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Page 1: January 2014 - The Bakken magazine

www.THEBAKKEN.comPrinted in USA

Page 2: January 2014 - The Bakken magazine

Ph: 406-969-2595 | Fax: 406-969-2597 | www.highlandprojects.comField Office: 406-876-1721

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Page 3: January 2014 - The Bakken magazine

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Page 4: January 2014 - The Bakken magazine
Page 5: January 2014 - The Bakken magazine

THEBAKKEN.COM 5

CONTENTS JANUARY 2014 VOLUME 2 ISSUE 1

Pg 20 EXPLORATION AND PRODUCTION

Resource RegulatorsOne day with the North Dakota Department of Mineral Resources: predictions, perspectives and the full-story of the DMR’s role in regulating the Bakken. BY LUKE GEIVER

6 Editor’s NoteThe Ultimate Bakken Resources BY LUKE GEIVER

8 ND Petroleum CouncilNew Rules on Pipeline InfrastructureBY TESSA SANDSTROM

10 Bakken NewsBakken News and Trends

THE DIRECTOR: Lynn Helms has flourished in his role as N.D. Department of Mineral Resources. He is now considered the go-to source on many Bakken-related topics.PHOTO: GLASSER IMAGES

Pg 34 PRODUCTS & TECHNOLOGY

Programming The Bakken

Design Solutions & Integration, a software developer and automation specialist, exemplifi es why the Bakken is using controllable, automated systems on the well site. And why programmers are fl ocking to the Bakken. BY LUKE GEIVER

Pg 42 EVENT PREVIEW

Finding The Next Innovation

Where innovation is needed in the Bakken and Three Forks shale plays and where it will come from will be the focus of more than 80 industry experts, researchers, CEOs and decision makers at The Bakken-Three Forks Shale Oil Innovation Conference & Expo, to be held in Grand Forks, N.D., Feb. 10-12.BY THE BAKKEN MAGAZINE STAFF

CORRECTION: In the December 2013 story, “Water Recycling’s New Reality,” all references, or usage of the term “partnership,” involving the relationship between Halliburton and Nuverra Envinornmental Solutions should instead be noted or replaced with the term, “contractual relationship.”

Page 6: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 20146

The Ultimate Bakken Resources Luke GeiverEditorThe Bakken [email protected]

EDITOR'S NOTE

The North Dakota Department of Mineral Resources has led the state’s oil and gas industry into unprecedented terri-tory. Led by Lynn Helms, an oil industry veteran with an undeniably impressive resume and an unmatched understanding of the Williston Basin’s oil and gas operational, economical and geographical environment, the DMR will very soon be regulating a state that produces one mil-lion barrels of oil per day, second only to Texas. As the play has evolved, so too has the DMR’s status. Helms, and several of the other DMR decision makers, have become go-to industry experts, speakers and borderline celebrities. National oil groups and gatherings, the Lyons Club and every type of group in-between wants to hear from Helms and his staff about the latest on the Bakken and Three Forks shale plays.

In December, I had the opportunity to spend an entire day with the main members of the DMR team at their facilities in Bismarck for a story that could fulfi ll the January feature theme of policy. As the feature story, "Resource Regulators," shows, it was a busy day. I tried to capture the important moments and perspectives gleaned from my time with the DMR crew, including: Helm’s 2014 predictions; Alison Ritter, public information offi cer, and her efforts to commu-nicate with industry and the public; Bruce Hicks, assistant director, and his ability to help other state’s regulate up-and-coming shale plays; State Geologist Ed Murphy’s role in fi nding the next Bakken; and Permit Manager Todd Holweger’s constant quest to stay consistent with permitting, even after his offi ce has seen an increase in permits from two or three per day in 2006, to the present number of 20 permits per day.

There are many ways to describe the entire DMR staff: busy, intuitive, respected, challenged. I would argue that the best way to describe the DMR’s abilities in the Bakken impressive. Helm’s thoughts about what he believes is the DMR’s story at the end of the feature prove why.

Within the impressive category is another North Dakota-based Bakken team that is making major impacts on the play. If you attend The Bakken-Three Forks Shale Oil Innovation Confer-ence & Expo, Feb. 10-12 in Grand Forks, N.D., you’ll understand why the University of North Dakota’s Department of Petroleum Engineering is quickly becoming a major player in the Bak-ken. The event will feature more than 80 presentations delivered from industry experts on topics ranging from exploration and production trends to transportation and logistics advancements. Without revealing too much bias, the main-stage presentation, which will include Steve Benson, chair of the petroleum engineering department, has me and other industry representatives I’ve talked with about the event excited. Benson will be speaking on innovation in the Bakken, and, more specifi cally, how his team is working to fi nd new technologies or strategies applicable to the future of the Bakken and which areas of the play’s operations will benefi t from such innova-tion.

Page 7: January 2014 - The Bakken magazine

THEBAKKEN.COM 7

www.THEBAKKEN.com

VOLUME 2 ISSUE 1EDITORIAL

Editor Luke Geiver [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 Tami [email protected]

Marketing Director John Nelson [email protected]

Circulation Manager Jessica Beaudry [email protected]

Advertising Coordinator Marla DeFoe [email protected]

ART

Art Director Jaci Satterlund [email protected]

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, Canada and Mexico. 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 specifi c topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To fi nd 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

Please recycle this magazine and remove inserts or samples before recycling

COPYRIGHT © 2014by BBI International

ADVERTISER INDEX

29 2014 Williston Basin Petroleum Conference

13 AE2S

38 AE2S Water Solutions

39 American Hospitality Management Inc.

44 AmeriPride Serivces Inc.

4 Avitus Group

15 Bakken Park, LLC - Value Place

36 Bartlett & West

37 Building Business in the Bakken Seminar

14 Capps Van & Truck Rental

16 Gamajet Cleaning Systems, Inc.

26 Grand Forks Region Econimic Development Corporation - Bakken Initiative

18 Greystone Construction

2 Highland Projects LLC

45 Horizon Power Systems

33 International Road Dynamics Inc.

24 J-W Energy Company

3 MBI Energy Services

17 Montana Energy 2014

40-41 National Oilwell Varco

27 North Dakota Guaranty & Title Co.

28 Protego USA, Inc.

47 Quality Mat Company

46 The Bakken Magazine

19 The Bakken-Three Forks Shale Oil Innovation Conference & Expo 2014

48 Rossco Crane

12 Wells Concrete

Page 8: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 20148

The 63rd Legislative Session ended more than seven months ago, but the work as a result of the ses-sion hasn’t stopped. Over the course of the legislative interim, the North Dakota Petroleum Council has continued working with landowners groups, regula-tors and other key stakeholders to provide input in 47 new rules that will help increase transpar-ency and effi ciency in siting and locating new pipelines, processing facilities, treating and disposal sites, and in reducing truck traffi c and fl aring. Many of these new rules were drafted as a result of legislative directives.

Two bills that were passed into law last session and that

led to the drafting of new rules include House Bill 1333 and HB 1147. Both will aid in building pipeline infrastructure more effi ciently and quickly to better address major challenges facing the Bakken today, including reducing truck traffi c and dust, capturing more natural gas and making our roads safer.

Building pipeline infrastructure can be a time-consuming process, and minor changes to the proposed route of a pipeline could cause construction delays of several days to several months, leading to continued fl aring and truck traffi c. The permitting process enacted as a result of HB 1147, however, will help eliminate

unnecessary delays in building pipelines by allowing companies and landowners the fl exibility to work together and make minor route variations within or slightly outside a pipeline’s permitted corridor at the request of a landowner or farmer during pipeline construction.

Strengthening the relationship between the industry and landowners was a key component in HB 1333, a bill that included many provisions, including expanded mediation, funding for an abandoned well fund, and a comprehensive location system for underground gathering pipelines that would be accessible to landowners and regulators, and creation of a

regulatory structure for oil and saltwater gathering lines. North Dakota will be the only state to regulate these lines.

The NDPC worked with landowners groups and others to expand the North Dakota Mediation Service to include disputes related to easements to help the industry and landowners avoid litigation, save time and money, and resolve issues. Previously limited to construction of roads and well pads related to oil

New Rules on Pipeline Infrastructure

NORTH DAKOTA PETROLEUM COUNCIL THE MESSAGE

By Tessa Sandstrom

Page 9: January 2014 - The Bakken magazine

THEBAKKEN.COM 9

NORTH DAKOTA PETROLEUM COUNCIL

development, the service, which is operated by the North Dakota Department of Agriculture, will now assist landowners and companies in resolving differences in the siting and construction of pipeline infrastructure, including water and saltwater lines, natural gas and crude pipelines and gathering systems.

