July13 The Bakken Magazine

JULY 2013

Water

Trends How an Evolving Water Grid is Connecting Community, Industry Page 18

Plus:

Perspective From Proven Product Suppliers Page 16

AND:

Planning a Salt Water Disposal Site Page 28

Need-To-Know Skills to Access the Bakken Page 26

www.THEBAKKEN.com Printed in USA

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Contents

JULY 2013

VOLUME 1 ISSUE 4

DEPARTMENTS

Products AND Technology

16 Proven Players

Successfully launched product providers share insights on the necessary attributes of new technologies.

By Staff

IN PLAY

26 Relationship Builders

Keith Lund and the Grand Forks Economic Development Corp. team have researched and found ways to generate Bakken-based business from outside the play.

By Staff

CONTRIBUTION

28 Environmental Responsibility Drives Siting of Saltwater Disposal Wells The process and outlook for saltwater disposal sites.

By Kadrmas, Lee & Jackson Engineering

INFRASTRUCTURE

The Water Mix The long-term nature of the play leads suppliers, handlers and organizations to focus on the future, and it starts with pipelines.

By LUKE GEIVER

Pg 20

6 Editor’s Note

The Other Resource

By LUKE GEIVER

8 N.D. Petroleum Council Survey Shows Support, Identifies Issues Ahead

By Tessa Sandstrom

10 Bakken News

Bakken News And Trends

JULY 2013

Water

Trends How an evolving water grid is connecting community, industry Page 18

Plus:

Perspective From Proven Product Suppliers Page 16

AND:

Planning a Salt Water Disposal Site Page 28

Need-To-Know Skills to Access the Bakken Page 26

www.THEBAKKEN.com Printed in USA

ON THE COVER: Water pipe installation projects are now connecting well sites to disposal or supply facilites in addition to expansions for community need PHOTO: AE2S

THEBakken.com

5

EDITOR'S NOTE

The Other Resource Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

The coexistence of water and oil in the Bakken play has been well documented. As this month’s feature article shows, the two are very similar, each presenting issues and challenges, but also opportunities for expansion, innovation and resolution.

Both are resources necessary to produce many other resources and, not surprisingly of both, everyone wants more. We spoke with water authority executives and private business decision makers to provide an update on the ways water is impacting the play, and in some cases, enhancing it.

Infrastructure development––storage, transport and treatment––is the main challenge to providing water for both industrial and residential use for Mary Massad, manager and CEO for the Southwest Water Authority, and Jaret Wirtz, executive director of the Western Area Water Supply Authority. Their organizations are responsible for managing the water supply in southwestern and northwestern portions of North Dakota, respectively. The amount of water available isn’t the issue, they say. It is finding the appropriate methods and scale to move water from an inlet or aquifer to a new housing development or a hydraulic fracturing water supply facility. A growing population of people and well sites complicates Wirtz’s ability to predict future water needs. But, on the positive side, oil companies and community leaders, Wirtz included, are implementing creative strategies to deal with the increasing needs.

In some instances, oil production firms of various sizes are partnering on a pipeline supply grid to move the water to a well site or to a treatment facility. The trend will help to reduce the amount of truck traffic. In addition, water depots and saltwater disposal sites are continuing to open. No matter who we spoke too, every conversation reiterated a common theme that made it clear in the Bakken and the communities impacted by oil production, the standard phrase many of us know doesn’t apply: Water and oil do mix.

We also spoke with suppliers to the oil and gas industry who have entered the Bakken market with innovative products and services and are finding success. They emphasize how important it is for companies interested in doing business in the play to demonstrate their product in person and to thoroughly highlight the product’s main advantage. For companies and organizations headquartered outside of the Williston Basin, Keith Lund and his team at the Grand Forks (N.D.) Regional Economic Development Corp. offer an example of how firms can access the Bakken.

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The Bakken magazine July 2013

ADVERTISER INDEX

www.THEBAKKEN.com VOLUME 1 ISSUE 3 EDITORIAL

4

Editor Luke Geiver lgeiver@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com Staff Writer Chris Hanson chanson@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

PUBLISHING & SALES Chairman Mike Bryan mbryan@bbiinternational.com

20/20 Properties LLC

32

AgriData, Inc

23

Bakken Oil Workers & Oil Service Expo

19

Consolidated Telcom

25

Empire Steel Manufacturing Company

18

Headwaters Resources

2

Quality Mat Company

CEO Joe Bryan jbryan@bbiinternational.com

31

The Bakken Magazine

President Tom Bryan tbryan@bbiinternational.com

30

The Bakken Online

3

Vice President, Sales & Marketing Matthew Spoor mspoor@bbiinternational.com

24

Vice President of Content Tim Portz tportz@bbiinternational.com

TouchStar Wells Concrete

Business Development Manager Bob Brown bbrown@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Senior Marketing Manager John Nelson jnelson@bbiinternational.com Advertising Coordinator Marla DeFoe mdefoe@bbiinternational.com

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

Subscriptions Subscriptions to The Bakken magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, 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 service@bbiinternational.com.

Advertising The Bakken magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about The Bakken magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to The Bakken magazine/Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to lgeiver@bbiinternational.com.

TM

COPYRIGHT Š 2013

by BBI International

Please recycle this magazine and remove inserts or samples before recycling

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7

North Dakota Petroleum Council

THE Message

Roughneck: $300/day Derrick hand: $350/day Driller: $475/day

Geologists: $500/day Consultant: $1,000/day work over

Consultant: $1,200/day

drilling (24 hrs.)

Floorhand work over rig: $280/day (benefits and clothing) Derrick hand work over rig: $310/day (benefits and clothing)

Truck Drivers: $350/day (benefits) Roustabouts: $260/day (benefits) Pumpers: $600/day (contract pumpers)

OILFIELD WAGES: Average wages for oilfield employees working in or around the well site.

SOURCE: NORTH DAKOTA PETROLEUM COUNCIL

Survey Shows Support, Identifies Issues Ahead

by Tessa Sandstrom

From becoming the second largest oil producer in the nation to being recognized as the best state for young adults, North Dakota has broken records and achieved national rankings in 2012 that are unprecedented. For the third year in a row, North Dakota has had the fastest-

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The Bakken magazine July 2013

NORTH DAKOTA PETROLEUM COUNCIL

North Dakotan’s Bakken Perceptions: growing economy in the nation at a rate of 13.4 percent, far out-pacing the national average of 2.5 percent. Our state continues to enjoy low unemployment, and is helping lead the way to energy independence. The petroleum industry is a contributor to our state’s significant growth, and this is a major reason why 89 percent of North Dakotans support oil and gas development in the state, with more than half strongly favoring it.

