February 14, 2020 -- Power to the People
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Members of the ND Legislature's interim Energy Development and Transmission Committee listen to Brian Tulloh, regional director for MISO, explain the various electric generation sources that serve North Dakota and the challenge of moving that power to consumers.
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NDPC Takes Issue with Land Board Ruling
In a strongly worded letter to its members, the North Dakota Petroleum Council (NDPC) calls a decision by the state Land Board an "overreaction" to a recent court decision regarding royalty deductions associated with processing natural gas.
The Land Board this week issued guidance to Land Commissioner Jodi Smith regarding a ND Supreme Court ruling in the case of
Newfield Exploration v State of North Dakota. The bottom line of the court ruling was that "Gross proceeds from which royalty payments under leases are calculated may not be reduced by an amount that either directly or indirectly accounts for post-production costs incurred to make the gas marketable."
In response, the Land Department sent
a letter to producers notifying them that if they have been deducting post-production costs from royalty payments, they have been underpaying royalties. NDPC takes issue with the state's insistence on royalty payments going "as far back as 1979, long before the
Newfield ruling was handed down." The Petroleum Council maintains that the law does not require a lookback beyond the
Newfield case, which was initiated in 2017.
The Land Board included
a flowchart with the letter that specifies how the gas royalties should be paid and would impose penalties and interest that NDPC says "will cost our industry tens of millions that would otherwise be invested in drilling new wells or gas capture infrastructure." The Petroleum Council's letter argues that the Land Board's action "violated the public trust by prioritizing what amounts to a quick cash grab over the health of the very industry that is sustaining the trust funds under the Land Board's control." NDPC urged its members concerned about the issue to contact Land Board members.
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Helms Cautioned Land Board About Royalty Decision
North Dakota's top oil-regulator said he is concerned about potential consequences of the state Department of Trust Lands' action regarding collection of unpaid royalties on natural gas.
Lynn Helms, director of the Department of Mineral Resources, said he cautioned the Land Board that being overly aggressive in their efforts would be a disincentive to reduce flaring "because the quickest and easiest way to reduce the royalty burden on gas is to flare it."
With natural gas wellhead prices well below $2.00 per thousand cubic feet, it is not economic to capture and process the gas. It is only because of state's gas capture regulations that they are compelled to do so. The inability of producers to deduct expenses from royalty payments tends to discourage investment in gas capture infrastructure.
Helms said he advised the Land Board to consider the implications of any decision to collect royalties on natural gas on the much larger pot of royalties paid on oil production.
Click
here to listen to Helms' comments.
Click
here to read a Bismarck Tribune article about the Land Board's decision.
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Oil Production Could Peak in Five Years
"Best of the Best" Oil Wells Nearly Finished
North Dakota oil production surged past 1.5 million barrels per day last fall, but the industry's days of setting new records will soon come to an end.
DMR Director Lynn Helms told members of the ND Legislature's interim Government Finance Committee this week that he expects production will peak in the next two to five years as drilling in the the most productive areas of the basin are completed.
Click
here to listen to Helms' comments.
Production is expected to peak between 1.75 and 1.85 million barrels per day sometime this decade. Many more new wells will be drilled after that point, but Helms said because they will be in less productive areas of the formation, production will remain relatively flat for a decade or more, before gradually beginning to decline in the decades that follow.
Click
here to listen to Helms comments.
Oil prices have declined in recent months to around $50/barrel on the WTI Index, and Helms expects prices to remain around that number the remainder of the year. He said global demand for oil has been impacted by the Corona virus in China, and the effects will linger for quite awhile.
Click
here to listen to Helms comments.
Members of the legislative committee are interested in the state's long-term oil production forecast because oil taxes contribute a significant portion of the state's general fund. In addition, 30% of all oil taxes collected are deposited in the state's Legacy Fund, the balance of which is approaching $7 billion.
"We need to know not just how much is going to be going into the Legacy Fund, but how big the Legacy Fund needs to be to cover the reduced oil revenue" when oil production declines, said Rep. Jeff Delzer, who chairs the legislature's House Appropriations Committee.
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December Oil Production Dips 3 Percent
Cold, snowy December weather and voluntary producer curtailments took a toll on oil production in North Dakota as output for the month dropped three percent.
Producers pumped an average of 1,475,685 barrels per day in December, down about 43,000 barrels from the previous month. Natural gas production also dipped slightly during the month, averaging 3.06 billion cubic feet per day, down about two percent from the November production number.