Among the common concerns expressed by landowners in relation to pipelines is assurance of

reclamation should the

pipeline ever be decommissioned or in the case of a pipeline spill or leak. To help quell these concerns, additional funding is being directed to the Abandoned Oil and Gas Well Plugging and Site Reclamation Fund, bringing the Fund’s total from $2 million to $75 million. While

companies are still responsible for reclamation and clean-up of their facilities, the measure permanently brings the fund into the law and ensures landowners can get spills

cleaned up should the company no longer exist or not have the funds.

Finally, gas and liquid gathering pipelines will be submitted into a mapping system to allow landowners or lessees to see the infrastructure that may underlie their properties. All gathering pipelines put into service after Aug. 1, will be included in the map by early 2015. The system will increase transparency and ensure effi cient monitoring of all pipelines.

A third bill, HB 1348, allowed for new rules to move well-site equipment further from an occupied home. Under the rules, landowners may request that safety fl ares, holding tanks and treaters be moved further away from the home if the wells are located within 1,000 feet of the dwelling.

The Legislative Session included a number of bills that

will have many positive outcomes for the responsible development of North Dakota’s oil and gas resources. Those related to pipeline infrastructure, however, remain the most important in alleviating the concerns expressed by most in western North Dakota, including truck traffi c, dust and fl aring.

The rules and regulations proposed by the Department of Mineral Resources are comprehensive and will further enhance the safety, monitoring and locating standards of the buildout of North Dakota’s pipeline infrastructure. This is good for landowners, good for regulators, and good for the industry.

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

Page 10: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201410

Continental Resources Inc.

$2.2 Billion

Marathon Oil Corp.$1 Billion

EnerplusCorp.$760

MillionSM Energy

Corp.$350

Million

BAKKEN NEWS BAKKEN NEWS & TRENDS

2014 Bakken Budgets

A new year means new budgets, and for the Bakken, that means big numbers. The fol-lowing is a breakdown of the 2014 spending and operational plans of some Williston Basin operators both large and small.

Note: Numbers reflect available budget numbers at press time

Marathon Oil Corp. $1 Billion

Of the company’s 2014 North American operational budget total of $9 billion, Marathon will spend $1 billion in the Bakken shale for the year. The company in-tends to increase current rig activity by 20 percent. For 2014, drilling plans include 80 to 90 net wells or 200 to 220 gross wells (75 to 85 of which will be company-owned). Mara-thon intends to invest $3.6 billion in the Eagle Ford Shale of south Texas.

Continental Resources Inc.$2.2 Billion

The largest lease-holder in the Williston Basin with 1.2 million net acres (Q3 2013), Conti-nental Resources plans to spend $2.2 billion in the Williston Basin to develop its assets. The company will spend an additional $300 million on exploratory efforts in the Williston Basin as well. The company estimated that by the end of 2013, 98 percent of its derisked acreage would be held by production (HBP), and that 96 percent of its derisked and exploratory acreage would be HBP by 2017.

SM Energy Co.$350 Million

The Denver-based exploration and produc-tion company will spend $350 million of its $1.9 billion 2014 budget in the Bakken and Three Forks shale plays. Of the $350 million planned for the Williston Basin, SM Energy will invest roughly 80 percent of that capital in its already operating properties, resulting in 45 gross fl owing comple-tions using three drilling rigs.

Enerplus Corp.$760 Million

Enerplus Corp. has budgeted for a spending program of $760 million for 2014, an 11 percent increase from 2013. Roughly $506.7 million of that will be used to continue activities in the Bakken and Three Forks plays. The Fort Berthold region will continue to see Enerplus’ main focus. Roughly 20 net wells will be drilled in 2014.

Triangle Petroleum Corp.$430 to $465 Million

The Denver-based fi rm with three main subsidiaries, TUSA (the drilling arm of the company), RockPile En-ergy Services and Caliber Midstream, has proposed a 2014 budget of $430 million to $465 million. No matter the amount, Triangle intends to spend its entire 2014 budget in the Williston Basin. Sixty-six percent will be put to-ward drilling, 26 percent toward land spending and 4 percent will be spent on both infrastructure and RockPile Energy Services.

Page 11: January 2014 - The Bakken magazine

THEBAKKEN.COM 11

Conoco Phillips$3.5 Billion

Halcon Resources Corp.

$400Million

Kodiak Oil &Gas Corp.

$940 MillionTriangle

Petroleum Corp.$430-$460

Million

BaytexEnergy Corp.$82.5 Million

AmericanEagle Energy$65 Million

10 COMPANIES BUDGETING ROUGHLY

$15.3 BILLION

BAKKEN NEWS

Kodiak Oil and Gas Corp.$940 Million

The exploration and production fi rm with pri-mary assets in the North Dakota portion of the Williston Basin will invest $940 million in 2014. The investment should in-crease year-over-year pro-duction volumes for the company by 45 percent. Roughly $890 million of the total 2014 budget will be put towards the drilling and completion of 100 net wells. Another $50 million will be spent on infrastructure build-out and small acreage acquisitions. In 2014, the company has budget for seven drilling rigs and one full-time completions crew working 24/7 with another crew possible on an as-needed basis.

Baytex Energy Corp.$82.5 Million

The Canadian ex-ploration and production company has allocated $485 million for its 2014 budget. Roughly $82.5 million will be spent on Baytex’s Bakken and Three Forks assets. The company intends to drill 15 gross wells.

American Eagle Energy$65 Million

The Colorado-based exploration and produc-tion fi rm may not have the budget of Marathon Oil, but in 2014 it will invest $65 million in the Williston Basin to drill 18 gross wells with one or two drilling rigs.

Halcon Resources Corp.Roughly $400 Million

The Texas fi rm is actually lowering its 2014 drilling and completions budget by 14 percent to $950 million. But, by divesting conventional non-core assets, the ex-ploration and production fi rm will add another $300 million to $400 mil-lion. Of the company’s core assets, the Bakken and Three Forks plays ranks as the largest por-tion of those assets on an acre basis.

Conoco PhillipsRoughly $3.5 Billion

In total, Cono-coPhillips will spend nearly $9 billion in 2014 on its North Ameri-can operations. Global investments will reach $16.7 billion. According to the company, 39 per-cent of its North Ameri-can budget will be spent on the Bakken, Eagle Ford and Niobrara shale. The company will spend another 13 percent of its exploration budget in the Permian Basin and the Niobrara shale, but none in the Bakken.

Page 12: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201412

BAKKEN NEWS

U.S. Shale energy produc-tion this year will make 2014 feel more like 1970. In the U.S. Energy Information Administration’s An-nual Energy Outlook, the major highlight of the outlook indicates that growing domestic produc-tion of crude oil and natural gas not only continues to reshape the energy economy, crude oil production is starting to approach the historical high of 9.6 million barrels per day (MMbd) achieved in 1970. Although crude oil production reached 6.5 MMbd in 2012, the EIA estimates produc-tion totals will reach 9.6 MMbd by 2019, a 22 percent total production volume increase assessment more than the EIA’s 2013 estimates. Through 2040, the EIA estimates crude oil production will remain at or above 7.5 MMbd. “Higher production volumes result mainly from increased onshore oil pro-duction, predominantly from tight, very-low permeability formations,” EIA said. Offshore production will account for 1.6 MMbd to 2 MMbd between 2015 and 2040.

Oil-directed drilling pace is much stronger in the 2014 AEO versus the 2013 version, mainly due to producers locating and targeting sweet spots of plays currently under development while also fi nding additional tight formations that can be developed using the newest technologies available to the industry including

horizontal drilling and hydraulic fracturing. As of 2012, tight oil production accounted for 51 per-cent, or 4.8 MMbd, of total U.S. crude production.

The growing presence of shale energy development is also affecting the use of energy imports by the U.S. According to the EIA, imported petroleum and

other liquid fuels as a share of total U.S. use reached 60 percent in 2005 before dipping below 50 percent in 2010. By 2012, imported petroleum and other liquids as a share of total U.S. use fell to 40 percent, and, by 2016, the imported share will fall to 25 percent.

While energy imports are

Takeaways from EIA’s 2014 OutlookComparison of projections in the AEO 2014 and AEO 2013 Reference cases, 2011-2040 Energy and economic factor 2011 2012 AEO2014 AEO2013 AEO2014 AEO2013

Primary energy production (quadrillion Btu) Crude oil and natural gas plant liquids 15.31 17.08 23.03 18.70 19.99 17.01

Net imports (quadrillion Btu) Petroleum and other liquid fuelsa 18.78 16.55 11.41 15.89 13.65 15.99

Petroleum and other liquid fuels (million barrels per day) Domestic crude oil production 5.66 6.49 9.00 6.79 7.48 6.13

Prices (2012 dollars) Brent spot crude oil (dollars per barrel) 113.24 111.65 108.99 119.45 141.46 165.57

West Texas Intermediate spot crude oil 96.55 94.12 106.99 117.41 139.46 163.54(dollars per barrel)

Natural gas at Henry Hub 4.07 2.75 5.23 4.96 7.65 7.97(dollars per million Btu)

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

a Includes petroleum-derived fuels and non-petroleum-derived fuels, such as ethanol and biodiesel, and coal-based synthetic liquids. Petroleum coke, which is a solid, is included. Also included are natural gas plant liquids and crude oil consumed as a fuel.

