural gas liquids (NGLs) at the well head and flaring the remaining meth-ane, U.S. Flare Management, a Houston-based startup with an office in North Dakota, has taken a new approach to reduction efforts, calling itself a technology integra-tor focused on finding the best solution to capture the methane stream present in all Bakken flares for use as feedstock for liquefied natural gas (LNG).

To do that, U.S. Flare Manage-ment has begun marketing Dress-er-Rand’s LNGo portable natural gas liquefaction plant, a system that cools the methane from the well site, filters it through a Joules-Thompson valve all in combination with a heat exchanger that turns the methane into LNG form.

The specialized approach has drawn interest from several pro-spective clients, according to Mark Bragg, CEO and founder, even in the midst of low oil prices and reduced CAPEX budgets. In fact, the U.S. Flare Management team says it has seen a huge increase in interest to potentially implement these units into the field.

The reduced price of oil means that revenue coming from an otherwise wasted product could be very useful to the producer—no matter how small the revenue stream—but it can be significant in terms of converting something that was once wasted into some-thing profitable, Bragg adds.

“The ability to make the con-version and pay for the methane should be very attractive for oil companies who have suffered dra-matic declines in the value of their product,” Bragg says.

The company says its target cli-ents are those with well pads with absolutely no access to pipelines. It has to come up with a mobile system that goes to the well head, captures the methane, and turns it into LNG, the team says.

Although competition for those focused on methane capture for LNG production is small, Bragg be-lieves the market is large enough for multiple service providers.

“We have a really huge job to do in terms of reducing and eventu-ally eliminating flares. We need as many people as possible to figure out how to do this profitably,” Bragg says.

By April, the company will deploy its first Dresser-Rand LNGo unit, offering the client the op-portunity to reduce flare volumes, utilize the methane portion of the flare and create an LNG end-prod-uct suitable for power supply. “I think we will easily deploy 15 units this year,” Bragg believes.



cubic feet of natural gas per-day customer, whereas Torrent’s single unit can process up to roughly 3 million cubic feet of gas per day. Torrent has the ability to process significantly higher volumes int the 10.0 to 20.0MM mil-lion cubic feet of gas per day range by stacking multiple units.

“Our competitors are focused on a very different market than we are,” says Czuppon. “So, while we address similar issues at the well sites they just don’t have the ability to take the larger gas streams that are more prominent in the Bakken and other resource plays across the country.

With more than 1 million barrels of oil per day produced from the Bakken shale play, Torrent has found prime business opportuni-ties in western North Dakota.

Torrent has been in the Bakken for two years, and understands that having people, service and viable operations is critical. The company has staff on call 24 hours, seven days a week and has a less than two hour on-site re-port time. “We’ve battled through the winters and we have folks on the ground and at our plants every single day,” Chiste says.

“Having a strong operations team and providing them the service for our equipment has been very well-received by our customers, especially when it’s in a resource constrained environment like North Dakota,” Chiste adds.

“Our equipment does greatly differentiate us from our competition, but really our experi-enced personnel and responsive 24 hour, seven days a week service is what sets us apart and keeps our customers happy,” Czuppon says.

In this low crude price environment, Tor-rent believes its services aren’t just about flare reduction targets. Its technology package also offers a valuable, cost-saving product. Opera-tors are able to market and sell liquids similar to how they market and sell oil. If oil prices are at $50 per barrel, there are liquids that Tor-rent can recover and then sell for another $5 to $10 per barrel, which is an incremental rev-enue stream. “People are not only looking at cutting costs, but they’re looking at optimiz-ing revenue and our plants help them do that,” Chiste says.

Author: Emily AasandEditor, The Bakken [email protected]

AT THE SOURCE: Torrent's well site units are monitored and serviced by the company within 2-hours of any issue. PHOTO: TORRENT ENERGY SERVICES



Conditioning


New regulations spotlight the role of burner management systemsBy Luke Geiver

Moving

THE SLEEPING GIANT: Profire Energy, a Utah-based company, believes the Bakken shale will create several clients due to the need for burner management systems on the well pad. PHOTO: PROFIRE ENERGY INC.

For Utah-based Profire Energy Inc. the Bakken offers in-credible potential for the burner management company. The future of Profire—and other firms capable of managing heating ele-ments on well pads and tank battery sites—is linked to the play’s ongo-ing push to better control flaring and to condition all crude prior to rail transport. Although the company has operating facilities in Texas, Canada, Utah and the East Coast, it is the Bakken that has the team excited for the future. “We call the Bakken our sleeping giant,” Andrew Limpert, CFO says. “We are just getting started there. Our presence there is more a function of our ability to get there than our opportuni-ties that exist there.”