This is according to an annual survey commissioned by the North Dakota Petroleum Council to help its members better gauge how citizens feel about oil and gas development in the state. The study also helps identify key issues and challenges that we will face as we prepare for another busy summer of oil and gas development and construction to repair and rebuild many of our heavily traveled roads.

By now, many of us are well aware of the positive economic impacts oil and gas development has had on our state.

Rural North Dakota communities that were once in decline are now burgeoning with new businesses, homes, families and growing school enrollments, even as far away as Grafton in northeast North Dakota.

This growth presents its own challenges, however, as these small communities work to accommodate the increase in people and traffic. Our survey found that more than 70 percent of

89% support oil and gas development 72% agree benefits of oil development outweigh impacts 70% concerned with truck traffic and housing costs or availability 45% agree state making progress on roads 60% believe state making progress on housing SOURCE: NORTH DAKOTA PETROLEUM COUNCIL

North Dakotans are concerned about the truck traffic on roads and the cost and availability of housing. In addition, about half are also concerned about the flaring of natural gas.

The North Dakota Petroleum Council and our members also share these concerns, and over the past few years, we have been working with state and local leaders to help make progress on these issues. In addition, with many oil production leases now held, activity in the Bakken is stabilizing, allowing construction to catch up. Many North Dakotans have taken note, with 45 percent agreeing that we are making progress on roads and highways and 60 percent agreeing that we are making progress in affordable housing.

But, our work is not done.

In the coming year, we will be working hard to get the infrastructure in place we need to capture more natural gas and transport more crude oil through

pipelines. Building this infrastructure is vital in getting trucks off our roads so we can invest less of our resources in repairing and rebuilding roads and invest more on schools, law enforcement, flood protection and affordable housing and assistance for our elderly and most vulnerable people.

We agree that North Dakota has its challenges, but we, like many North Dakotans, also consider ourselves fortunate. While much of the nation struggles with a stagnant economy and high unemployment, North Dakota’s challenges are those of growth. These are good challenges to have, and 72 percent of North Dakotans agree that the benefits of oil development and the economic development that comes with it outweigh the risks and impacts.

Author: Tessa Sandstrom Communications Manager, North Dakota Petroleum Council 701-557-7744 tsandstrom@ndoil.org

THEBakken.com

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

Workforce Challenges for Petroleum Companies with Operations in Canada’s Bakken Oil Play

SASKATECHEWAN Regina

the BAKKEN Medicine Lake

Williston

Hard-to-recruit location

Ray

Minot

MONTANA Dickinson

Bismarck

NORTH DAKOTA

In Canada: Build the Brand Worker recruitment is a crucial facet of running any successful Bakken-based operation, and as a recently released workforce study assessing hiring practices in the Bakken shows, finding success in the oil patch is all about building the brand. The Petroleum Human Resources Council of Canada surveyed Canadian-based oil and gas companies on human resource trends, hiring strategies and workforce projections. The survey, “HR Trends and Insights: Workforce Conditions in Canada’s Bakken Oil Play,” concluded that to recruit workers locally or from outside the region, “companies aggressively compete based on their company brand or reputation.”

More than half of the survey participants said company culture, leadership, strategy, stability and financial performance were the key selling points used to attract top staff. The report also states that 10

successful staffing in the Canadian portion of the play requires the constant communication of the company’s brand promise to prospective employees. Interview participants from human resource departments also noted that companies could even work in unison to positively brand the oil and gas industry in the Canadian Bakken to show younger workers the opportunities for multiple career paths and to older workers to highlight the retirement options linked to oil and gas companies.

The need for additional staff, in combination with the need to maintain current staff levels, is important to the continued development in the region. According to the survey, from November 2010 to November 2012, total employment in Saskatchewan and Manitoba increased by 25,100 jobs, more than half of which came in the Bakken region. Of the 280 Bakken-related job post-

The Bakken magazine July 2013

72% 50% 39% 28%

ings recently offered, the survey says, 77 percent were from service companies, 21 per cent were posted by exploration and production firms and the remaining 2 percent were posted by pipelinebased organizations.

More than half of all oil and gas companies surveyed reported plans to add new staff, based on market opportunity, expansion efforts and the need to meet seasonal demands. Hiring isn’t easy, however. The most pressing challenge for human resource departments is attracting and retaining workers in the remote locations of the Bakken, the report says.

And, for Canadian employers looking for U.S.-based labor, challenges also exist. According to the report, working visas and housing costs are the main deterrent for U.S. workers to cross the border.

Employee turnover/retention

Labour/skills shortages

Employee engagement and productivity

28% 22% 17%

Aging workforce

High cost for labor

Compensation/benefits expectations

6% 6%

Workforce safety

Managing a mobile workforce

6%

Managing multigenerational workforce Source: Online survey of petroleum companies conducted in December 2012 and January 2013.

BAKKEN NEWS

Taxing Activities The North Dakota Sales and Use Tax Statistical Report published by the N.D. Tax Department is used primarily “as a summary of the economic activity that occurs throughout the regions of the state,” according to the Tax Department. Based on the 2012 annual report, economic activity in the state is hectic. For all industries in the state, activity levels were 28.7 percent higher in 2012 than in 2011, reaching $25.291 billion last year. The mining and oil extraction industry continued to grow, generating $5.1 billion in taxable sales and taxable purchases in 2012, almost 45 percent higher than 2011 when the industry reached $3.56 billion.

The effect of oil and gas

Taxable Sales and Purchases INDUSTRY Mining and Oil Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Finc., Insur., Real Estate, Rent/Lease Accommodation and Food Services

$/2011 3,563,971,821 170,226,811 705,086,833 996,328,629 4,382,656,818 5,449,056,567 1,010,092,808 1,472,844,889

$/2012 Percent Change 5,117,138,306 43.58% 216,862,518 27.40% 1,073,180,098 52.21% 1,270,236,581 27.49% 5,987,059,129 36.61% 6,348,806,735 16.51% 1,384,784,795 37.09% 1,706,097,731 15.84%

Source: N.D. Tax Department

extraction on every other industry in the state may not have been outlined in the Tax Department’s report, but the percentage change for almost every industry in the state seems to make a clear statement about the role of oil and gas on the state’s economy. Cory Fong, N.D. tax commissioner, said that increases in construction

and the wholesale trade sectors reflect optimism of N.D. businesses. “That growth, coupled with the growth in retail trade, is good news for North Dakota and suggests that our consumers remained confident in our state’s economy,” he said.

To generate the report, the Tax Department tracked growth

in 200 N.D. cities. Four out of the top five cities showing major activity increases are located in or near the Bakken oil and gas play.

New Town recorded growth of 117.4 percent, Columbus rose by 112.3 percent, Alexander grew by 110.2 percent and Glenburn rose by 94.6 percent.