Page 13: January 2014 - The Bakken magazine

THEBAKKEN.COM 13

BAKKEN NEWS

going down, energy exports con-tinue to rise. The 2014 AEO in-dicates that exports are occurring faster than the EIA had estimated in its 2013 outlook. By 2016, the U.S. will become a net exporter of liquefi ed natural gas (LNG). By 2018, the U.S. will be a net exporter of natural gas, two years before the EIA had predicted it would happen in its 2013 outlook.

“The net import share of

total U.S. energy consumption is 4 percent in 2040, compared with 16 percent in 2012 and about 30 percent in 2005,” the EIA said.

Although shale energy development is one of the main drivers of change for the U.S. energy outlook, the EIA does point to crude oil prices along with gasoline and diesel demand as variables that affect energy use. In 2012, U.S. gasoline prices

will decline to around $3.03 per gallon before reaching $3.90 per gallon by 2014. In 2013, EIA predicted 2040 gasoline prices would reach $4.40 per gallon. Diesel prices follow a similar trajectory, although demand for diesel will rise in the coming years. “Increasing demand for diesel puts pressure on refi ners to increase diesel yields and results in a rising difference between

diesel prices and gasoline prices from 2017 to 2025,” EIA said.

Other key highlights of the 2014 AEO were linked to natural gas production in the U.S., includ-ing the fact that natural gas prices are boosting natural gas-intensive industries, and higher natural gas production supports increased exports of LNG.

38%

12%

20%

22%

8%0

20

40

60

80

1980 1990 2000 2010 2020 2030 2040

History Projections

Natural gas

Nuclear

Coal

Crude oil andnatural gas plant liquids

Renewables31%

11%

22%

26%

10%

U.S. energy production by fuel, 1980-2040(quadrillion Btu)

100

120

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

Low Oil Price

Reference

High Oil Price

0

50

100

150

200

250

1987 2000 2010 2020 2030 2040

History 2012 Projections

Average annual Brent spot crude oil pricesin three cases, 1987-2040 (2012 dollars per barrel)

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

Page 14: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201414

BAKKEN NEWS

Oil and gas permitting on fed-eral lands in western North Dakota has been offi cially streamlined. The U.S. Senate has passed The Bureau of Land Management Streamlin-ing Act, legislation authored by N.D. Sens. John Hoeven and Heidi Heitkamp. The bill has expanded the service area of the Miles City, Mont., offi ce to include North Da-kota, a service expansion that will help to address backlogs and delays in the federal permitting process that has created a nine-month delay for federal permit approval.

In May 2013, N.D. Rep. Kevin Cramer authored a similar bill. Cramer’s bill has already passed. “This legislation is about helping to cut red tape and making the federal permitting process more timely and effi cient,” Hoeven said. “Right now, it takes about 180 to 270 days to permit an oil well on BLM land in

North Dakota, compared to about 10 days on private lands. There are currently about 525 permits await-ing approval,” he added, “This will help us to alleviate the backlog and other delays that are costing us jobs and economic growth.”

Heitkamp said that for too long, a lack of federal resources and coordination in western North Dakota has led to excessive drilling permit wait times. “We must con-tinue to make commonsense fi xes like this to help North Dakota reach its full energy potential,” she said of the bill.

Following the passage of his bill in May, Cramer said the bill was “rather benign,” but had “major implications.” A 2005 bill had estab-lished the Federal Permit Streamlin-ing Pilot Project within the Bureau of Land Management that was aimed at improving the handling of

oil and gas permits on BLM land. At the time, North Dakota was not part of the pilot project. Cramer’s bill worked to include North Da-kota in the pilot project by form-ing the Miles City offi ce into the Montana/Dakotas State Offi ce. The new offi ce can work on North Dakota permits.

In late 2013, another bill passed the House that would affect the federal pemitting process for energy developments. The Federal Lands Jobs and Energy bill (HR 1965), sponsored by Doug Lam-born, R-Colo., focuses on two main areas of federal lands energy devel-opment: leasing and permitting.

For leasing, the bill would require the Interior Secretary to conduct new lease sales in areas identifi ed with the greatest energy potential, prohibit the Interior Secretary from taking away leases

already sold, set fi rm timeliness for the Secretary to issue leases, and, according to the U.S. House of Representatives’ Committee on Natural Resources, prohibit the Secretary from changing the rules after the leases and contracts have been fi nalized.

On permitting, the bill would set fi rm timelines on the Interior Secretary to act on a permit to drill. According to the Committee on Natural Resources, the average time to get a well permitted on state land is roughly 12 to 15 days, while the average time to permit a well on federal land is 307 days. The bill would also direct a portion of the permitting processing fees to the lo-cal offi ce where they were collected to ensure the permitting offi ce has the appropriate staff, expertise and resources.

Federal Oil, Gas Permitting Streamlined

Page 15: January 2014 - The Bakken magazine

THEBAKKEN.COM 15

BAKKEN NEWS

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Watford City LocationOpening Spring 2014

Strata-X Energy is taking its fi rst-mover philosophy to south central North Dakota. The exploration and production fi rm with offi ces in Canada and Australia has been granted the necessary permits to drill and explore for shallow gas in the counties of Emmons and Mc-Intosh. The North Dakota De-partment of Mineral Resources has permitted four wells and a drilling company has already been contracted for what the company is calling its Sleeping Giant Project. The wells will target the gas-rich Niobrara formation.

“Strata-X Energy strives to be the fi rst mover or early mov-er on opportunities it pursues. This strategy tends to lead the company away from the main

pack of the industry where leases can be prohibitively expensive for a small company,” Strata-X said. “We can lead the industry into the next hot area.”

Although Strata-X will be working to prove out the Sleeping Giant Project, the DMR said in a statement on the rare permits that it will be a long time before the area, and the project, is proven to be economical. In 2006, Staghorn Energy looked into the same region in search of shallow gas resources but determined retrieving the resources would not be economical.

The site in question is located within a fl at agriculture land area. According to Strata-X, there has been relatively little drilling in the area and the

drilling that has occurred has been performed away from the main structures that Strata-X will target. Previous drilling targeted the Cretaceous and Paleozoic formations. “The Niobrara formation in this area has been overlooked despite gas shows and small fl ares being reported,” the company said.

After drilling commences on the project, Strata-X has a period of six months before the wells, and the results, are taken off confi dential status. Follow-ing that period, the DMR can release the name of the opera-tor, well name, well location, spacing or drilling unit descrip-tion, drilling date and produc-tion sold.

Sleeping Giant Shallow Gas Project Approved

Page 16: January 2014 - The Bakken magazine

The pipeline industry in North Dakota is becoming more transparent. The N.D. Industrial Commission recently approved rules that will increase pipeline regulations and reporting requirements. “The Legisla-ture saw a need for greater pipeline enforce-ment, due to the growth in pipelines to move all fl uids in western North Dakota,” said Wayne Stenehjem, attorney general, following an announcement that the NDIC had approved several new rules and regula-tions created by the Department of Mineral Resources.

Stenehjem said the rules will require operators to submit data to the Industrial Commission in an effort to track con-struction and reclamation of pipelines. In addition, the new regulations will require the tracking of pipeline locations for use by surface owners. The rules will go to the Legislature’s Administrative Rules Commit-tee for approval and are expected to take effect April 1.

Gov. Jack Dalrymple called the ap-proved rule changes a sign that NDIC is committed to the oversight of the oil and gas industry. Although Ron Ness, president of the North Dakota Petroleum Council, called the regulations good for landowners, regulators and the industry, he did note that an infl ux of new regulations over the past

two years could potentially slow the efforts of the oil and gas industry. “We must be mindful of the effects some rules may have on creating burdens or bureaucratic red tape,” he said, adding that, “technology has allowed us to develop more of our natural resources while reducing our impact. But, overburdening the industry with regulations could inhibit innovation needed to further enhance technologies and responsible operations.”

While the state’s regulators are working to make the pipeline industry (related to the movement of oil and saltwater safer), the N.D. Department of Health, Environmen-tal Health Section is also helping anyone in the state stay abreast of all oil or saltwater spills. The Department of Health has cre-ated a spill report webpage that provides information on the types of spills, amounts released, dates of incidents, locations and incident summaries—all related to the spills reported to the department. Prior to the website, the information was publically available upon request, but the new ap-proach provides better access to the public, according to the department. Data on the site is broken down into incidents within the past 12 months, and incidents older than that. Data will be updated weekly.