Profire’s major entrance into the Bakken represents the start of a new era for the shale play. In late 2014, the North Dakota Industrial Commission implemented new crude conditioning rules that will take effect April 1. The new rules require all crude set for transport to meet certain pressure and temperature limits. The limits, the state believes, will ensure that Bakken crude transported via rail matches the volatility levels of gasoline used in car engines or lawnmowers and ensure all entities involved in the movement of the commodity that the crude in the cars is safe and within average volatility levels. Prior to shipment, oil will need to be stored at or below 13.7 Reid Vapor Pressure and at a temperature of 110 degree Celsius.

The Bakken magazine spoke with Limpert the day the NDIC is-sued its ruling on crude conditioning and it was clear then why the

Toward Crude

THEBAKKEN.COM 31



team—and others that offer similar servic-es—has such high hopes and plans for its service offerings in the Bakken.

Burner Management BackgroundPrior to the final ruling on the crude

conditioning order, the NDIC had held sev-eral hearings on the subject. In September, a packed house offered several hours of tes-timony opposing, supporting, and explain-ing new technology and commenting on the NDIC’s reasoning and plans for condition-ing. Before the initial hearing on the subject, the NDIC received 1,114 pages of testimo-ny from 33 groups or individuals. Roughly two months, later, the NDIC held another hearing and re-opened the call for testimony on the subject. The call created another 141 pages of testimony submitted by 25 various groups.

Armed with more than 1,200 pages of

testimony, the NDIC arrived at its decision to implement crude conditioning regula-tions despite calls from the exploration and production community calling the regula-tions unneeded. According to the N.D. De-partment of Mineral Resources, the ruling would impact only 15 percent of the existing operators in the Bakken. But, all new well pads and tank batteries would have to meet the requirements for temperature and pres-sure standards. Failing to do so will result in a $12,500 fine for every day the oil is out of compliance. DMR field representatives will check pressure and heat gauges during site visits. Transload facilities also need to ensure oil moved onsite is under the 13.7 Reid Va-por Pressure threshold.

Although the Profire team believes it can play a major role for the operations of those looking to ensure compliance, it also has another reason for optimism.

After forming the company in the mid-2000s, Harold Albert and Brent Hatch learned that the oil industry is constantly in need of evolution to remain profitable and safe, Limpert says. Albert, a former field service operator who worked on burners in Alberta, Canada, was once tasked with maintaining and relighting burners in the field. “He learned then that they could be hazardous,” Limpert says. The hazardous nature is best linked to the home BBQ. Imagine when you attempt to light the unit and the only reaction after pushing the igni-tion button is the sound of propane hissing. Eventually, Limpert says, when it lights you get a big boom. Inspired by his negative field experiences with that hissing sound, Albert formed Profire to offer a burner manage-ment system to the oil industry. His work to offer a safer tool for lighting burners in the oilpatch was also one that would open his

FROM THE PATCH TO THE NASDAQ: After starting as a small operation in Canada, the Profire Energy team has grown its employee base and shale play reach. PHOTO: PROFIRE ENERGY INC.


THEBAKKEN.COM 33

team up to a massive market. Nearly every well pad in North America has some form of heating element present on the pad. Pro-fire’s main burner management tool has evolved and now includes the ability to not only reignite a failed burner but also ma-nipulate the amount of desired temperature needed for any application. Manipulating temperature in the oil patch is the main reason for optimism amongst the Profire group, according to Limpert.

Conditioned CrudeTo keep Bakken crude properly con-

ditioned to state-set standards, the use of heater treaters or heated liquid emulsifiers must be used. The systems use heat as the main method to strip out natural gas liquids that cannot be transported with the liquid crude under the new standards. The need for heat is the variable that Profire believes it can better manage.

Once installed for roughly $4,000, the system can maintain a given temperature for a certain application and detect and reignite a low flame if needed. It can also help to mitigate downtime created when oil tanks are not heated appropriately be-fore transport trucks arrive. In North Da-kota, weather causes the viscosity of oil to change, Limpert explains. When weather is cold and oil viscosity is low, a truck driver will have to wait to fill until the oil is heated and flowing at the appropriate level.

In the case of flaring, pilot lights do go out, he says. “Our technology makes sure they stay consistently lit.”

While the new crude conditioning rules for North Dakota mean the Bakken is officially entering a new era, Limpert hopes the new era isn’t seen as a negative or inef-ficient, uneconomic hassle to oil producers and well site servicing firms. Implement-ing a burner management system can also help save money in low crude price times, he says.