Increasing Production Without the Drill Increasing oil and gas production isn’t just about drilling more holes. Kodiak Oil & Gas Corp. recently added 5,700 barrels of oil per day to its net production totals without drilling a single well. The exploration and production firm purchased 42,000 net acres from Liberty Resources, a Denver-based oil and gas company, of which 90 percent of the purchased acres are held by production. Lynn Peterson, chairman and CEO, said the $660 million purchase will provide the company with a longer runway of sustainable growth.

To fund the purchase, Peterson said KOG maxed out its revolving credit facility of $650 million and worked with its current banking syndicate along with other organizations to fund the extra $10 million needed for the transaction. The purchase increased

KOG’s Williston Basin acres to 196,000.

Texas-based research and production Halcon Resources Corp. has also improved its production numbers, not by purchasing new acreage, but by tweaking its production methods. In the Fort Berthold, N.D., area, the company reports it has transitioned to batch pad drilling along with several modifications to completion protocols. The combination of the plug and perf completion technique that isolates portions of the well bore with ceramic plugs for discrete fracture stimulations in individual well bore sections, and the use of ceramic proppant material in place of sandbased proppant used to prop open the fractured shale rock following stimulation, have played a major role in production hikes for the company. And, Halcon has also increased

the amount of proppant used per lateral foot along with the practice of simultaneous fractures known as zipper fracks, a process that helps to stimulate fractures in multiple wells.

The modified techniques have created a 38 percent improvement in initial production (IP) rates versus all Bakken wells drilled and completed by the company in the first quarter of this year. The most recent well completed by the company has helped to demonstrate that production increases in the Bakken aren't just about drilling more. For a well in the Fort Berthold area, the company reported an IP rate of 3,060 bopd (90 percent oil), the highest IP rate of any company-owned well in the Bakken formation to date, Halcon said.

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11

BAKKEN NEWS

Accelerating the Sand Supply Jim Hoffman, president of Wisconsin-based Hoffman Construction Co., decided to ramp up his highway construction and dirtmoving operations in his home state instead of expanding to the Bakken region. The decision to stay home has paid off. After creating a new mining division last year, Hoffman and his team have already transformed into a frack sand mining services company that helps suppliers such as EOG Resources Inc. and Northern Frac Proppants to develop and manage frack mining sites. “We looked at some of the heavy civil work opportunities for companies like ours out in the Bakken oil play,” he said, “but we realized we could probably best support the play from right here in our own backyard.”

Part of Hoffman’s decision to stay home is that he wanted to serve

the frack sand supply industry, not supply the sand, he said.

The success of Hoffman’s company and the decision to provide frack site development services makes sense given the recent news from Canadian National railway, a global transportation company. The company recently announced plans to upgrade and accelerate its ability to move frack sand from Wisconsin to shale plays across the country. CN will spend $33 million to upgrade its Whitehall Subdivision to increase car-loading capacity and train velocity used to move frack sand from Badger Mining Corp., Preferred Sands of Wisconsin LLC, Atlas Resin Proppants LLC and Taylor Frac LLC. The money will help move heavier loads and improve the 74 sections of rail in three years

SERIOUS SUPPLY: Frack sand service providers and suppliers are all increasing offerings or building additional infrastructure to meet demands from shale plays.

PHOTO: PREFERRED SANDS LLC

rather than four. The investment

by CN is not only just to move more sand, according to JeanJacques Ruest, CN’s executive vice president and chief marketing officer. It is also “to develop a more

robust supply chain for our customers in Wisconsin to connect with the oil and gas shale basins in North America,” he said.

Another BNSF Bakken Investment

STRONGER ROUTES: BNSF is already a major transport player in the Bakken, and a Bismarck-based office will help keep relationships already formed strong into the future.

BNSF Railway wanted to be closer to the Bakken action. The rail giant already provides a significant transportation alternative for oil and gas companies in the play, and it has opened a new office in Bismarck, N.D. The economic development office will allow the company to have a greater presence in the region, and help to serve existing and future customers, Amy Mcbeth, spokesperson for BNSF, said.

“We have strong relationships with economic development partners and opening an office closer to our customers will put BNSF in better position to help shippers in all industries in the state expand and grow,” she said.

BNSF's current role in oil and gas transportation is huge. The company serves 16 of the top 19 oil-producing counties in central and western North Dakota and five of the top six oil-producing counties in eastern Montana, through thousands of miles of rail in the Williston Basin. Mcbeth also notes that BNSF

PHOTO: BNSF

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The Bakken magazine July 2013

currently hauls more than 50 percent of all Bakken crude.

The new Bismarck office will house an economic development, sales and marketing staff, many of whom will work with outside developers in planning rail access for new industrial developments. The team in Bismarck will also help current and future customers plan and construct new locations, Mcbeth said.

“BNSF continues to make tremendous investments in North Dakota,” said N.D. Gov. Jack Darlymple of the office opening. In the past two years, BNSF Railway has hired more than 400 employees in the state and currently has 1,500 employees in the state. Those numbers help to support comments Mcbeth made on the role of the company in the development of the Bakken and the entire state. “We are investing and expanding to support economic growth for the next century,” she said.

BAKKEN NEWS

Fitting into the World Market The North American hydrocarbon revolution is happening, according to the International Energy Agency, and supply growth is occurring faster than previously expected.

The IEA recently released its annual, “Medium-Term Oil Market Report.” The report indicates that supply from shale oil resources, including the Bakken, will transform the market over the next five years. “A country that 150 years ago served as the cradle of the oil industry, but which for decades seemed to face an irreversible production decline, now finds itself, all of a sudden, at the center of an oil boom,” Maria van der Hoeven, IEA executive director said.

The increase in U.S.-based oil supply to the world markets, however, isn’t the entire story. The IEA recognizes several factors that will influence the impact of more oil in the market, including: crude quality, infrastructure requirements, current regulations and the potential for technology used in plays like the Bakken to be used in other plays around the world. “Altogether, these factors are forcing a series of chain reactions that will leave very few links in the global oil supply chain unaffected,” van der Hoeven said.

According to van der Hoeven, the supply shock created by the surge in supply, should help to ease the market and reduce the effect of political- or infrastructure-based disruptions that influence the price of a barrel of oil, companies will begin to rethink their strategies and although emerging economies could become the leaders in refining capacity or overall oil demand, not everyone will be a winner.

Another effect of North Americanbased oil production is the decline in imported oil for the U.S. Increased production and refining capacity in the U.S., however, hinges on the development of necessary infrastructure, the IEA believes. Without it, bottlenecks could pressure prices lower and slow development.

Origin of North American Crude Imports in 2012 and 2018 (million barrels per day)

2012

0.3

1.1 2.7 1.5

2018 0.3

0.2

1.7

1.2

Middle East

Latin America

Africa

Infrastructure Trends

For the Bakken, infrastructure development is only increasing, and project expansions continue to be announced before initial projects are even completed. Recently, Paradigm Midstream announced it would build and operate a pipeline system that will tie into an oil-based rail terminal and oil storage facility still under development by Dakota Plains Holdings Inc. Dakota Plains Holdings Inc. has also said it will add storage capacity and other services to the facility in the future.