Pipeline Industry Goes Transparent

BAKKEN NEWS

1305

391

734

245

552

104

178

45

0

200

400

600

800

1000

1200

1400

Contained Not Contained

Contained* vs. Not Contained**

All OilSalt WaterOther

SOURCE: ND HEALTH DEPARTMENT

Inci

dent

s

*Contained releases are those that remain within the boundaries of the production or exploration facility

** Not contained releases are those that overflow the boundaries of the facility or leak from a facility pipeline

Page 17: January 2014 - The Bakken magazine

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Roughly 400 miles sepa-rates Guernsey, Wyo., from the Bakken shale formation. The distance has not hindered the Wyoming community from utilizing Bakken crude as a main driver for its recently opened crude oil unit train facility near the town. The facility was designed to handle varying crude types and is the fi rst in the surrounding area capable of loading multiple crude types, in-cluding crude from the Bakken, Powder River Basin, Niobrara, Southwest Wyoming, Big Horn Basin and Canada.

For example, Western Ca-nadian Select crude oil with an API gravity of 20 and 3 percent sulfur content can be loaded on one train, while Bakken crude with an API gravity of 40 and .20 percent sulfur content can be loaded on another. “This fl exibility allows for more op-tionality as producers ship their products to markets through-out the East, West and Gulf coasts and along the Mississippi River,” said Strobel Starostka

Transfer, the company respon-sible for building and now operating the facility.

“This is such a unique facility and we are so pleased to have been able to join the project at its inception, design it, construct it and see it all the way through to continual operation,” said Steve Strobel, CEO of SST. “Because this terminal has been designed to handle multiple crude types, we are confi dent in its long-term viability, something we are truly excited about.”

Strobel Starostka Construc-tion built the facility owned by Eighty Eight Oil. The facility has three loop tracks with entry and exit from each direction. Roughly 80,000 barrels per day of crude oil can be loaded. Fol-lowing the construction of the facility, SST was awarded the contract to operate the facility, including the hiring and train-ing portion of the facility. The facility currently employs 20 but SST plans to hire another 40 employees in 2014.

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BAKKEN NEWS

FIRST RUN: The first crude oil train moving through the Wyoming terminal.PHOTO: STROBEL STAROSTKA TRANSFER

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EXPLORATION & PRODUCTION

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When Lynn Helms became Director of the North Dakota Department of Mineral Re-sources in 1998, the drilling rig count was at zero and oil prices had recently plummeted only seven months after taking the position. “We were doing emergency rulings to allow opera-tors to shut wells in. Everybody thought the price of oil would recover, but no one knew when,” Helms told me on a cold, bright December day from his Bismarck office. Roughly seven months after taking the Directors job in 1998, light sour crude from Bot-tineau County, N.D., was going for less than $4 per barrel, he explained to me with his arms and legs crossed while leaning back in his chair, a concerned look on his face and the December sun shining through the cracks of his window blinds onto the leaves of his impressive office plant collection. “But, things have changed,” he added, leaning forward in his chair, uncrossing his arms, his bearded cheeks high on his face as he smiled.

Over that December day, I held one-on-one ses-sions with many of the DMR’s top regulators— in-cluding Helms, the face of the department—to learn how the regulatory agency responsible for oversee-ing one of the most important energy developments in the world has dealt with extreme industry change, overcome challenges and formed a process to deal with new issues directly related to the state’s oil and gas industry. Although portions of every conversa-tion that day included discussions of hometowns,

RESOURCEREGULATORS

TOP REGULATORS: From left, Alison Ritter, Todd Holweger, Bruce Hicks, Lynn Helms, Ed Murphy, Dave Hvinden, Rich Suggs. PHOTO: GLASSER IMAGES

The inside story of the N.D. Department of Mineral ResourcesBy Luke Geiver

EXPLORATION & PRODUCTION

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alma maters and trips––Helms of German heritage and his wife of more than 30 years visited Norway last summer––each regulator expressed the sense that the DMR has a seri-ous story to know, one that will continue to affect how shale energy resources are devel-oped in North Dakota and the rest of the country.

Helms on Helms

“A lot of what is involved with this po-sition is about protecting the environment and human safety,” Helms said, when asked about his role with the Department of Min-eral Resources. Because of that, he made a point early in our conversation to explain the early portions of his life in northwestern South Dakota, “riding horses, chasing cows and hunting on the prairie.” The son of a cattle rancher, Helms grew up adjacent to U.S. Forest Service land that the family ran cattle on. “It set a tone for how I view the world,” he said.

Between his days living and working within the open country, extreme rural set-ting and his time as North Dakota’s top oil and gas regulator, Helms developed an im-pressive resume that seems tailor-made for his current position. Following his time in Rapid City, S.D., at the School of Mines and Technology, he took a job with Texaco in Billings, Mont., as a production engineer that included duties related to drilling opera-tions. “That was an introduction by immer-sion. I supervised drilling rigs and more. I got a hands-on lesson,” he said.

While Helms was in Montana working in the declining Cut Bank oilfi eld discovered in 1928, Williston, N.D., was experiencing an oil boom. Helms took a job in Tioga, N.D., with Hess Corp. to get in on the ac-tion. Eventually, Helms became an asset team leader for Hess, leading a team that included a geologist, physicist and produc-tion engineer. “We put together budgets and presented them to John Hess,” he said.

“One of the biggest things that came out of that that infl uenced this job is the testify-ing I did before the Industrial Commission. When those guys sit on the other side of the table and their attorneys are asking them questions, I know what they are up to.”

During his early days with Hess in the '80s, he was also on a team responsible for plugging and reclaiming the Clarence Iver-son well, the fi rst well to recoup oil in North Dakota.

By the '90s, Helms was faced with a di-lemma. To remain at Hess, Helms needed to move to Houston. “The buzz word at the time was global mobile, if you were go-ing to move up the ladder you took jobs in Kazakhstan or Equatorial Guinea,” he ex-plained with a laugh. “I didn’t want to leave

North Dakota. This job opened up and what a blessing it has been.”

Since taking over the position, Helms believes one of the biggest changes he has dealt with has been the use of hydraulic fracturing by industry to recover oil and gas. “Horizontal drilling was also one of the biggest changes ever,” he said. “Much of the oil [in the Williston Basin] laid in wait for a technology like horizontal drilling to come along.”

He remembers distinctly when the practice became a reality in the Bakken. Af-ter watching Halliburton and a handful of other companies apply the technique in the Elm Coulee fi eld in Montana, Helms said his team began wondering if the process could work in North Dakota. In 2006, EOG

EXPLORATION & PRODUCTION

'Horizontal drilling was also one of the biggest changes ever. Much of the oil [in the Williston Basin] laid in wait for a technology like horizontal drilling to come along.'- Lynn Helms, Director

PHOTO: GLASSER IMAGES

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THEBAKKEN.COM 23

Resources hit on a Parshall, N.D., well and then Bud Brigham, founder of Brigham Resources, an exploration and production fi rm bought out by Norwegian-owned Statoil, started experimenting with mul-tiple stage fracks and increased proppant on a well southeast of Williston. The well came in fantastic, he said, “and the rest is history.”

Horizontal drilling may have ushered in a new era for N.D.'s oil development, but Helms and his team have also issued regulatory measures that have reshaped the way the play has been, and will be, devel-oped for decades to come. One of Helm’s proudest achievements has been to limit-ing the amount of what he calls Tetris in the oilfi elds.

“Right at the end of 2009, all of sud-den, we started to see all of these company proposals for random horizontal drilling spacing units of all shapes and sizes,” he said. If approved, the random units would have made the development of the Willis-ton Basin appear incredibly cluttered and chaotic. “I told the staff that we were start-ing to play Tetris, a game of Tetris with 15,000 square miles of people’s minerals. And, if you have ever played Tetris, you know you can never win, the pieces just keep coming.”

The DMR staff analyzed the develop-ment happening in the Bakken and esti-mated that if the Tetris game continued, the amount of land consumed and the pipeline footprint in western North Dako-ta, would be 10 times as much as what was actually needed. Helms brought together all of the big oil companies operating in the state to explain the DMR’s order and new plan with 1,280 acre spacing units. By implementing a scheme that put all spac-ing units at 1,280 acre units oriented north and south, the DMR was able to reduce the number of gravel roads needed from 60,000 to 6,000 miles. And, the pipeline

OFFICE GEOLOGY: The DMR offices feature a representation of the geologic layers present in North Dakota.

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The BAKKEN MAGAZINE JANUARY 201424

footprint was equally impressive, decreasing from 300,000 to 30,000 miles.