“We have the ability to measure the amount of temperature that a tank can ar-rive at,” Limpert says. “Most people that have some kind of minimum requirement overheat their tanks and they run the burn-

NEW SAFETY STANDARDS: Reigniting failed burner systems doesn't have to include old, hand-based methods with electronic systems such as Profires.PHOTO: PROFIRE ENERGY INC.



ALL-DAY ASSURANCE: The burner management unit allows for remote monitoring and can safely relight a system should it blow out.PHOTO: PROFIRE ENERGY INC.

er almost around the clock. If you run it all day you are wasting money and overheating your oil.”

The Profire technology allows a user to manage and tweak temperature ranges. “Heating your tank all day is like leaving your car idling all day long. Sure it will be plenty warm, but it isn’t the most efficient way to achieve your goal,” he says.

The state’s new conditioning regulations, in com-bination with the cost savings related to remote, instant temperature manipulation, has made Limpert keen to talk of burner management systems. “Burner manage-ment technology is going to be coming to the board room,” he says, “either from a regulator or a safety issue.” When it does, Limpert believes the work of company founder Hatch and the rest of the team over the past eight years will pay off for more than just the boardroom.

Author: Luke GeiverEditor, The Bakken [email protected]



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IN PLAY

Top US energy sources through 2040 By Patrick C. Miller

Presenting the State of American Energy 2015 address in Washing-ton, D.C., last month, American Pe-troleum Institute President and CEO Jack Gerard noted that the U.S. is the world’s top producer of natural gas, the world’s leading refiner of petro-leum products and could soon be the leading producer of oil.

“The United States is in the midst of a new era in domestic energy abundance char-acterized by rising use of renewable energy and increased oil and natural gas production that is strengthening our economic outlook and enabling America to emerge as a global energy superpower,” Gerard says. ”It is a re-markable transformation that has been made possible because America is uniquely rich in energy resources, a talented workforce and cutting-edge energy technologies.”

Despite falling prices, oil “represents the lifeblood of the U.S. economy” in

meeting more than a third of the nation’s energy needs, a statistic that’s not expected to change markedly in the next 25 years, ac-cording to the report.

The report forecasts that the consump-tion of oil and gas will move in opposite di-rections from 2012 to 2040. Oil accounted for 92 percent of transportation fuels in 2014, but by 2040, that is expected to fall by 5 percent with natural gas and renewable fuels making gains. The use of natural gas for residential and commercial purposes is projected to rise from 76 percent in 2014 to 81 percent by 2040. Changes in energy con-sumption for industry and electric power generation are expected to be small.

The U.S. surpassed Russia as the world’s largest natural gas producer and is projected to become a net exporter within the next decade, a development made possible by advances in horizontal drilling and hydraulic fracturing. According to the Energy Infor-mation Administration, natural gas repre-

sented 28 percent of U.S. energy consump-tion in 2012 and is expected to grow to 30 percent by 2040.

The API reports stresses the impor-tance of infrastructure—pipelines, railways, ports, waterways and transmission lines—to promote the development of diverse energy sources for reliable delivery to consumers and businesses. In the next 12 years, oil and gas industry infrastructure development alone is expected to contribute up to $120 billion annually to the economy while sup-porting 1.15 million jobs.

“A diversified portfolio of fuel and technology to supply power is fundamental to a reliable and affordable electricity sys-tem, and low-carbon sources will become ever-more valuable,” the report says. Other sources of energy including coal, nuclear, hydro, solar, wind, geothermal and biomass, are either forecast to expand or continue to meet significant portions of America’s en-ergy needs.

Although the nation’s consumption of nuclear energy is forecast to fall from 21 per-cent to 19 percent by 2040, it will continue to be part of the mix. Currently, 100 nuclear energy facilities in 30 states produce nearly 790 billion kilowatt hours of electricity each

U.S. Energy Consumption by Sector, 2012

SOURCE: AEO 2014, TABLES A2 AND A17, MAY 2014

Primary Energy Consumption by Sector and Fuel TypeTotal Energy Consumption by Fuel

Transportation

Industrial

Renewable Energy9%

NuclearPower8%

40% 43% 7% 10%

76%

41% 21% 25% 12%

1%

3% 5%

17% 6%

Oil37%

Natural Gas28%

Coal18%

Residential and Commercial

Electric Power

92%

Oil Natural Gas Coal Renewable Energy Nuclear Power

THEBAKKEN.COM 39

IN PLAY

year. Because one nuclear power plant can provide electricity for 690,000 homes while emitting less carbon dioxide than one hybrid car, the report says it will play an important role in helping the U.S. Environmental Pro-tection Agency in reducing CO2 emissions by 30 percent by 2030.