Summit Midstream Partners has expanded an existing hub terminal near Epping, N.D. The company has opened a 50,000 bopd crude gathering system that connects into the COLT Hub terminal. A Cromer, Manitoba oil storage and rail loading facility that can currently handle 30,000 bopd, is already planning to expand to 60,000 bopd, according to Tundra Energy Marketing Ltd., the facility’s owner. WBI Energy Inc. has announced plans to build a natural gas pipeline from western North Dakota to western Minnesota.

And, in what appears to be a trend in infrastructure development in the Bakken, the company has already said it could expand the proposed 400 million cubic-foot-per-day natural gas line to a 500 million cfd line in the future.

Others

IMAGE: INTERNATIONAL ENERGY AGENCY

EASY TO SEE: There is no end sight for oil storage facility construction.

PHOTO: OVERLAND AERIAL AVIATION

THEBakken.com

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BAKKEN NEWS

Hydraulic Fracturing Opinions

Total 307 300

Total 247

250

Average Days to Complete

The U.S. Bureau of Land Management has released an updated rules draft and issued a comment deadline of Aug. 23.

Lynn Helms, director of North Dakota’s Department of Natural Resources, provided an update on the proposed hydraulic fracturing regulations in his monthly press conference, in June. The BLM issued a rules draft last year, but after receiving 170,000 comments, it withdrew the rules draft.

With the new draft issued, Helms offered three key elements that he urged oil and gas industry stakeholders to comment on. First, he pointed out, the draft’s rules are about state’s right. The revised rule allows an operator to get a statewide exemption if the state has adopted hydraulic fracturing rules that include chemical disclosure, well construction and well bore pressure testing, Helms said. “The proposal should be expanded to allow the state to apply for an exemption from the rule.”

Second, the revised rule allows for one well to satisfy the pre-fracturing approval requirements for an entire field. For

350

Total 218 Total 196

200

Total 228

Total 212 84

72 77

127

150

74 134

39 236 100

50

163

164

2009

2010

151

122

115 91

78

0 2005

2006

2007

2008

2011

2012

Fiscal Years 2005-2012 Average Days Waiting on Operator - Industry Days

Average Days from Complete Date - BLM Days

SOURCE: U.S. BUREAU OF LAND MANAGEMENT

Helms, that isn’t enough. “The proposal should be expanded to allow a type well to cover an entire county or basin if the geology is substantially similar,” he said.

Third, Helms said that he believes the requirement to submit water source and recovered fluid disposal methods encroach on state jurisdiction over waters of the state and over underground injection control through

the primacy agreement between the state and the U.S. EPA. The BLM states that roughly 90 percent of wells drilled on federal and Indian lands use hydraulic fracturing, but the current regulations governing the completion practice have been in use since 1983 and were not written to address modern hydraulic fracturing activities.

Sen. John Hoeven, R-N.D., has also offered his opinion on

March Oil: 782,999 bopd

April Oil: 793,249 bopd New All-Time High March Gas: 834,637 mcf per day

April Gas: 860,398 mcf per day New All-Time High

14

71 Total 236

The Bakken magazine July 2013

the BLM’s role in oil and gas retrieval. Along with Sen. Heidi Heitkamp, D-N.D., Hoeven has authored the BLM Streamlining Act that would help streamline oil and gas permitting on federal lands in western N.D. The bill would allow the Miles City, Mont.-based BLM office to approve permits in western North Dakota.

BAKKEN NEWS

Fracking Tweaks Yield Record Results 46

50 45

21

HALCON RESOURCES

20

20

22

COMPANY J

23

25

23

26

31

32

COMPANY D

30

31

33

35

COMPANY C

37

40

15 10 5

COMPANY K

COMPANY I

COMPANY H

COMPANY G

COMPANY F

COMPANY E

PETRO-HUNT

0

COMPANY A

Halcon Resources Corp. is producing at record levels in the Bakken following a completions methodology tweak. The Houston-based firm has transitioned to batch pad drilling, a plug and perf completion process and started to use ceramic proppants.

The changes have created a 38 percent initial production (IP) improvement in comparison to other wells completed in the company’s Fort Berthold, N.D., operating area.

Along with other completion tweaks that include increased proppant volume per lateral foot, fracture state density and the simultaneous fracking of wells, the company was able to record its highest ever initial production rate in the Bakken formation of 3,060 barrels of oil per day. In the Marmon area, the new completions approach has also paid off. Halcon reported a 91 percent IP increase rate over other wells previously completed in the region. The new approach to fracking also has the company

SOURCE: HALCON RESOURCES CORP.

eyeing 462 million barrels of recoverable oil from the area, a 40 percent increase over previous estimates.

Good news for the company isn’t just about its success with newly installed completion methods. In its most recent operational update, Halcon reported

that well costs will decrease by 10 percent to $9 million per well.

The decrease can be attributed to pad drilling, centralized production facilities and its proven completion methods.

In total, Halcon is involved

with 105 Bakken producing wells and 9 wells that are undergoing completion. The company also has 32 Three Forks producing wells with another five wells in the completion stage.

A Bakken Education Teachers in North Dakota are learning about the oil patch and how it affects their students, thanks to the outreach efforts of private companies and organizations. The North Dakota Petroleum Council organized a week-long event in mid-June that helped educate the educators on a range of information from well spudding to pipeline sizes. The event also provided each teacher with the opportunity to earn continuing education credits. Decision-makers and government officials from several Bakkenrelated industries provided basic insight, as well, into the jobs now available because of the activity there.

Jason Kringstad, director of the N.D. Pipeline Authority, explained to the teachers the basics of pipeline construction, monitoring and jobs. “From an education standpoint,” he said, jobs include, “engineers, operators, developers and IT specialists related to instrumentation and control.

There are just so many different options for folks to get involved with the pipeline industry for their career options.” Along with input from Kringstad and others, the teacher group visited a well site and toured a refinery.

DRILL BIT DISPLAY: Previously used drill bits along with several other displays allowed seminar attendees to touch or see up-close Bakken-based equipment, shale pieces or petroleum products.

PHOTO: LUKE GEIVER

THEBakken.com

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PRODUCTS and TECHNOLOGY

SPRAYING POWER: Castagra's coating can be applied in extreme cold and because the coating has no flash point, the applicator can use any light source without fear of product ignition.

PHOTO: CASTAGRA

Proven Players

These companies exemplify what it takes to service the oil industry with new technology

By Luke Geiver

16

The Bakken magazine July 2013

Time can be the best friend or the worst enemy of any company looking to introduce a product or technology into the Bakken oil and gas play. Recognizing that can help them brand, launch or pitch a product to prospective users.