Although the industry did react with some negative kick-back, Helms said the role of DMR director requires the ability to issue regulations that can not only affect the entire industry, but, to understand and predict where the industry is headed. “I remember in 2008 saying that what was happening here would take us 12 years to drill all of the wells, and people said I was nuts, that oil booms never last that long. They said I was wildly optimistic,” adding that, “In 2010, I said it’s not going to take us 12 years, it is going to take us 20 years. And then they said I was grossly pessimistic.”

Changes in the industry is not something Helms dislikes, however. It’s the main perk of his job. “My job is so fun be-cause I sit in the middle of all of it,” he said, “No two days are ever alike.”

Outside CommunicatorAlison Ritter doesn’t have an oil industry background, but

if you spoke with her for 10 minutes, you would think she did. “I have to have a working knowledge of what is going on,” she said. Her role as Public Information Offi cer may not seem as crucial to the DMR’s ability to regulate the industry as others

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EXPLORATION & PRODUCTION

SMALL BUT POWERFUL: The in-office display includes samples of bottled Bakken crude and working models of artificial lifts and a drilling rig.

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THEBAKKEN.COM 25

in the Bismarck offi ce, but after listening to her perspectives on the DMR and its role to both the industry and the general public, it was clear that Ritter is the multi-tasking DMR liason the team couldn’t do without. Ritter’s exuberance and authentic interest in her work was obvious. She spoke with an enthusiastic expression the entire session and paused before answering nearly every question, a vocal clue that her intent was to provide the same accuracy to my ques-tions as she would to a mineral owner from Tioga, a drilling supervisor near Dickinson or yet another reporter from a national me-dia outlet looking for the true story of the Bakken.

“I came with an outsider’s perspective. I can bring a new perspective to things, help the department understand what the aver-age person thinks,” she said, speaking on her background in communications and news media production. Ritter frequently fi lls in for Helms at public gatherings to give presentations on the state of the Bakken, and every day, she fi elds several media-relat-ed calls that had previously been handled by Helms. In 2013, Ritter fi lled in for Helms at the Williston Basin Petroleum Conference in Regina, Saskatchewan, (while pregnant) delivering a presentation on par with some-thing Helms could have delivered. Ritter ac-companied me during the day at the DMR facilities, and during each sit-down session, she added snippets of information to our conversations ranging from drilling permit trends to well pad designs.

Ritter also helps mineral owners with questions of their own, and has an incred-ible grasp on the DMR’s website functions that allow users to predict everything from future drilling activity to the hottest fi elds in the play. While there, Ritter provided a shortened version of an interactive elec-tronic wall display presentation on par with something seen on ESPN, and at the gener-al computer in the lobby of the facility, she explained a mapping tool available to track future oil production based on the days until an oil lease expires.

“We are trying to prepare people for what’s ahead. We are trying to minimize en-vironmental impacts while maximizing the economic and social impacts of all of this,” she said. When it comes to industry, most calls she fi elds are from industry represen-tatives in search of a rule clarifi cation. She also helps the operators in some instances herself, or directs a question to the appro-priate person in the offi ce if the industry

representative or the respective company has a question regarding compliance with a rule. In any given day, Ritter could fi eld fi ve or more calls requesting information for the same story (when I was there the hot topic was weather’s role on production).

Of all the DMR staff members, Rit-ter best embodies the constant change and learning experience each member has gone through since the development of the Bak-

EXPLORATION & PRODUCTION

'I came with an outsider’s perspective. I can bring a new perspective to things, help the department understand what the average person thinks.'- Alison Ritter, Public Information Officer

PHOTO: GLASSER IMAGES

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EXPLORATION & PRODUCTION

ken began, she said. The change and learning process is an ele-ment of the team she believes is important for the industry and the general public to recognize. “These people really care about what is going on. I see people work really hard and work lots of hours that go unnoticed,” she said. In the 2011-'13 biennium, the DMR staff was also increased by 30 percent with another 20 percent increase expected in the current biennium. Being at the center of the Williston Basin isn’t something Ritter is afraid of though. In her own words, it’s fun.

Ed Murphy Can See The FutureIn an 18-month period that included 2012, the DMR’s Geo-

logical Survey brought in as many core and sample boxes to its Grand Forks-based core library as it had in the past 10 years, ac-cording to Ed Murphy, state geologist. “We are going through record activity up there [the core library] from companies coming in to look at core and companies that are providing core,” Murphy said. In 2012, the core library received 12,000 feet of core (rock samples taken from North Dakota). “We always say you could lay the core samples and reach from Grand Forks to Fargo.”

Murphy held a core sample of the Middle Bakken in his hand as he explained the incredible growth the Geological Survey team has seen in the past fi ve years. “We love companies to core,” he said, pointing to the small pinhole openings in the rock that could have held hydrocarbons.

Although Murphy’s team’s more glamorous task is to re-search new geologic opportunities available to potential industries (recently the team helped a company in its quest for diamonds near Drayton), it also has to track core sample submissions. For every well drilled in North Dakota, a drilling team must provide a cutting sample taken from the well. is important for the industry and the general public to recognize. Generally, an operator is given three to six months to send in the core sample to the DMR. But, there is such a backlog at the labs right now that the time before the Grand Forks library receives the samples is much longer.

Once the core library receives the samples, University of North Dakota students are hired to photograph the samples for online viewing. According to Murphy, the core library’s online option for core viewing is second to none in the entire country. “This is the nicest site in the country by far,” he said, scrolling through the images as we viewed the site on a screen at his desk. “We are told that over and over again.” The site allows geologists from Houston to review samples before fl ying to North Dakota, he added.

“They love looking at others, but, of course, they don’t like others looking at theirs,” he said. But, information is a boon to the development of the play because people are still learning.

For the past four years, Murphy’s three oil and gas geologists have been focused on the Middle Bakken and Upper Three Forks

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THEBAKKEN.COM 27

formation, he said, but it’s now time to learn about other formations and provide that information to industry. “We try to an-ticipate what industry’s needs are.” Or, in some cases, the team tries to reveal where industry can look for new developments.

“There are questions that we can an-swer now more than ever before. I think that the important thing is that there are still other units out there that with new technology hold promise,” he said. For example, Murphy pointed to the Tyler for-mation as well as others below the Three Forks. “We are saying to take another look at the Tyler, and companies are. We had a lot of vertical success in other units, and some we didn’t. We are saying regardless of that, think about going back to other for-mations, the Birdbear and others below the

Three Forks. Rethink all of these using this horizontal and fracking technology,” he said with a look, a slight smirk, that implied he knew something the rest of us non-ge-ologists didn’t.

Born To RegulateHigh school vacation was an impor-

tant time for Bruce Hicks. Because his fa-ther worked for a small oil and gas com-pany, most of his vacation days were spent pumping and doing roustabout work. “I didn’t really enjoy most of it, but it got me interested in oil and gas.” His interest has blossomed into a 33-year career with the DMR. His main job today is as assistant director to Helms, supervising the oil and gas division. There may be no better per-son to focus on regulating the oil and gas

EXPLORATION & PRODUCTION

'There are questions that we can answer now more than ever before. I think that the important thing is that there are still other units out there that with new technology hold promise.'- Ed Murphy, State Geologist

PHOTO: GLASSER IMAGES

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EXPLORATION & PRODUCTION

industry than Hicks. He has the physical demeanor and presence of someone with serious intent, and he isn’t afraid to make tough decisions. At one point early in his career, he said, “I actually had to regulate my dad, something he was not real fond of.”

Hicks has been integral in the DMR’s efforts to add staff to its offi ces in Dickinson, Minot and Williston. The frantic hiring effort, in addition to the massive case load increase over the past fi ve years, has added a new dimension to Hick's job. Five years ago, the DMR may have heard 200 to 300 cases a year, but today, Hicks and the team hear roughly 200 to 300 cases per month. The DMR has expanded from one building to two, and the conference room once used for

case hearings has been scrapped for a new, much larger room where Hicks, Helms and others hear cases. Helms also performs his monthly Director’s Cut we-binars from this the room.

For the fi eld staff, the evolution of the Williston Basin from a play solely fo-cused on the Middle Bakken, to a multi-formation play that now includes several layers of the Three Forks formation, has presented new challenges. “We have to keep track of where these wells are and in what formation they are in,” Hicks said, a task that may sound trivial but becomes diffi cult when a four-well pad could be drilling into four different formations.

New fi eld inspectors require train-ing before they can be released to their own wells. Inspectors with engineering

'We have shown other state regulators what we are doing. It has been very helpful to them to see how we took this play and got it more developed on a uniform pattern to minimize the impacts.' - Bruce Hicks, Assistant Director

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The BAKKEN MAGAZINE JANUARY 201430

and geology degrees are placed on drilling rigs and new inspectors with math or en-vironmental backgrounds are tasked with inspecting facilities, tank batteries and dis-posal systems.

