March 2014 - The Bakken magazine

MARCH 2014

Instructing The Field Topics at the Inaugural Bakken/Three Forks Shale Oil Innovation Conference & Expo Page 18

Plus

The Secret to Liberty Resources II’s Completion Design Page 10

AND

Rail Industry Perspective on Crude-By-Rail Page 36

What Every Growing Bakken Company Needs to Know Now Page 42

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CONTENTS

MARCH 2014

VOLUME 2 ISSUE 3

Pg 30 EXPLORATION & PRODUCTION

Why Liberty Is Back In The Bakken

Liberty Resources II’s fracture stimulation approach has yielded industry leading results.

With new Williston Basin assets, Liberty is set to reprove it’s success.

BY LUKE GEIVER

Pg 36 LOGISTICS

The Safest Route

The rail industry steps up in the evolution of crude-by-rail transport.

BY LUKE GEIVER

CONTRIBUTION

BUISNESS LAW

Pg 18 EVENT REVIEW

Inside Innovation

The hottest topics, freshest research and emerging oilfield technologies and strategies were showcased at The Bakken/Three Forks Shale Oil Innovation Conference & Expo

BY THE BAKKEN MAGAZINE STAFF

30 Avoiding Litigation: What Every Company Should Know Before It Is Too Late

Considerable company growth requires considerable attention to avoid future legal disputes

BY ANNE LOCKNER

6 Editor’s Note

The Power of a Compelling PowerPoint.

BY LUKE GEIVER

8 ND Petroleum Council Educating the Educators

BY TESSA SANDSTROM

PETROLEUM DIRECTOR: Steve Benson is leading the University of North Dakota's Department of Petroleum Engineering on solving issues in the Bakken oil industry.

10 Bakken News

Bakken News and Trends

PHOTO: MIKE HESS PHOTOGRAPHY

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EDITOR'S NOTE

The Power of a Compelling PowerPoint Luke Geiver

Editor The Bakken magazine lgeiver@bbiinternational.com

PowerPoint presentations don’t typically leave us with a sense of pure excitement and genuine interest. At least not the kind of excitement and interest that inspires us to open the lap top or notepad to record our thoughts and scribble down our action plans inspired by the perspective or information in the PowerPoint slide. The presentation Leen Weijers, vice president of technology and sales for Liberty Oilfield Services, delivered at The Bakken/ Three Forks Shale Oil Innovation Conference & Expo, however, was a clear exception. For the March issue, we put together an event review highlighting the industry's most important topics and talking points discussed at the event. Shortly after I began reviewing Weijer’s presentation, “The Proof is in the Production: Benefits of a Design Focusing on Conductivity and Contact Area in the Williston Basin,” I knew there was an important story to be told based on his incredibly informative slides.

After reviewing multiple slides and handwriting several pages of notes on Weijers work, I had everything I needed to put together a story on Liberty Resources II’s industry-leading take on well completion design. But, having been engrossed in the slides, there wasn't time to open a word document on my lap top to take notes on Weijers’ presentation, so I wrote them on the back of a discarded press release from November I’d had lying around. The story, “Liberty Resources Is Back In The Bakken,” is on page 30.

Weijers presentation was one of many well worth writing or talking about. In addition to the event review piece from this issue based on some of the presentations, our team also had the opportunity to speak with several mainstream media outlets about some of the more timely topics during the show.

TCrude-by-rail was one of the hottest topics, and rightfully so. The U.S. Department of Transportation, the Pipeline and Hazardous Material Safety Association, the Association of American Railroads and many other groups have been active in making suggested changes, enforcing new regulations or continuing operations designed to enhance the safety of crude-by-rail transport from the Bakken.

As the feature story, “The Safest Route,” reveals, the rail industry is welcoming changes to the transport of crude-by-rail and, in many cases, spearheading the changes. Ed Hamberger, president of the AAR, says changes to the crude-by-rail process will not hinder those working in the Bakken. The work by the rail industry and others to enhance the crude-by-rail transport method responsible for more than 70 percent of all Bakken-crude movement is proof that the Bakken is constantly evolving. We need look no further than the numbers for carloads of crude +between 2008 and now. Six years ago, the AAR reported roughly 9,500 carloads originated to carry crude. Today, more than 415,000 carloads originate with crude.