The product providers featured here offer two things to those seeking insight into the Bakken’s unique opportunity

for nonexploration and production (E&P) companies to do business with E&P firms. First, these teams provide perspective on and proof of how products or technologies succeed in the play. Second, their experiences help highlight the tactics, methods or talking points that turn a potential product into a proven entity.

PRODUCTS and TECHNOLOGY

Coating by Castagra

Somewhere in the play, a four-wheel drive truck towing an enclosed trailer with the word Castagra painted on the side is pulling onto a well site or an oil storage facility. The trailer carries environmentally friendly, nonflammable, solvent-free material that within a day will be applied as a coating to the inside of a storage tank. Invented roughly 20 years ago for the moldings and shingles industry, the gypsum- and castor oil-based product is now being used in the Bakken to coat the inside surfaces of 400- and 10,000-barrel oil tanks and frack liquid tanks. Tatsuya “Tats” Nakagawa, company vice president of marketing and strategy, says that although the product has been used in Texas and Alberta oilfields, “the areas which we have the greatest interest and success is in the Bakken.”

According to Tats, the reasons are many, but when he pitches his product, he only focuses on what he believes is the greatest advantage of the product. “Although our coating product can and has been used on many applications,” he says, “we really focused on tank lining because that is where we have the greatest advantage for the end customer.”

The product works when it is cold, or until the thermometer hits -25 degrees Fahrenheit. The product doesn’t have a flashpoint, meaning it can be applied under any form of lighting because fire ignition isn’t a concern.

The prep for application is minimal, with a quick round of sandblasting all that is necessary. The company has designed a solventfree application system that reduces waste and doesn’t require solvent to clean out the hose or pumping spray system. Castagra’s applicators have made great strides since they began working in the play, Tats says. They can work in extreme weather and can complete a project in a day. An applicator recently finished two 10,000-barrel oil storage tanks, but, as Tats says, big tanks weren’t always the norm.

“With our new product entry, the smaller tanks were easier to get contracts for because they were viewed as a smaller risk. Small tanks

equaled smaller risk. Tats says Castagra is starting to work on gaining the trust of the larger companies. To earn that trust, it had to perform several product demos onsite to prove the product could perform to its billing. “In the oil and gas industry, these companies make a lot of money and they don’t want to take a chance on something that is just marginally better.” According to Tats, understanding that aspect of the play will help any company brand their offering correctly. The key question he says a company needs to ask itself is, “Where is your biggest advantage?”

A Good Tool Turned Great

Peter Duncan, founder and CEO of MicroSeismic Inc., has described the difference AWESOME ARRAY: The MicrosSeismic system combines multiple inputs between conventional seismic buried below ground to compile data necessary to more accurately monitor and predict hydraulic fracture stimulation success. technologies combined with the IMAGE: MICROSEISMIC INC. use of microseismic technology as if one were adding a stethoRecently, the company unveiled its scope to an ultrasound. Duncan used his extrademarked Productive-SRV system that perience as a geophysicist with Shell Canada uses three microseismically created calculaand other firms before starting the company in Houston. Microseismic technology allows tions to estimate target zone productivity, the user to listen and record the sounds pres- the fracture network and the size of fracture ent in an oil reservoir. The company, formed and the drainage capability of each fracture. in 2003, now offers a product to monitor the The new tool allows drilling teams to better noise emitted during the hydraulic fractur- understand the 90-day initial production peing process. The technology helps provide riod. The technology also allows geologists oil and gas firms with a better understand- to monitor how much proppant a fracture ing of their pools allowing them to optimize contains.

After providing technology to the Bakwell completions, determine well spacing and plan field development and enhance proven ken, the company believes it has learned what brought success. “There is a big difference reserves.

In the Bakken, the company has installed between testing technology and scaling-up. three trademarked BuriedArrays (near-sur- MicroSeismic has implemented its solutions face listening geometry). For the BuriedAr- at scale and can address field wide complerays, the team has monitored roughly 250 tions challenges,” said Mike Mueller, vice president of technology development. well stimulation jobs.

THEBakken.com

17

PRODUCTS and TECHNOLOGY

Riding to Safety

RIDE Inc.’s team has created a safety product developed by rig workers for rig workers. Because of that, the success and implementation of its safety product into the Bakken and other plays around the world may be no surprise. The product is a safety harness and escape structure attached to a zip line that ensures a derrick worker can safely escape from the monkey board, the catwalk platform

sometimes 35 feet above the main platform, in an emergency such as a well blowout or fire. The patented braking system can move a worker off the top of the rig to the ground at 22 feet per second before the braking system engages and slows the worker for a soft landing.

The system can also be operated even if the worker is unable to sit-up or stand.

Greg Hartman, sales manager, says the company wanted to offer a product

FOR RIG WORKERS: The safety system utilizes a patented breaking device that allows a worker to zip down the line and off the monkey board without crashing to the ground.

PHOTO: RIDE INC.

COMMON SITE: After earning the trust of those in the Bakken industry by spraying 400-gallon well site tanks, the company is now working on 10,000-gallon oil storage tanks.

PHOTO: CASTAGRA

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The Bakken magazine July 2013

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PRODUCTS and TECHNOLOGY

that would give all rigs a tool for safely escaping but also offer a user-friendly tool that kept rig workers on the monkey board connected to the rig at all times to avoid the hassle of connecting to an escape harness in an emergency in hot or cold weather. “Input from the industry helped to develop the system to what it is today,� he says.

Darrel Boulter, a former derrick crewman, helped to design the product and says fumbling for a metal clip attachment with freezing or wet hands when the emergency siren on the rig has sounded is not a situation that should require a lot of time or thought. Because of that, the product allows for escape in under 30 seconds.

Currently, 12 Precision Drilling-operated rigs employ the system in the Bakken, but that number should grow Hartman says, based on the continuing influx of workers to the industry, many of whom are untrained on the rigs. The company also offers an accompanying training program.

To introduce the product into the play, the company hit the tradeshow circuit in the region to gain exposure and also leveraged its relationship with Tervita Corp. and Precision Drilling. Working in the Bakken has taught the team that safety is important to all companies, and products like RIDE’s can ensure worker confidence and can find a place in the play.

SAFE DESCENT: The system keeps the worker connected to the zip line device at all times. If an accident occurs, the worker will be moved off the rig even if he or she can't stand or hold onto the handlebars.

PHOTO: RIDE INC.

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INFRASTRUCTURE

A BETTER ROUTE: Pipeline installation trains used to install pipe in the ground are becoming more common as both industries and communities look to expand the water access grid.