The business dealings and acquisitions are a challenging aspect of the oilpatch to monitor, Hicks said, but he follows every activity closely because when technology or ownership changes, plans typically change.

In addition to his monitoring efforts, Hicks believes in the power of education. “We have shown other state regulators what we are doing. It has been very helpful to

them to see how we took this play and got it more developed on a uniform pattern to minimize the impacts.”

Hicks recognizes the relatively new state of plays such as the Bakken, and because of that, he knows that his job is no longer only about case hearings and compliance issues. It’s also about setting an example for other resource plays. “If you look at some of the other resource plays, they have Bakken-like potential in place there. Almost every sedi-mentary basin has a source rock there like the Bakken that you could drill into. What we are trying to do is teach everybody and

show them what we have learned here and try and avoid some of the early mistakes.” Hicks shared Helm's sentiment on develop-ing spacing units, stating and restating his satisfaction with the ability of the DMR to help the industry see the benefi t of energy corridors.

Dave Hvinden Has 2 SmartphonesDave Hvinden is in tune with the

day-to-day activity in the Williston Basin. As the Field Supervisor, he has to be. Be-fore we started talking, he set both of his smartphones to silent, and after the email alert on his computer beeped multiple times in the fi rst few minutes of our talk, he closed his email down. Hvinden is no stranger to pressure from outside voices; he has been a football referee for nearly 30 years. At his position in Bismarck, he tries to communicate what the fi eld staff is see-ing throughout the state to the offi ce staff. And, as the play evolves, he is constantly trying to maintain an understanding of the new technologies being used. When asked about the technologies he’s excited about, he laughed, telling me there were too many. But, the use of multipad drilling techniques has his entire team excited, even if there will be new rules and regulations needed to ensure the safety of the new technologies.

“We have people coming in nearly ev-ery day saying that they can put a new well pad together better than before,” he said. “I’ve learned to be patient. I think we need to do the right thing rather than do the quick things.”

Although Hvinden’s role is to help with the fi eld staff ’s ability to perform their jobs, he also said his entire team has been helping young industry engineers. “We do a lot of troubleshooting for them because

EXPLORATION & PRODUCTION

'We have people com-ing in nearly every day saying that they can put a new well pad together better than before. I’ve learned to be patient. I think we need to do the right thing rather than do the quick things.' - Dave Hvinden, Field Supervisor

PHOTO: GLASSER IMAGES

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THEBAKKEN.COM 31

they are young in their careers.” For his new fi eld staff, Hvinden typically makes new DMR hires spend a month with ex-perienced fi eld techs, going on ride-alongs and gaining an understanding of how the experienced technicians manage their areas. In total, Hvinden manages 31 fi eld staff. As his phones and email frequency showed that day, he is never idle.

Rich Suggs Lives GeologyTo ensure the integrity of a well bore,

North Dakota requires cement to be pumped behind the well casing to eliminate

fl uid migration from the well bore into the surrounding area. As the Petroleum Re-source Geologic Analyst, it's Rich Suggs job, to monitor the process. “Once they set casing and then run cement, they run ce-ment bond logs and I review all of those,” Suggs said. “That is one of the critical ele-ments of preserving safety in the Williston Basin and from preventing contamination.”

There are multiple ways to provide Suggs with a cement bond log, but all tool versions essentially provide the same infor-mation. Usually, a sonic tool is used to pres-ent sound waves into the cement to detect

the amount of air or fl uid present between the casing and cement. The wave readings can indicate if an adequate amount of ce-ment is present. If the cement is shown to be inadequate, there are various options for the operator, Suggs said. “We may re-quire remedial work. They may have to go in, perforate and punch holes in the casing and pump cement back in to fi x the prob-lem. In some situations we can allow the well bore to be monitored based on which formations are open.”

Of the approximate 200 new wells per month that Suggs monitors, remedial work will only be requested on roughly three to four wells. In addition to monitoring ce-ment bond logs, Suggs is also busy making sure operators are sending their core sam-ples to Grand Forks. Because production is not slowing down, Suggs foresees much of the same for his role with the DMR in 2014. But, for Suggs, that is not a bad thing as geology is a very natural part of his life. His wife is also a geologist.

Todd Holweger Is PermittingIn 2006, Todd Holweger was only

managing himself. In 2014, Holweger is managing six other oil and gas permitters as the permit manager for the DMR. When a permit for a well pad, seismic procedure or other oil facility is received electronically at Holweger’s offi ce for a new well pad, the permitting team has four individuals who can issue permits and another three that prep the permits for review. The prepping team is tasked with making sure the appli-cations are fi lled out correctly and include any necessary attachments that document, for example, why an operator has chosen one particular location versus another. If fi lled out properly with all of the appropri-

EXPLORATION & PRODUCTION

'Once they set casing and then run cement, they run cement bond logs and I review all of those. That is one of the critical elements of preserving safety in the Williston Bain and from preventing contamination' - Rich Suggs, Petroleum Resource Geologic Analyst

PHOTO: GLASSER IMAGES

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The BAKKEN MAGAZINE JANUARY 201432

ate accompanying information, Holweger’s staff can turn-around a permit in roughly 30 days.

“In 2006, I received two to three per-mits per day. Now, I’m getting 20 permits per day. It is up to 100 permits per week,” Holweger said. The offi ce staff will issue permits based on a case-by-case basis, a point Holweger made several times during our discussion. And, the entire team insists on being consistent and looking for the same elements in each permit. After the of-fi ce staff reviews a permit, a fi eld inspector will also review a proposed well site and add more stipulations if necessary.

The idea of effi ciency isn’t only big in the drilling and completions world. Holwe-ger preaches the same ideals in his offi ce, and, he even urges those submitting applica-tions to practice what they preach as well. An attention to detail can minimize the number of days for any operator who has issued a permit. As an example, he points to cases that require an affi davit allowing a sur-face location to be placed outside of a spac-ing unit. Operators that don’t submit the af-fi davit with the original permit application will then have to be called by Holweger’s staff and obtain or send in the proper docu-mentation before the team can proceed in the permitting review.

In the event that a potential well site is environmentally challenged, Holweger said an operator should provide a simple, one-page Word document explaining why the well pad has been placed in a certain loca-tion. “The operator might just state briefl y that they checked four other spots and this was the best one. Without that, the only thing that we really see is the rough area and we don’t know that they have evaluated other sites,” he said.

Although four is currently the average number of wells per pad in North Dako-ta, Holweger expects that number to rise. “You are going to see a lot more wells on a pad, but, just because you have more wells doesn’t mean the pad is going to be huge,” he said. “The most wells on a pad in the state is currently 14. We’ve got a couple of

pads with future wells noted on the pad for up to 22,” a number Holweger recited with a hint of excitement and exhaustion behind his voice, and a tone that implied to me that it was time to stop talking and to get back to permitting.

Predictions for 2014Numbers from Holweger’s permitting

offi ce make it easy to see where the Wil-liston Basin is headed. For 2013, 58 percent of all permits were for wells on multi-well pads, a 10 percent increase from the previ-ous year. The same rough increase will con-tinue in 2014. “You are going to see more

and more wells on existing pads where they have to enlarge the pad just a little bit,” Hol-weger said. And, the entire staff is starting to see a new spacing unit era taking shape. Using 1,280-acre spacing units has been a major success so far, but Helms, Hicks and Holweger all believe it is time to start 2,560 acre spacing units. “We will strand roughly 4 billion barrels of oil if we go by 1,280 acre spacing units,” Holweger said.

Hicks believes technology, and a move towards infi ll drilling is driving permits to be redone. “From what I’m seeing,” Hicks said, “we are getting so many infi ll wells drilled that it is getting pretty complicated

EXPLORATION & PRODUCTION

'The most wells on a pad in the state is currently 14. We’ve got a couple of pads with future wells noted on the pad for up to 22'- Todd Holweger, Permit Manager

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THEBAKKEN.COM 33

on spacing units and the sizing and who gets paid for what wells,” adding that, “when we start having a lot of overlapping spacing units, it is probably best to see if someone will come in an unitize a certain portion so that wells can be drilled out to their maximum extent.”

The spacing unit change will result from greater use of multi-well pads, the biggest change set to happen in the Wil-liston Basin in 2014, Helms said. “The ex-citing thing is that they will be able to drill more wells with less trucks and less rigs,” he said. “Economically, it is going to be a challenging year for oil companies, but by multi-well pad drilling and reducing con-struction that is going on in the frontend of the well pad, costs will go down. Multi-well pads are going to save the prairie. It will make it possible to drill more wells with less rigs and it will make it more eco-nomic.”