Hydropower, a source of renewable en-ergy with no carbon footprint, could poten-tially expand from the current level of 100 gigawatts of electricity annually generated. A study found that 60,000 megawatts of new hydropower capacity could be added in the next 15 years, much of which could oc-cur without the construction of new, large water infrastructure. About 10,000 MW of new capacity could be added with upgrades to existing hydropower plants.

2014 was the best year ever for solar energy in the U.S. as 7.4 GW of new ca-pacity was installed, a 42 percent increase over 2013. Solar power became the fast-est growing source of renewable energy in America, accounting for a record 53 per-cent of all new electric generation capacity installed during the first half of 2014. The current installed solar capacity of 20.2 GW is expected to nearly double by 2016. The International Energy Agency says solar en-ergy could be the world’s largest source of electricity by 2050 if policymakers provide “clear, credible and consistent signals.”

In geothermal energy, the U.S. today ac-counts for 3.6 GW of the world’s 12.1 GW in nameplate capacity. Geothermal power capacity is expected to increase 4 to 5 per-cent each year for the remainder of the de-cade. Oil and gas production represent an important potential source of geothermal power in the western U.S. According to the API report, the industry produces 25 billion barrels of hot water annually, which could be used to generate up to 3 GW of electric-ity.

Although the EIA says the U.S. has the world’s largest recoverable coal reserves, this source of inexpensive, reliable energy that provides 40 percent of the nation’s elec-tricity needs is in jeopardy because of EPA regulations. The Government Accountabil-ity Office estimates that 13 percent of coal-fired generating capacity will be retired by 2025, and warned that “some regions may face reliability challenges.”

Biomass has significant potential as an energy source. One scientific report esti-

U.S. Energy Consumption by Sector, 2040

SOURCE: AEO 2014, TABLES A2 AND A17, MAY 2014

Primary Energy Consumption by Sector and Fuel TypeTotal Energy Consumption by Fuel

Transportation

Industrial

Renewable Energy12%

NuclearPower8%

39% 44% 12% 5%

81%

38% 19% 25% 16%

7% 6%

14% 5%

Oil32%

Natural Gas30%

Coal18%

Residential and Commercial

Electric Power

87%

Oil Natural Gas Coal Renewable Energy Nuclear Power


IN PLAY

mates that up to 680 million tons of bio-mass “could be used for energy and fuels, resulting in 54 billion gallons of nonfood ethanol and biofuels, and enough electricity to meet 20 percent of U.S. energy demand by 2030.”

Zero emissions, lower power costs and stable prices have resulted in wind energy increasingly becoming the primary choice

for new power in such regions as the Pacific Northwest, the Plains states and the Mid-west. Between 2011 and 2013, wind energy provided 60 percent or more of all new elec-tric generating capacity and delivered more than 80 percent in the upper Midwest. The U.S. has more than 62,000 MW of wind en-ergy capacity, which generated 168 million MW hours in 2013.

The report notes that since the 1970s, energy efficiency has been “a quiet success story” for the U.S. The oil crisis of 1974 and energy shortages resulted in new strategies and technologies that use less energy to “de-liver the same or better services to consum-ers and businesses.” Although America’s economy has continued to grow, energy use has slowed significantly. One study predicts that energy efficiency could further reduce energy requirements in America’s economy nearly by half by 2050.

“Today, different sectors of the econo-my rely on certain forms of energy. Trans-portation is largely fueled by oil, while elec-tricity generation is powered by coal, nuclear, natural gas and renewables,” Gerard says. “Looking ahead a quarter century from now, this is not expected to change, which means each energy source—from oil and natural gas to solar and wind energy; from coal and nuclear to hydropower, geothermal and bio-mass—will remain essential to successfully meet America’s future energy needs.”

0

50

100

150

200

250

1970

Quad

s of

Tota

l Prim

ary

Ener

gy

1976 1982 1988 1994 2000 2006 2012

1970 energy consumption Actual energy consumption

Energy consumption if energy intensity were the same as in 1970 (adjusted for imports)

Note: Energy intensity is measured as quads per $ GDP

Reduction in energy consumption as a result

of energy efficiency

Energy Intensity Declines Due to Efficiency Gains

SOURCE: ACEEE USING DATA FROM U.S. EIA & U.S. CENSUS DATA168

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The Bakken Magazine - February 2015