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The BAKKEN MAGAZINE MARCH 2014

ADVERTISER INDEX www.THEBAKKEN.com VOLUME 2 ISSUE 3

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AE2S

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Ali Arc Industries

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EDITORIAL

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Editor Luke Geiver lgeiver@bbiinternational.com Senior Editor Sue Retka-Schill sretkaschill@bbiinternational.com

AmeriPride Serivces Inc. Avitus Group

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BakkenJobs.com

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Bartlett & West

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Capps Van & Truck Rental

PUBLISHING & SALES

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Cat Auction Services

Chairman Mike Bryan mbryan@bbiinternational.com

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CHS, Inc.

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Combustion Technologies

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DenBeste Water Solutions

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

CEO Joe Bryan jbryan@bbiinternational.com

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ECKEL Manufacturing Co., Inc.

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com

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Gamajet Cleaning Systems, Inc.

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Vice President of Content Tim Portz tportz@bbiinternational.com

Grand Forks Region Economic Development Corporation - Bakken Initiative

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Greystone Construction

President Tom Bryan tbryan@bbiinternational.com

Business Development Manager Bob Brown bbrown@bbiinternational.com

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Account Manager Tami Pearson tpearson@bbiinternational.com Marketing Director John Nelson jnelson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

ART

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Montana Energy 2014

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Petrogas Process Systems Inc.

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Presto Geosystems

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Quality Mat Company

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The Bakken/Three Forks Shale Oil Innovation Conference & Expo 2015

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Hart Energy MBI Energy Services

Rossco Crane

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St. Louis Pipe & Supply

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Wells Concrete

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Wingate By Wyndham

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.

COPYRIGHT © 2014

by BBI International TM

Please recycle this magazine and remove inserts or samples before recycling

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NORTH DAKOTA PETROLEUM COUNCIL

THE MESSAGE

ONSITE EXPERIENCE: A teacher from North Dakota visits the BNI Coal Center Mine to learn about the industry.

PHOTO: LIGNITE ENERGY COUNCIL

Educating the educators

By Tessa Sandstrom

Energy is all around us and impacts nearly every minute of every day of our lives. It lights and powers our homes, heating them in the winter and cooling them in the summer. Energy powers our laptops, televisions and smartphones, so we can work and stay informed. It fuels trucks, trains and planes 8

that bring food and products to stores or sometimes right to our doorsteps, and it fuels our cars to allow us to travel to work, school or a vacation destination.

We are all very aware of the importance energy, and we are all confident that when we go to flip the light switch, our lights will come on. This

The BAKKEN MAGAZINE MARCH 2014

is because North Dakota is fortunate to have many safe and reliable resources of energy.

But, it’s also that reliability and confidence that sometimes allows us to take that energy for granted and forget just where that energy comes from.

Educating the public about our energy resources and the role they play in our

everyday lives is an important part of both the North Dakota Petroleum Council and the Lignite Energy Council’s operations and goals. As technology and innovation change the way we develop our resources, both organizations recognize the need to continue educating the public about North Dakota’s energy and

NORTH DAKOTA PETROLEUM COUNCIL

calm any fears or misconceptions about the new technologies or processes we use to develop our coal and oil resources. It can be a big job, however, and both organizations have turned first to educating our elementary and high school educators by inviting them to attend Teacher Seminars and learn about energy development in North Dakota.

These courses have helped shed light on the industry and have offered teachers an opportunity to bring those lessons back to their students so they too can gain a better understanding of North Dakota’s role as an energy powerhouse for the nation.

Now, both councils are hoping to take their successful programs further and are working together to host a two-day energy education tour for professors of North Dakota State University and the University of North Dakota in August. The idea for the energy forum and tour came from the Minnkota Power Cooperative in eastern North Dakota and the hope is that this tour will become an annual offering for university and college professors. Up to 20 professors will be members of this inaugural tour and will spend one day learning about the lignite industry and touring a power plant and lignite mine. They will spend the second day in western North Dakota learning about the Bakken and the state’s oil and gas industry.

As the industries grow, however, so do the stories, rumors, and misconceptions.