The evolution of the oil and gas play and the move to unitization and multi-well pads is exciting to Helms and the entire DMR team, but it isn’t unexpected. Dur-ing his Hess days, Helms said he learned that in the oil business, innovation must be constant. Spend a day with any of the DMR team members, and that theme shows up again and again. When I asked

Helms about the DMR story, what it means, what is important to know about the group at the center of a shale energy proving

grounds that has garnered global attention both good and bad, he stuck to that theme of innovation. “I would like people to know how hard we work and how focused on per-formance and continuous improvement we are. We never stop thinking about the next session, the next rule, the next improvement on how we regulate or publish information. We aren’t just working hard on what we’ve learned,” he said from his offi ce that De-cember day, his bearded cheeks tense from the serious tone he had taken to the ques-tion. “We are working to improve on what we can do in the future,” he said, the beard-ed smile returning to his face as the word future exited his mouth.

Author: Luke GeiverManaging Editor, The Bakken [email protected]

EXPLORATION & PRODUCTION

WORTH THE VISIT: The DMR facilities house more than just office space. Fossils and other historic findings or artifacts are on display for visitors to understand the full scope of the DMR.

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The BAKKEN MAGAZINE JANUARY 201434

PRODUCTS & TECHNOLOGY

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THEBAKKEN.COM 35

Automation Companies are bringing efficiency, and programmers, to the oilpatchBy Luke Geiver

Programmable logic controllers (PLC) are changing the way a well pad is run, monitored and maintained. Typi-cally housed in a industrial control panel located on a well pad and operated by a touchscreen interface system similar to a tablet, the PLC can route oil into a storage tank, run a pump jack or warn a work crew about the presence of dangerous gas built up on a site. Once con-nected to a wireless or wired network, the PLC can send a message to an accountant at a desk with information detailing oil tank levels at multiple locations. The PLC is made to automate virtually any process. “Automation can do as little or as much as you want it to do,” says Craig Pistulka, president of Design Solutions and Inte-gration, a programming, UL508A panel shop and elec-trical company with offices in Stanley and Grand Forks, N.D., and Sioux Falls, S.D. “The reason why PLCs and automation is advancing so fast in the oil industry,” he says, “is because the technology and the applications for it are advancing just as fast.”

Over the past five years, several automation com-panies have entered and grown in the Bakken shale play. DSI started in the Bakken roughly seven years ago after servicing the water, wastewater, grain and ethanol indus-tries with PLCs and automated systems. DSI isn’t the

THE PANEL SHOP: The Sioux Falls, S.D., DSI panel shop can build customizable automated control panels for well sites in the Williston Basin.PHOTO: DESIGN SOLUTIONS & INTEGRATION

PRODUCTS & TECHNOLOGY

PROGRAMMINGthe Bakken

Page 36: January 2014 - The Bakken magazine

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PRODUCTS & TECHNOLOGY

only company that has thrived through pro-grammable automation.

In June of 2012, Flow Data Inc., which installs and supplies instrument and electrical needs on the well pad, opened a 6,000 square-foot facility in Dickinson, N.D. The company also has field offices and employee housing in Watford City, N.D., and Crosby, N.D. The same month Flow Data expanded its N.D. operations, the company did the same in Pennsylvania in the Appalachian Basin.

In 2008, Industrial Automation, a divi-sion of widely recognized Williston, N.D.-based Triangle Electric, opened an automa-tion and programming service. Industrial Automation can install, build and design PLC and automation systems. In 2012, Tarpon Energy Services LLC acquired Schmidt Elec-tric Inc. of Killdeer, N.D., in a move that Tar-pon explained would give the company the ability to offer electrical instrumentation in North Dakota and the prolific Bakken play.

No one understands the demand for well site automation systems better than DSI. In 2001, he was working out of his bedroom

on programming and panel designs. One year later, he hired his first employee, Brian Evans, who is still with DSI today. Today, he oversees a panel production shop in South Dakota and more than 30 programmers dedicated to the oil and gas industry.

Establishing an Elite TeamThe breakout year for DSI came in 2010.

Pistulka was able to land jobs with several ma-jor operators in the Bakken, and several other projects. The company is currently installing a 300-plus radio site system for a pipeline.

WIRED AND READY: DSI has expanded from a programming, panel-making operation. The company can now offer the electrical hook-up services need to bring an automated well site online. PHOTO: DESIGN SOLUTIONS & INTEGRATION

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THEBAKKEN.COM 37

Multiple DSI programmers are working on projects that consist of automating well pads to pipelines and transloading facilities for a range of operators and infrastructure firms.

Finding work was not difficult for DSI, Pistulka says. Assembling the right group of programmers was, however. To get 30 pro-grammers capable of working in the style DSI has created, Pistulka had to go through more than 50 programmers and countless

resumes and interviews. “We are still look-ing for more,” he says. The current group is made up of programmers from throughout the U.S., including Texas, Florida, North Car-olina, Georgia, Utah, Arizona, Ohio, South Dakota and North Dakota.

“There is a lot that goes on beyond the scenes that people don’t realize anymore,” he says, “it is not just about punching holes into the ground. The oil companies are very de-

manding—and rightfully so—they are invest-ing billions of dollars. They expect A-plus service and technology.”

To ensure DSI is meeting the needs of the oil industry, a programmer undergoes a multilevel training program that could take up to one year to complete. “We want someone that not only knows how to program a PLC but also knows the instrumentation that they are monitoring and all of the equipment that

PRODUCTS & TECHNOLOGY

ELECTRICITY BOOM: In addition to the panel shop, DSI has also added electrical services to its offerings, allowing customers to utilized DSI for an entire well site automation system and hook-up. PHOTO: DESIGN SOLUTIONS & INTEGRATION

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Page 38: January 2014 - The Bakken magazine

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PRODUCTS & TECHNOLOGY

they are controlling,” he says, adding that, “We have found some guys that are really good at programming but are kind of shy at knowing the instrumentation. We train them so that they know what they are hooking up to and how it should be run.”

If DSI is able to find a senior level programmer with oil or gas experience—which isn’t often—the training period can end after 8 weeks. Since DSI first started serving the Bakken, he has noticed an increased emphasis on safety options in many of the program requests and the automated processes that the programs run. Dawn Pistulka, operations coordina-tor for DSI and wife of Craig, says that DSI’s programs are vastly more complex than they were five years ago, “because in addition to new safety options, we are trying to make every program and system better than the last.”

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Global consulting firm Frost & Sullivan recognizes the role of software in the Bakken. In 2013, Fargo-based Pedigree Technologies was awarded the North American Customer Value Enhancement award for its oil and gas software. Pedigree, a com-pany that has seen tremendous growth, has a created a machine-to-machine software package that can track equipment, including trucks, tanks, generators and other products used in the field.

“The idea is that you know what condition your equipment is in or where it is. You can coordi-nate a very streamlined opera-tion,” says Alex Warner, Pedi-gree’s CEO. “If you are a rental operation and you identify that your skid steer has a diagnostic code error, you could dispatch and find out where a maintenance technician is in the field in relation

to that equipment piece,” Warner says, “and then be able to show up with the right part at the right time.”

Pedigree’s technology can be used with tablets and smartphones. The system allows any user to see multiple data sets taken from a well site or a truck. In certain cases, a truck driving team can assess the best time to visit a well site for oil pickup based on information from a Pedigree technology package installed on oil storage sites.

“There is a pressing need for a platform that can amass data from these assets, along with data from their back-end business systems, to further streamline operations and improve overall efficiency,” Frost & Sullivan said of the need for systems such as Pedigrees.

Award-Winning Tracking Technology

PROVEN METHODS: DSI will take base programs from previous projects and revise or tweak them to meet the needs of new customers, a process that helps clients receive an automated service faster. PHOTO: DESIGN SOLUTIONS & INTEGRATION

Page 39: January 2014 - The Bakken magazine

THEBAKKEN.COM 39

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DSI Programmer DutiesNot all programming and automation

service providers operate the same, but DSI's team has found a way to utilize exist-ing programs built in the past to streamline the well site automation process. When an customer requests service, a programmer will be assigned to a well site. The program-mer will receive all applicable engineering and electrical design drawings.

Using a base model program from a previous site, or, an entirely new program design, the programmer will build a program to run any process the operator requests, however the programs that are created are proprietary to each individual customer. Af-ter each program has been tested to 95 per-cent in-house, the programmer will meet the operators commissioning team on the well site to install, finish testing and start the au-tomation process.

After the system is tested, including all safety sensors, the well can be put on flow-back or production. After the well site is brought onto production, the programmer will stay at the site and monitor everything to make sure the software and the site is work-ing correctly. Although the well sites are starting to be more standardized, Pistulka says, many are still one-off sites that could feature a varying amount of equipment.