DMR Director Lynn Helms said much of the decline was not attributable to adverse winter weather, but rather it was the decision of producers to curtail production to meet gas capture targets.
"It looks like self curtailment accounts for more than the entire drop," Helms said. "In an effort to try to balance gas capture and bring that up, they curtailed about 54,000 barrels a day."
Producers were able to capture and process 84 percent of natural gas production, short of the state's 88% capture target. But Helms said thanks to new midstream infrastructure coming on line, he expects producers will meet gas capture goals in the first quarter of 2020.
Click
here to read Helms December Director's Cut.
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Coal Creek Decision Coming Soon
GRE Will Determine Plant's Future in 2020
Great River Energy, the owner of the 1,100 megawatt Coal Creek Station near Underwood, plans to announce a decision about the plant's future later this year.
Jon Brekke, Vice President of Power Supply for GRE, addressed questions about the fate of the coal-fired power plant at a meeting of the ND Legislature's interim Energy Development and Transmission Committee. It was revealed last week (see
Feb. 7 newsletter) that GRE is considering shutting down one or both units at the plant due to ongoing financial losses.
Legislators were told that many of the coal-fired plants in the region have been forced to operate at less than half their design capacity due to competition from federally-subsidized wind generation and the recent addition of thousands of megawatts of cheap natural gas fired generating units. Brekke said Coal Creek Station has been forced to deal with the negative financial impact for more than a decade.
"The persistent low market prices are having an impact on coal fleets nationwide," Brekke said. "That's a situation that's been around since 2008, we've faced low market prices for that long, and they're getting lower in the market as we go forward."
Brekke said GRE is conducting an analysis of the economic conditions facing the coal plant and if it decides to make any changes to its operations, the decision will be announced in 2020.
"We have great concern about the communities in which we operate, and we're going to do our best to have a good analysis, a good decision-making process, and communicate that decision or that set of decisions once we've made it," he said.
With its 1,100 MW of generating capacity, Coal Creek Station is far and away GRE's largest generation asset, which also includes the Spiritwood Station near Jamestown and wind farms in eastern North Dakota. Click
here to see a slide showing the cooperative's power supply portfolio.
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Shift Away From Coal to Continue
Reliability Concerns Aired at Meeting
Coal's share of the electric generation market has been reduced by a third since 2005, and market observers expect the trend to continue as policy makers push to "de-carbonize" the electric sector.
That was also the consensus opinion of utilities and generation owners who shared their views this week at a meeting of the state legislature's interim Energy Development and Transmission Committee.
Coal-fired generation once dominated the energy mix in the Northern Plains and throughout the Midwest, but now represents less than half the available generating capacity. Brian Tulloh, regional director for MISO - the Midwest Independent System Operator, which manages the grid for much of North Dakota, said political pressure and competition from cheap natural gas and wind generation will likely force additional coal plants to shut down. But he said contrary to the wishes of anti-coal activists, some coal-fired generation will remain part of the mix.
"We look out to 2030 or so, we don't see coal going away," Tulloh said. "There are folks who believe that certainly, but that's not a fossil-planning scenario for 2030."
The generating assets that are part of the MISO grid are bid into the market by their owners, but that market can be distorted by wind generators, the owners of which collect a 2.4 cent production tax credit for every kilowatt hour they produce. That doesn't sound like much, but it adds up to big dollars over time.
John Weeda, director of the ND Transmission Authority, said the Public Service Commission calculated that from the time the first wind farms were built in North Dakota through 2018, investors in wind power have earned $1.46 billion in tax credits. Because there is no fuel cost associated with wind generation, the availability of the PTC at times creates an opportunity for negative pricing. Wind power can be sold for less than zero, but its owners still make a profit because of the tax credit.
As more and more coal units are forced to shut down because they are no longer economical, grid reliability becomes a concern because a larger percentage of its generating capacity is intermittent.
Weeda noted that about 25% of North Dakota's electrical energy is now generated by wind turbines and the percentage is projected to grow. In his closing comments, he cautioned legislators to be wary of becoming dependent on renewable generation to power the grid.
"Major change is coming, but I think we have to careful about calling zero-cost energy going into the market our lowest-cost option, because there are other costs that we're going to start experiencing," Weeda said. "Pretty soon you're up into that 30-some percent range where complexity starts to hit, and we're on the leading edge in North Dakota with all the renewable generation we have."
Click
here to see Weeda's slide presentation. Click
here to see Brian Tulloh's slides.