Often, the facts are overshadowed by the sensational, and the Lignite Energy Council and North Dakota Petroleum Council hope these tours will help educate some of our state’s key influencers—its teachers and professors—and, in turn, give them the tools and firsthand experience and knowledge they need to help disseminate more facts and truth about these two very important industries.

The tour will be held Aug. 5-6, and will include one night in Medora where participants can relax and enjoy the Medora Musical, which is one of many attractions that has benefited from the benevolent donations given by the energy companies operating in the state. Interested professors can learn more and apply for the program at www. lignite.com/?id=420&page=Nor th+Dakota+Energy+Tour.

We invite and encourage NDSU and UND professors to join us on this inaugural tour and take advantage of the rare and exclusive opportunity to tour some of North Dakota’s state-of-the-art energy facilities, ask questions and learn from industry experts, visit a drilling rig, refinery and crew camp, and get an inside look at the industries and all they do to develop our energy resources responsibly. And in the

JOINT EFFORT: At left, Jason Bohrer, president and CEO of the Lignite Energy Council, and Ron Ness, president and CEO of the North Dakota Petroleum Council, recently announced that their two groups would collaborate on an energy tour for college professors this summer. The energy tour will include stops at a lignite mine, power plant, oil rig, refinery and crew camp.

meantime, we hope this tour will offer insight and help dispel the tall tales often told about “the West.”

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

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BAKKEN NEWS

BAKKEN NEWS & TRENDS

Up For Debate: US Crude Oil Exporting In early February, the U.S. Senate Committee on Energy and Natural Resources held a hearing on exporting U.S.-based crude oil, the first hearing on the subject in 25 years. “America’s energy renaissance has sparked a conversation on whether exporting crude oil is in the national interest,” said Sen. Ron Wyden, D-Ore. “Our country is in the enviable position of having choices about our energy future.”

The hearing included testimony from four panelists with different perspectives: Harold Hamm, CEO for Continental Resources; Graeme Burnett, senior vice president for fuel optimization at Delta Air Lines, and chairman of the board at Monroe Energy, a refinery purchased by Delta that utilizes Bakken-based crude; Amy Myers 12

Jaffe, executive director of energy and sustainability at the Institute of Transportation Studies, University of California, Davis; and Daniel Weiss, senior fellow and director of climate strategy for the Center for American Progress.

Research completed by the Congressional Research Service shows that the export of U.S.produced crude oil is generally prohibited. Any company looking to export U.S. crude must obtain a license from the U.S. Commerce Department’s Bureau of Industry and Security. Between 2008 and 2013, the BIS received 338 export license applications, 304 of which were approved. All of the approved licenses, (outside of those that were approved for the export of foreignbased crude) were for exports to

The BAKKEN MAGAZINE MARCH 2014

Canada. According to the BIS, the dollar value of the export licenses would reach nearly $480 billion.

During the Senate hearing, Hamm started the discussion, voicing his hopes that the export ban could be lifted. As the world has changed and post oil-embargo legislation has been phased out, he said, “The question has to be asked: Why does the U.S., a nation historically very supportive of free trade, continue to impose export barriers for domestic crude oil? The fact is, the supply and demand factors and scarcity mentality that originally led to the creation of these export restrictions in no way reflect the economic reality of the global energy marketplace of today.”

Hamm’s question was one of many that were raised during the

hearing––the questions dominating the hearing focused on the impact of domestic crude oil exports on the U.S. consumer, the global oil price and supply, refining capacity and competition, and the retention or creation of crude oil-based jobs in the U.S. or Europe.

Burnett offered an opposing perspective to lifting the crude oil ban. “If we lift the export ban we would in essence be allowing the transport of crude out of a competitive market in this country and into a less competitive global one controlled by a few oil-producing states,” he said. “The results would be easy to predict: U.S. crude would flow out of this county and onto the world market. OPEC would reduce supply to maintain high global prices. The U.S.’s use

BAKKEN NEWS

POST A JOB TODAY

FAMILIAR SCENE: Earlier in the year, the U.S. Senate Committee on Energy and Natural Resources held a hearing on shale energy's impact to the country.

PHOTO: U.S. SENATOR RON WYDEN

of homegrown oil would diminish and prices here at home would rise to match the higher global price for a barrel of crude.”