Since opening the PLC panel shop in Sioux Falls, and the addition of an electrical installation team in June, DSI can now sup-ply every service or product a client looking for automation would need. The use of au-tomation is allowing oil companies to man-age multiple wells much more efficiently, and according to Pistulka, it pays for itself pretty fast. Automation can cut down on the in-person monitoring that is needed at remote well sites, and, it can help operators stop a problem before it starts. “Say for example you aren’t monitoring your wells and one shuts down. The only way you know it shut down is if someone drives out there. What happens if that operator only checks that well every two or three days?” he says. “You can see the amount of money they lose in two to three days.”

Companies that can provide a wide-range of services, such as DSI, will have an

advantage, Pistulka says. When an issue aris-es, it is easier to call one provider rather than six. Automated pump jacks, LACT units or other well site equipment packages aren’t the only thing DSI has programmed PLCs for. The company recently started offering video monitoring of well sites, another option that helps to reduce the amount of in-person monitoring needed at a site. He is proud of the role automation is playing in the Bak-ken, and he is thankful for the oil industry’s role in turning his bedroom-based company

into an automation giant that is still grow-ing. “We need a bigger staff, we need more programmers, more electricians that want to further their education. We need those that are willing to run a computer and download programs,” he says. “Any place that there is drilling, there is work.”

Author: Luke GeiverManaging Editor, The Bakken [email protected]

Page 40: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201440

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Page 42: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201442

EVENT PREVIEW:THE BAKKEN-THREE FORKS SHALE OIL INNOVATION CONFERENCE & EXPO

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THEBAKKEN.COM 43

Top researchers, industry experts, executives and technology providers will address the future of the Bakken-Three Forks Shale play at an event aimed at the Bakken’s global impact and potential for innovation. By The Bakken Magazine Staff

For three days in February, the future of the Bakken and Three Forks shale plays will be in Grand Forks, N.D. The Bakken-Three Forks Shale Oil Innovation Conference & Expo, a collaborative event created by The Bakken magazine and the University of North Dakota’s College of Engineering, and Mines, the Department of Petroleum Engineering and the Harold Hamm School of Geology and Geological Engineering, will feature industry CEOs, water experts, completion design manag-ers, flaring specialists, engineers and some of the play’s leading researchers. The event will combine main stage presentations with dedicated breakout track panels, all focused on a singular theme: innovation.

Steve Benson, chair of UND’s Depart-ment of Petroleum Engineering, will head-line a panel of speakers who are at the fore-front of the Williston Basin’s future. Benson will discuss the research efforts that his staff and students have undertaken in the past three years—efforts that are a direct result

of industry requests and partnership proposals. According to Benson, the research work will help to meet indus-try needs of the present, and change the way Bakken-focused firms oper-ate in the future. Joining Benson on the panel, “Finding The Next Inno-vation,” will be Jim Sorensen, senior research manager for the Energy & Environmental Research Center, and John Staub, team leader of exploration

and production for the U.S. Energy Infor-mation Agency’s Office of Petroleum.

Sorensen will deliver a presentation and an update on the EERC’s efforts to utilize

EVENT PREVIEW: THE BAKKEN-THREE FORKS SHALE OIL INNOVATION CONFERENCE & EXPO

FINDING THE NEXT

INNOVATION

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The BAKKEN MAGAZINE JANUARY 201444

EVENT PREVIEW: THE BAKKEN-THREE FORKS SHALE OIL INNOVATION CONFERENCE & EXPO

CO2 in the oil industry. His presentation, “Po-tential to Use CO2 for Enhanced Oil Recovery in the Bakken,” will reveal how the EERC and industry partners have been able to tackle the Holy Grail of the Bakken’s future, EOR. One of EERC’s partners, Denbury Resources, has already purchased property in the Cedar Creek anticline of both Montana and North Dakota for more than $1 billion.

In his presentation, Staub will explain why the EIA has created and is now perfect-ing a better way to track shale oil production. Earlier this year, Staub and his team unveiled a tracking method that accounts for drilling rig efficiency, initial production rates, decline curves and other metrics that are calculated to better assess North America oil produc-tion that is largely driven by horizontal drilling. Lynn Westfall, EIA’s director, calls the new oil reporting method exciting from an intellectual standpoint and for the industry.

Joeseph Hartmann, director of the Har-old Hamm School of Geology and Geological Engineering, will present on the current state of the school’s research efforts since Hamm

and Continental Resources Inc. invested a total of $14 million in the school. Hartmann will also provide a list of benefits associated with the school’s resources, including the Continen-tal Resources High Resolution Virtual Core Li-brary. Will Gosnold, another researcher from the Harold Hamm School, will discuss his ef-forts to make geothermal heat an alternative to well site power in the Bakken. A poster session on display for the entire event will offer the most promising young researchers two days to offer insight to the most promising research projects. Some of the student presentations have been delivered to Houston-based execu-tives through private meetings.

For those interested in the use of water in the Williston Basin, an all-star group of ex-perts will provide an update on several major projects or technologies recently deployed in the play. Members from Halliburton, AE2S Water Solutions and GE Power & Water will all discuss efforts to recycle frack water, pipe recycled water from the well site or decrease disposal costs by treating frack water.

To highlight the innovation approaches

used to create some of the highest producing Bakken wells to date, Liberty Resources will lead a panel focused on explaining the meth-ods used to turn a potential well site into a record-breaking well. In July 2013, Liberty Re-sources sold its Bakken assets, but prior to the asset sale, the Denver-based completion and production company, had proven that its ap-proach to completing a Bakken well was sec-ond to none. According to Liberty, the com-pany’s unique completion design was pumped on a total of 86 company-operated and part-ner company wells, “resulting in the highest production rates per well among operators in the Bakken formation.” Liberty will be joined by a Canadian-based company, NCS Energy Services LLC, that has quietly been complet-ing wells with three-mile laterals and over 50 discrete fracture stages per well using an inno-vative down hole tool.

To answer any questions regarding the fu-ture of proppant usage in the Williston Basin, Carbo Ceramics Global Engineering Advisor Terry Palisch will present on the ins and outs of proppant selection in the Williston Basin,

Page 45: January 2014 - The Bakken magazine

EVENT PREVIEW: THE BAKKEN-THREE FORKS SHALE OIL INNOVATION CONFERENCE & EXPO

including new products and operator trends. Scott Greenbauer, technical product man-ager from Texas-based Santrol, will unveil a newly created self-suspending proppant tech-nology that offers better production without increased cost. The proppant technology has just started to break into the Bakken, accord-ing to Greenbauer. Both will be speaking on the panel, “The Proppant Push: Trends in Size, Placement, Type and Volume.”

For an update on the overall North American oil energy industry, the American Petroleum Institute’s Chief Economist, John Felmy, will deliver a speech on the policies, economics and regulations that are worth not-ing in 2014.

North Dakota is responsible for the two most recent refinery projects since the '70s, and members from the Dakota Prairie Refin-ery under development near Dickinson, N.D., and the Thunder Butte Refinery under devel-opment on the Fort Berthold Indian Reserva-tion, will each provide an update and overview of the respective projects.

Patrick Montalban, president and CEO

of Mountainview Energy, a Montana-based exploration and production company, will pro-vide an all-access glimpse into the world of a small, independent operator and what it takes to finance, contract, complete and operate a Bakken well in the past and into the future.

Building Business in the BakkenInnovation in the oil patch isn’t linked

solely to energy-related technology. And, a one-day preconference seminar aimed at help-ing businesses of all kinds understand, expand or maintain operations in the Bakken, will show why. The preconference seminar has brought together many of the play’s leading minds and decision makers responsible for de-veloping economic success. The seminar will include the following multi-presentation pan-els: The New Boom: Emerging Markets and New Opportunities in the Bakken; Accessing Bakken Business: Case Studies in Successful Company Entries and Sustainable Business Models; The Case for Place: Why Companies Operate From Within the Bakken.

The emerging markets panel will include

presentations from Tom Rolfstad, director for the Williston Area Development Foundation, Jerry Chavez, president and CEO, Minot Area Development Corp. and Darick Franzen, pres-ident, Watford City Chamber of Commerce.

Keith Lund, vice president of the Grand Forks Region Economic Development Corp., will deliver a keynote presentation explaining his team’s success at bringing major Bakken-business entities to the region. Lund was re-cently elected to the Greater North Dakota Chamber board of directors.

Sponsors for the entire three-day event range from the quickly growing pipeline firm, Chaznline Construction, to Coil Chem LLC, an Oklahoma-based chemical provider. The event has also drawn interest from several me-dia partners, including among many, The Wil-liston Herald. The North Dakota Association of Oil and Gas Producing Counties highlights a list of supporting organizations involved with the event.

Page 46: January 2014 - The Bakken magazine

The BAKKEN MAGAZINE JANUARY 201446

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