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NDDOT Starts Hwy 85 4-Lane Project
Watford City to Long X to be Built in 2023
The North Dakota Department of Transportation is expanding Highway 85 to a four-lane from Watford City to the Long X Bridge over the Little Missouri River.
NDDOT is launching the highway widening project by starting project design, right-of-way acquisitions and utility relocations along the corridor. Once the four-lane project is designed and land is secured, the project may be bid in late 2022 with construction starting in 2023.
“Highway 85 is a critical route for transportation and commerce in western North Dakota, yet it continues to see a high number of traffic crashes,” Gov. Doug Burgum said. “This project will improve the flow of traffic for the public, business and industry and enhance safety as we work toward Vision Zero.”
The stretch of Hwy 85 from Watford City to the bridge moves about 4,500 vehicles a day. The 11-mile, $104 million expansion project is the second phase of a multi-phase plan to four-lane the corridor. The first phase of the plan is underway as construction is progressing on a new four-lane Long X Bridge, about 15 miles south of Watford City. The new bridge is to be completed by the end of the 2020 construction season.
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Legacy Committee to Meet in Watford City
Residents of western North Dakota have an opportunity next week to share their thoughts about the best use for earnings from the state's Legacy Fund with legislators who are tasked with developing recommendations for its use.
The legislature's interim Legacy Fund Earnings Committee will hold a two-day meeting February 19-20 at the Rough Rider Center in Watford City. The opening session begins at 6:30 Wednesday evening. The
agenda includes time for members of the public to share their thoughts on proposed uses of Legacy Fund earnings. The session is only scheduled for one hour, but if the public input portion of the committee's last meeting in Fargo is any indication, the meeting will likely last much longer than that. About three dozen individuals testified or submitted written comments at the Fargo meeting. Click
here to see minutes of that meeting, which includes links to written testimony.
Several members of the Western Dakota Energy Association are preparing remarks for the Watford City gathering, many of whom represent school districts that are struggling to come up with classroom space to cope with rapidly increasing enrollment.
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Hot Night in Williston at API Chili Cook-off
Real Winners Found with Charitable Donations
Even though it was a cold February evening in Williston, the night was as hot as it could get as the Williston Basin Chapter of API hosted the 39th Annual Chili Cook-off at the Grand Williston Hotel. It was hot with spicy chili and sizzling hot with generosity for area charities.
As the first of two fundraisers for the year, the event held on February 8 generated a total of $70,000 for a variety of organizations around Williams County.
“We had over 1,000 people attend the event for the chili and music and help support the API,” said Ken Callahan, president of the Williston Basin Chapter of API. “We presented Williams County a check for $500 to support the 2020 Census. We also issued Williston State College a check for $15,000 towards the Oil and Gas Monument that will be unveiled later this summer. We owe $15,000 more towards the monument and $60,000 towards the endowment.”
The event will ultimately provide a total of $19,000 on “Giving Hearts Day” split among the Make-A-Wish Foundation, Relay for Life of the American Cancer Society, Upper Missouri Ministries, PATH, Northern Lignite Council of the Boy Scouts, Trinity in Williston, and the Salvation Army. In addition, $5,000 was given to CHI – Williston, $1,500 for Studio 89, $750 for Elizabeth’s Dance, and $1,000 for Feed My Starving Children.
Callahan said 25 companies provided their favorite chili recipes to compete for several awards. The teams also competed in chili games with the “Most Valuable Team (MVT)” award for raising funds prior to the event. The “Bakken Bread Winner Award” was given to the team that raised the most money during the chili cook-off.
Click
here to see the complete list of chili champions. Click
here for an article from the Williston Herald about the Chili Cook-off.
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Education Study on Track for March Completion
Contractors for the soon-to-be-released Williams County Public School District Education and Collaboration Study confirm that a comprehensive report of findings is on track for a March release.
The report is intended to provide important insight to school leaders, policymakers and the public about lasting solutions to the current challenges of creating and maintaining quality K-12 schools for all students in Williams County.
Study team sub-contractors presented progress reports and preliminary data to study team leads on January 24. Finalized information from the subcontractors is anticipated to be compiled by February 15, which will then be analyzed by the leads. The leads will compose a final report that will be submitted to Williams County Commissioners and presented to the public. The final report will include an executive summary, recommendations, and potential scenarios along with each subcontractor's summary report and supporting raw data.
Click
here to see the Williams County news release and
here for additional information about the study.