Jaffe provided a counterargument to Burnett’s assertion regarding OPEC’s possible reaction to the U.S. exporting crude. Sometimes people are unclear about how the international oil market works, she said. When or if the U.S. exports refined products globally, it typically means refiners in Europe have bought those products and reduced their own refinery runs, a move that affects OPEC. “Whatever OPEC policies they take, they will take whether we export

the products or whether we export the crude oil, so that is not the issue,” she said.

Jaffe was in favor of lifting the ban, citing geopolitical stability as the main reason.

Both Weiss and Burnett said lifting the ban would raise the price of gasoline in the U.S. Hamm pointed to the export ban’s impact on European refineries to exemplify his support of lifting the ban.

“Many refineries overseas designed to only process light, sweet crude similar to U.S. grades find it difficult to compete profitably with U.S. refiners with access to domestic crude at artificially low prices, forcing many to close, thereby reducing supplies

of refined products on the global market,” adding, “the true benefit to the American consumer will be competition for the refining of gasoline… lower prices are only brought about by increased supply, greater competiton amongst sellers, weaker demand or improved efficiency in the manufacturing and distribution process.”

Even with the viewpoints and testimony provided by both the panelists and the senators in attendance for the hearing, Wyden made it clear that a decision on lifting the crude oil ban is still a long time from happening.

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BAKKEN NEWS

Oasis Tops Project Schedule, Aims at High-Density, Infill Oasis Petroleum couldn’t wait to explain its 2013 accomplishments and plans for 2014.

In early February, the Bakken’s top pure play operator provided an update to investors and analysts earlier than it had scheduled. “2013 was a transitional year and a transformational year for Oasis,” said Thomas Nusz, CEO. In 2013, Oasis completed four key accomplishments: First, the company completed 136 gross operated wells, eight more than it had originally budgeted for the year, and it also drove down well costs from $8.4 million to $7.5 million. Second, Oasis grew its annual production by 51 percent. Third, net acreage was increased by 54 percent, and fourth, the Houston-based exploration and production firm expanded its drilling inventory with tighter downspacing.

This year, according to Taylor Reid, company president,

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Oasis will focus on four areas: inventory acceleration; subsurface well density work; surface pad operations; cost control and well performance. With acquisitions and well density or formation testing nearly complete, the company is now looking to embark on a major high-density, infill program. “In 2014, we expect to spud 90 percent of our wells from multiwell pads,” Reid said. On average, the company will drill roughly 10 wells per spacing unit on its 403 drilling spacing units (DSUs).

Oasis has grouped its DSUs into three categories. The first category, or bucket, Reid said, will feature 15 or more wells per DSU. The second will feature 10 wells per DSU, and the third will include seven wells per DSU. None of the DSUs, at this time, will include the third bench of the Three Forks formation.

There has been testing on the lower bench of the Three Forks,

The BAKKEN MAGAZINE MARCH 2014

Crude Oil Gathering Infrastructure

SOURCE: OASIS PETROLEUM

however, through core and log analysis on seven wells. Current analysis shows that Bakken wells are yielding an average of 600 bopd and Three Forks wells are yielding 400 bopd.

Roughly 75 percent of the company’s produced water is now going into Oasis operated disposal wells, 50 percent of which is being transported by gathering lines. In 2014,

BAKKEN NEWS

Type Curves in Williston Basin

SOURCE: OASIS PETROLEUM

between 15 and 20 slickwater frack jobs will be performed.

Overall, Oasis is completing more wells than it ever has per year, all at a lower cost than it ever has. “We are continuing to

find ways to improve economics by driving down costs in the basin, lowering well costs 22 percent year over year,� Reid said.

THEBAKKEN.COM

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BAKKEN NEWS

Fracking Uses Under 5% Total Volume Consumed Water used for hydraulic fracturing in North Dakota accounted for less than 5 percent of the total volume consumed in 2013, according to a new report released by the N.D. Water Commission. “Facts About North Dakota Fracking & Water Use,” outlined several facets of the fracking process and how each effects water volumes in the state. Water sources used for fracking include surface and groundwater. Groundwater sources typically reside roughly 2,000 feet below the surface in freshwater aquifers. The Appropriation’s Division of the Office of the State Engineer is responsible for managing the freshwater aquifer.