PHOTO: SOUTHWEST WATER AUTHORITY

20

The Bakken magazine July 2013

INFRASTRUCTURE

The

Water MIX Oil and people are finding new ways to connect to water

By Luke Geiver

John Rivers calls Michigan home, he’s moving to Denver, and during a recent sit-down conversation with The Bakken magazine held at his employer’s impressive Grand Forks, N.D., headquarters just hours before boarding a plane to Oklahoma, all he wanted to talk about was water in the Bakken.

Director of Business Development for Advanced Engineering and Environmental Solutions’ (AE2S) water division, Rivers has a lot to talk about. Like many others tasked with understanding, utilizing or supplying water within the oil and gas play of western North Dakota, Rivers speaks about water with an easy sense of passion, seriousness and exhaustion. He is one of several in the play tasked with tracking the way water has been, will be or could be handled.

And, after listening to Rivers talk for nearly an hour, his right leg

THEBakken.com

21

INFRASTRUCTURE

DRIVING SCENE: Pipeline installation will help reduce the amount on roads used by farmers, ranchers and others living in rural locations.

PHOTO: SOUTHWEST WATER AUTHORITY

crossed, one arm resting on the expansive table and his sight line rarely shifting from the windows for most of the conversation, it is clear that water is a serious topic that requires both immense effort and time to understand.

Rivers and the other experts we spoke to about water in the Bakken, circa 2013, prove that the popular phrase most of us know about water doesn’t apply to the Bakken. Water and oil do mix.

ban locations, or via private pipeline linked into the main lines. WAWSA and the Southwest Water Authority, a similar organization tasked with water supply to the southwestern portion of the state, both utilize the seasonal climate of the state to provide water to industrial users. Both organizations operate under the premise that excess water capacity created during cold temperatures, or any

times when water treatment facilities are not running at full capacity for any reason, can be sold to industrial users.

“On the days that we are not at peak capacity, we are able to sell that capacity that isn’t being used,” Wirtz says, “So we are able to run our plants at capacity most days and sell that extra water that isn’t needed for domestic uses to the oil industry to pay for the project.” But in all cases, domestic use takes precedence over industrial, so when infrastructure used to supply both struggles, industrial users are at risk.

According to Wirtz and Mary Massad, manager and CEO of SWA, the need for industrial water use is always immense, but unless it’s sent via pipeline, the need isn’t directly linked to oil production companies. The majority of all water moved in the play for oil and gas extraction purposes is sold directly to water transport service providers who then move the water by truck from a water depot to a well site. Some water is piped to crew camps and developments as well. Private water depot operators also supply water to trucking teams and centrally located oil production facilities.

Complex Connections

Every time a weather system drops precipitation on the Missouri River, Yellowstone River or any tributary feeding either, a Bakken well site in need of water is affected. In early June, Jaret Wirtz, executive director of the Western Area Water Supply Authority, the state-formed organization that helps to spearhead the massive task of expanding water infrastructure and supply to western N.D., had to deal with turbidity issues created from heavy spring and early summer rainfalls. The influx of water muddied the supply used in city treatment plants in Willistion, N.D., while maxing out the local water handling capabilities and according to Wirtz, “that affects what we can sell to the industrial users.”

To provide water to industrial users, the resource is typically taken from the Missouri River system, including Lake Sakakawea, or freshwater aquifers operated by both private and public entities. Water for industrial use is accessible at water depots located on main water supply pipelines in rural and ur-

22

The Bakken magazine July 2013

INFRASTRUCTURE HEAVY: Water issues in the Williston Basin are directly linked to the lack of infrastructure, not the amount of water available for use.

PHOTO: SOUTHWEST WATER AUTHORITY

INFRASTRUCTURE

Because water is made available in most cases by state-based pipelines that serve people, the issue of access for industrial users is complex. In 2010, the WAWSA system was created to service— through the appropriate new infrastructure, including pipe, pump and storage—a population of 50,000 people by 2030. The system is currently serving 58,000. Now, Wirtz and his team expect to serve 100,000 people. Because domestic demands are growing but, at the same time, difficult to predict, producing a system capable of meeting domestic and industrial WATER LEADER: water use demands in a timely fashion is a chalAdam Wirtz, executive director for the Westlenge. “That is the toughest part, designing for ern Area Water Supply what is here today and planning for what could Authority, balances industrial and community be here tomorrow,” Wirtz says. water use daily.

Infrastructure availability is the No. 1 chalPHOTO: WAWSA lenge for water in the Bakken, not resource availability, say Wirtz and Massad. “We are perfectly fine on our water supply,” Wirtz says.

Massad and her team have been trying to bring water to some rural locations for several years. The lack of infrastructure and the funding required to link one location to the next along with the need for over 50 percent of those tasked with funding a new water pipeline to agree, has made her job about infrastructure management and development more than accessing water supply. But, a greater water supply is on the way. Massad is working to add another intake from Lake Sakakawea to meet the growing needs of Dickinson, N.D., and the surrounding region. And the list of infrastructure paid for by the SWA or WAWSA currently under development is extremely long.

Both Massad and Wirtz are working to upgrade water treatment facilities, add pumps, add storage, add pipelines and water depots. Depots that were started in 2011 by WAWSA came online in late 2012, but not all of them are operational yet.

Added into the water mix is the struggle to staff needed positions, find the appropriate contractors to build water tanks or lay pipelines and predict where future capacity will be needed. “Some communities we serve are selling water that is within their allocation, to the oil industry,” Massad says, “which as they VISIONARY: John grow they won’t be able to do that because they Rivers, director of will need it for human consumption. So, that is business development for AE2S Water Soluwhere we can come in.” tions, is connecting oil The connection between water availability, companies to make oil and population estimates is one thing Wirtz pipeline work. believes many look over. “This thing doesn’t PHOTO: AE2S work out here unless you provide water for housing, schools and amenities. All of those things take water,” he says.

Rivers and his team are among those working to understand the link between population growth and how to match domestic water needs with industrial demand. They are a prime example of a for-profit organization that is alleviating the havoc water supply is wreaking on those in or around the Bakken play. To do that, Rivers has spent the past year promoting the use of pipeline to link oilcom-

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INFRASTRUCTURE

Quick Takes Robert Hearne, associate professor in North Dakota State University’s Agribusiness and Applied Economics department, has led a team in researching the economics of recycling or disposing of flowback water produced during fracking. Along with perspective on water recycling, Hearne has several thoughts on water in the Bakken.

- Mathematical programming employed by his team shows there are substantial benefits to recycling frack water.

- The availability of Missouri River water is very convenient for the oil producers. The presence of surplus water is exceptional.

- Public officials need to protect water supplies and roads, and should use authority to develop incentives for drillers to conserve water.

- Water disposed of in deep wells takes water out of the hydrological cycle and should therefore be considered differently than other water.

panies to water sources and water treatment facilities.