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Autonomous Vehicle Grant for NDDOT
The North Dakota Department of Transportation received a federal grant to use innovative technology to improve work zone safety with an autonomous impact protection vehicle. The Federal Highway Administration awarded NDDOT a $241,687 grant through its Accelerated Innovation Deployment program in January.
This pilot project will include the purchase of autonomous vehicle technology that will be used to convert a truck into a self-driving vehicle, or autonomous impact protection vehicle.
“NDDOT is always concerned about safety,” said Brad Darr, NDDOT State Maintenance Engineer. “In 2019 there were 234 work zone related crashes on North Dakota highways. This will be one tool to enhance safety in work zones.”
The autonomous vehicle will improve safety in work zones by removing the driver from the impact protection vehicle during normal operation. Impact protection vehicles are typically human operated and are designed to protect road construction crews from distracted motorists in work zones.
The pilot project is expected to be deployed in the Fargo area later this year.
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Write it Down on Your Calendar!
WDEA 2020 Annual Meeting
Get this date on your calendar! The Annual Meeting of the Western Dakota Energy Association will be held:
October 7-8, 2020
The Grand Williston Hotel & Conference Center
Williston, ND
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Quick Connect
- South Dakota tribes speak against Gov. Noem's ‘riot-boosting’ penalties -- Associated Press
- ND DOT director William Panos speaks to Williston City Commission -- Williston Herald
- Who is Dr. Shelley Lenz, the veterinarian wanting to be ND governor -- SayAnything Blog
- State Capitol to livestream legislative meetings from two busiest meeting rooms -- KFYR-TV
- North Dakota non-oil exports of ag and machinery total $2.2 billion in 2019 -- Associated Press
- ND Reclamation Conference "Moving Reclamation Forward" set in Dickinson -- Bismarck Tribune
- Belfield Public School announces potential plans to build a $15M new school -- KFYR-TV
- Ray school construction project ahead of schedule, completion in July -- Tioga Tribune
- Beulah School Board selects propane over coal for boiler in school addition -- Beulah Beacon
- Williams County says study of public schools on track for March release -- Williston Herald
- Dickinson School Board decides not to act on Midgets mascot complaint -- Dickinson Press
- Dickinson School Board approves purchasing four new school buses for district -- KFYR-TV
- Numbers up at Dakota College at Bottineau, 903 for spring semester -- Minot Daily News
- North Dakota Democrats promise smooth, low-tech caucus in March -- Associated Press
- ND Public Service Commissioner Brian Kroshus announces re-election campaign -- KXMB-TV
- Superintendent of Public Instruction Kirsten Baesler seeking re-election -- Associated Press
- 'Unique circumstances' surrounds wind farm compliance with lighting law -- Bismarck Tribune
- Fracking makes America stronger: Rep. Kelly Armstrong speaks on proposed ban -- CSPAN
- International shipping interests are not immune from the Corona virus -- Hellenic Shipping
- Energy emissions plateau, pointing towards the benefits of natural gas -- Energy In Depth
- Oil from federal lands tops 1 billion barrels as Pres. Trump eases rules -- Associated Press
- IPAA testifies to Council on Environmental Quality on NEPA modernization -- Energy In Depth
- Michigan town shutters 69 MW power plant early after running out of coal -- S&P Global
- Natural gas prices fall to lowest level since 2016, the lowest February prices in 20 years -- EIA
- Environmentalists drop lawsuit over federal oil, gas leases in Arizona -- Associated Press
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Factoid of the Week
Between 1970 and 2017, U.S. GDP increased 262 percent, vehicle miles traveled nearly tripled, energy consumption increased 59 percent, and U.S. population grew by 44 percent.
During the same time period, total emissions of six principal air pollutants dropped 73 percent.
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February 18
Bismarck
February 19-20
Watford City
February 20
Watford City, ND
February 24-27
Bismarck
February 25
Williams County
February 25-26
Dickinson
February 27
Bismarck
March 6
Williston
March 16
Bismarck
March 19
Bismarck
March 19-21
Minot
March 24
Bismarck
March 27-28
Bismarck
April 1
Bismarck
April 21-23
Four Bears - New Town
April 28-30
Watford City
May 19-21
Bismarck
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Oil prices and rig count
February 14, 2020
WTI Crude: $52.05
Brent Crude: $57.32
Natural Gas: $1.84
North Dakota Active Rigs: 56 (up 2)
2/14
/2019
-- 65 rigs
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Geoff Simon
Editor/Executive Director
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