Connecting Water to the Well

To understand the amount of truck traffic required to supply the necessary amount of water to a well site during the completion process is to understand why Rivers believes in pipelines: hydraulically fracturing one well takes 500 truckloads of water delivered. To put that in context, Rivers offers this example. What if you are a landowner considering pipeline easements on your property and the road in front of your property leads to

24

The Bakken magazine July 2013

an oil development that will feature 12 to 14 well pads? Each pad could have 8 to 10 wells.

Considering that each well will require 1,000 truckloads (there and back), that landowner “is going to have semi-trucks traveling on that road for the rest of his life unless the infrastructure gets put into the ground.”

And, in addition to the incredible amount of truck traffic required if no pipeline is present, Rivers also says, that the state should be in favor of piping water to and from the site, considering each Bakken well requires the state to pay $108,000 in road construction per well per year. On top of all

of that, most Bakken wells will be re-fractured roughly 10 years to 15 years after the initial completion.

Wirtz shares Rivers' opinion on piping water to the well site. “More and more oil companies are seeing the light and the benefit of using pipelines instead of having water trucked.” Although most oil companies have been “hopscotching around,” as Rivers says, to secure their leases, times have changed.

“Now they are in a different mode, and they are just starting to transition into that mode.

It is a farming mode, where they are trying approach the lease acres like a farm property.” Doing that means finding efficiencies and linking up to infrastructure.

“The thing that is swinging the economics is that we are putting both fresh water and saltwater lines together,” he says of efforts to provide pipelines to the well site. Along with dual lines, there are several other reasons that water pipelines are being installed more frequently.

One of Rivers' main objectives over the past year has been explaining to oil companies of all sizes that pipelines are always possible. “Just because you don’t have enough lease area to justify the pipeline system, doesn’t mean we can’t do it. We just have to get others involved.” Pipelines are always possible because the AE2S team can bring together multiple companies on a single line,

INFRASTRUCTURE

Adding pipelines for water transfer is also a pathway to increasing value. According to Rivers, the desire of large oil operators to buy-out smaller leaseholds or oil operations in the Bakken is becoming more and more prevalent. “If your wells are connected,” he says, “you’ve just increased the value of your lease holdings.”

Although wells in the Bakken will never all be connected to a pipeline water grid, Rivers estimates that roughly 75 percent of the area could one day be connected to pipelines, and even if that happens, there will always be truck traffic to and from the well site. Regardless of what happens, it is clear that oil and water are connected. And, as Rivers says, “there is no excuse any more to not look at this shale play long-term.”

IMPORTANT PIECE: The reverse osmosis skid is crucial to treating water in southwestern North Dakota.

PHOTO: SOUTHWEST WATER AUTHORITY

and, the company is also willing to own, operate, design or build the lines in any combination possible to make it happen.

When that happens, oil companies save.

Most proposals the team has submitted to oil companies in search of a pipeline sys-

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

tem lately have been to transport any water for less than $1 per barrel. In most cases, oil firms pay anywhere from $2 to $5 per barrel of water. Most wells use 60,000 barrels of plus additional fresh water supply and saltwater removal capabilities over the life of the well.

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THEBakken.com

25

IN PLAY

SOLID SUPPLY: Concrete in the Bakken is in high demand and Grand Forks, N.D.-based Wells Concrete is helping to meet the region's needs.

PHOTO: GRAND FORKS REGION EDC

Relationship Builders

By The Bakken Magazine Staff

26

The Bakken magazine July 2013

In 2010, Keith Lund, vice president of the Grand Forks Region Economic Development Corp., joined a chamber-led group of city leaders on a road trip to western North Dakota. The team toured the region, met

with community members, government officials, business leaders and, most importantly, listened. Lund says the group quickly learned several key things from those initial discussions, and helping the group bring business to Grand Forks while helping business in the Bakken.“The oil and gas industry, much like others, but maybe more, is really relationship-based,” Lund says.

Understanding that facet of the play has helped Lund and other regional businesses excel. “A model that works for us is working through partners,” Lund says.

“When we first started this initiative, we

visited with folks and let them know we weren’t trying to steal any business.” The initiative, originally branded with the term, “Expand east do business west,” was created because of what Lund and the team were told by western North Dakota officials. “One of the things we heard was that anything that we could do to create or manufacture something outside of the region, but have it shipped in and installed by a crew that would soon leave, would be beneficial.”

Since the initiative started, several Bakken-based businesses have moved to Grand Forks to supply the play from miles outside of the region. And, Lund and others in the city are now working to help Grand Forks-based companies with a link to those in need of service. Lund's team and the Grand Forks Chamber of Commerce estimates there are roughly 110 businesses in the region doing some form of business in the Bakken. And for those that aren’t, or even for those that are, Lund has several recommendations.

“Trying to understand a business’s challenge and its markets is key,” Lund says of companies looking to serve the Bakken. Lund tries to ask companies first about what they need before ever pitching the idea of working with, or moving to, Grand Forks, an approach he says, “is not a great message.”

For companies looking at Grand Fork as a potential business location, Lund says each potential company must first have the business case and the economics related to the logistics of moving products

IN Play

EXPANSION REALIZED: Steffes Corp., an oilfield services and equipment provider, moved to Grand Forks after working with Lund and others to verify employee and land availability.

PHOTO: GRAND FORKS REGION EDC

from one side of the state to the other, before ever asking his team about tax breaks or business potential. Prospective firms also need to understand the labor force of the city.

According to Lund, the city, like most now in the state, offer hardworking, efficient laborers who expect a THE LISTENER: Keith fair salary and attracLund, Grand Forks EDC tive benefits. “What vice president, is applying the message from we have found is that western N.D. to create if you are willing to business. invest in both (fair salPHOTO: GRAND FORKS REGION EDC ary and attractive benefits), you will have success in recruiting people.” Even outside the Bakken, finding a capable and sizeable labor force is crucial he adds.

Although Lund and several other organizations have already helped bring several large companies to the region to service the Bakken, he says he fields more calls about eastern North Dakota firms looking to expand west. “If you are providing a service that they need in western N.D., there is a

good chance you can do it from here,” Lund says. But, it still requires a great deal of the key component Lund learned about during that initial visit: listening.

Companies that have done so are now supplying dry cleaning services, oil changes, concrete mix, electrical services, construction, and many more. And, SPACE AVAILABLE: Unlike western N.D., other portions of the state have a strong manufacturing industry with room to grow and store in some cases, companies in product.

Grand Forks have benefited by PHOTO: GRAND FORKS REGION EDC not serving the Bakken. Lund has spoken with some companies that are Grand Forks Convention and Visitors Budoing well because other competing firms reau has also had success in signing up the have shifted focus to western North Da- North Dakota Petroleum Council to hold kota, and might not be serving the eastern its annual meeting across the state from the part of the state to the extent they previ- oil patch, in Grand Forks this fall. But, another development might also be the effect ously had.

After three years of working to grow of firms expanding east and doing business the initiative, Lund says the work is still only west. Some investors are starting to lease or beginning, pointing back to the necessity of buy more space in Grand Forks. “When derelationship-building. He points to many velopers start investing in it (the city), you accomplishments, including helping a major get the sense that people are buying in,” he oilfield service provider relocate to Grand says, adding that most of them are doing so Forks and a Texas-based tank provider relo- with their own money. cate up the interstate to Grafton, N.D. The

THEBakken.com

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ENGINEERING Portal Ambrose

Antler

40

42

85

Fortuna

5

Sherwood

8

Crosby

5

Columbus

5

Contribution

5

Noonan

52

Lignite

43

Flaxton

Divide

83

Mohall

5

Burke

Tolley

Maxbass

52

40

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42

Wildrose

14

256

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Grenora

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Lansford

Grano

Alamo

83

50

Powers Lake

85

50

Upham

Possible Siting Location

50

Donnybrook

Possible Siting Location 2.5 Mi Buffer

Glenburn

Bantry

Mature Bakken Boundary

40 8

Tioga

2

Williams

Ray

2

US Highways 14

Aquifers Tribal Land

Palermo

2

Ross

Stanley

2

2

Berthold

2

Drilled

Burlington

Des Lacs

Granville

Mountrail

1804

Surrey

Minot

1804 1804

Active

2

2 2

SWD Wells

83

8

2

Counties

Deering

Epping

Spring Brook

Carpio 28

White Earth

2

State Highways

52

2

McHenry

Inactive 0 2.5

Williston

10 Miles

All Others Year Spudded

52

Ward

5

LOC 14

(in Counties with Siting Locations)

83

< 2006 (391)

41

1804

2006 (10)

Sawyer

52

8

Karlsruhe

2007 (6)

1804

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1806

85

Plaza 23

58

New Town

23

Parshall

Makoti

14

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23

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Alexander 85

68

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28

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73

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Max

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2012 - 2013 (49)

Balfour

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1806

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52

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23 200

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53

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37 41 22

1804 1804

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85

16

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83

McLean Dunn

1806

Underwood

Killdeer 200

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83

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8

22

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200

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Beulah

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41 200

31 48

Saltwater disposal sites in North Dakota

Oliver

Burleigh

1804

Environmental Responsibility Drives Siting of Saltwater Disposal Wells

Continued oil production will increase the demand for saltwater disposal methods

By Len Davisson and Mark Luther Images by Kadrmas, Lee & Jackson

The Bakken, well-known for its rich petroleum deposits, has been experiencing steady oil production since 2004 when the application of horizontal drilling technologies and hydraulic fracturing facilitated oil extraction from previously unviable deposits. Generally, three products are extracted from a typical North Dakota oil

well during production: crude oil, natural gas and produced formation water (saltwater). Both crude oil and natural gas are profitable, however, saltwater is not. In many parts of the Williston Basin, these saline formation waters can contain up to 300,000 parts per million of various types of salts, nearly equal to the waters of the Dead Sea and almost 10 times that of ocean water.

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of The Bakken magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

28

The Bakken magazine July 2013

Operators are required to properly dispose the high-saline saltwater in an environmentally responsible manner as highsaline waters can destroy soil productivity or pollute near-surface freshwater aquifers.

Saltwater is typically disposed in one of two ways: 1) re-injected into the oil-producing formation for enhanced or secondary oil recovery, or 2) injected into an underground formation that contains a natural saline

ENGINEERING

aquifer. The second method is termed saltwater disposal (SWD), and shows a high potential for profit by the disposer—if the disposal (injection) well is sited in a good location.

Siting Factors Locating an appropriate site for a new SWD well includes a robust set of criteria.

Kadrmas, Lee & Jackson a multidisciplinary engineering and planning firm, considers several factors essential for a properly sited well, depending on the preference for a specific geographic location. Major siting factors utilized include: Current and Future Production.

Depending on client parameters, SWD sites can be located in areas where producing oil wells have low water production but are densely spaced, or in areas where producing wells are widely spread apart but have a higher water-to-oil ratio.

Aerial Photos. A visual overview of the proposed site is assessed, typically utilizing Google Earth or similar aerial images.

Geographic areas to avoid are visually assessed, such as areas with underground seepage or sites within a close proximity to homesteads and farms. Certain commercial/industrial zones may raise or lower the siting criteria as well, especially if the zone shows signs of recent expansion.

Accessibility. A significant factor is proximity of the site to a paved road. Although access from a main corridor may seem preferable, there are growing constraints concerning additional access points along some state highways and county roads. For some situations, designing access to a SWD site involves locating egress points along county gravel roads in order to mitigate the need for an additional intersection.

Topology: Typically following the visual inspection is a topographical assessment, which considers such factors as the amount of earthwork needed to develop a site large enough to accommodate up to 30

commercial vehicles, potential interference with natural drainage patterns and spillage containment requirements.

Competition. North Dakota SWD sites typically inject saltwater into the Dakota Formation. However, because the Dakota Formation varies in thickness and consistency, the proximity of neighboring SWD sites can be a concern. The closer sites are to each other, the higher the chance that injected saltwater from one site may begin to communicate or interfere with another site’s injection potential. Proper geographic spacing of SWD sites take into consideration the current and planned locations of SWD sites, historical average of daily volume injected and the pressure needed to inject that volume.

Avoidance of Fresh Water Aquifers.

Because the Dakota Formation is located above the Bakken Formation and several thousand feet below the surface, an SWD injection well must be sited to avoid penetrating overlying geological zones containing fresh water aquifers used for human, livestock or other consumptive uses. Currently, the North Dakota Industrial Commission requires a SWD well-bore to avoid any freshwater aquifer by at least a quartermile, or 1,320 feet.

Future Impacts For most producing oil and gas wells, the percentage of saltwater increases over the well’s lifetime. For example, many new wells can initially produce one barrel of saltwater for every two barrels of oil produced. However, over the well’s lifetime, that ratio can grow to 10 barrels of saltwater for every barrel of oil. This creates a situation where operators could be forced to plug and abandon a well due to rising costs of available saltwater disposal sites.

Earlier this year, Lynn Helms, director of the North Dakota Industrial Commission’s Department of Mineral Resources, said North Dakota is currently injecting 468,000 barrels of saltwater a day into the Dakota Formation. He further stated that North Dakota could require approximately 1,600 additional SWD wells, which currently can be built for $2 million to $3 million per well. For the next 50 to 60 years, these wells could potentially inject roughly 10,000 barrels of saltwater a day, at an economic return of $1 per barrel.

Authors: Len Davisson and Mark Luther Kadrmas, Lee & Jackson Engineering Phone: 701 355 8400 Email: Len.davisson@kljeng.com

THEBakken.com

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