The report shows North Dakota’s unique geology, highlighting the distance between any oil or water disposal activity and that of the freshwater aquifers. The report also discusses the state’s struggle to provide great access to the Missouri

16

River water resources for the oil industry. The U.S. Army Corps of Engineers contends that it has authority of the Missouri River water through the Flood Control Act of 1944 to charge fees for the use of surplus stored water in mainstream reservoirs, the report said. In North Dakota, there is only 10 miles of Missouri shoreline accessible to the oil industry or others. The rest is controlled by the Corps.

“One day of the average daily flow of the Missouri River at Bismarck (45,480 acre-feet) is enough water to frack 6,497 wells or 87 percent of all wells ever fracked in North Dakota,” the report said. The average fracking process requires roughly 7 acre-feet of water.

The state’s Water Commission is currently working to hire more staff to meet the demands of the oil industry.

The BAKKEN MAGAZINE MARCH 2014

BAKKEN NEWS

$650M Pipeline to Move Bakken Gas To NW Minnesota MDU Resources Group Inc. has joined the list of companies looking to build a Bakken pipeline. WBI Energy Inc, the pipeline and energy services subsidiary of MDU, has announced plans to build a 375-mile natural gas pipeline from western North Dakota, to northwestern Minnesota. According to WBI, rapidly growing natural gas production in the western North Dakota, along

with increasing demand from industrial, commercial and residential markets in eastern North Dakota, Minnesota, Wisconsin, Michigan and other Midwest markets, has generated great interest in the proposed $650 million pipeline.

The pipeline would interconnect with other pipelines in northwestern Minnesota. Initial plans for the pipeline include 400 mil-

lion cubic feet per day of natural gas with the potential to expand to 500 MMcf/d. The project will require two new compressor stations. Construction could begin in 2016 and be complete by 2017, the company said.

Over the past two years, the push to build a pipeline to move Bakken-sourced crude has not succeeded for some. Koch Pipeline Co. stopped plans to

build a 250,000 barrels-per-daypipelinefrom North Dakota, to Illinois. Oneok Partners LP, a major player in the shipment, storage, handling and compression of Bakken natural gas, also abandoned plans to build a crude oil pipeline from the Bakken play to Cushing, Okla.

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EVENT

CONFERENCE REVIEW:

INSIDE

INNOVA A look back at the Bakken/Three Forks Shale Oil Innovation Conference & Expo

By Luke Geiver

Patrick Montalban brought the wisdom he has accrued during his 30-plus years in the oil industry and shared it with attendees at the first Bakken/Three Forks Shale Oil Innovation Conference & Expo, which was held in Grand Forks, N.D., in February. The second-generation owner and president of Mountainview Energy Ltd., a small exploration and production company, provided candid insight about being an operator in the Williston Basin, offering upfront opinions about the operational costs, concerns and challenges faced by independent oil and gas producers working in the Bakken.

Joining Montalban on the stage for a comprehensive discussion on the state of the industry were two other industry players: Terry Palisch, global engineering advisor for Carbo, and Trent Howard, director of oilfield services at KLJ Inc. engineering. Palish spoke about the constant work he and his team do to inform the oil industry about the various types, sizes and uses for frack sand and ceramic-based proppant.

Howard provided insight on staffing an energy ser-

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The BAKKEN MAGAZINE MARCH 2014

EVENT

ATION

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EVENT

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The BAKKEN MAGAZINE MARCH 2014

Top left: KEYNOTE: Bruce Hicks, assistant director of the Oil and Gas Division for the North Dakota Department of Mineral Resources. Top right: INSIDE THE INDUSTRY: (Left to right) Luke Geiver, managing editor of The Bakken magazine; Williston Basin veterans, Patrick Montalban, president of Mountainview Energy; Terry Palisch, global engineering advisor, CARBO; Trent Howard, director of oilfield services, KLJ Inc. Bottom left: ENHANCED OIL RECOVERY RESEARCH: Jim Sorenson, senior research manager at the Energy & Environmental Research Center. Bottom right: INSTRUCTOR: Steve Benson, chair of the University of North Dakota Petroleum Engineering Department.

PHOTO: MIKE HESS PHOTOGRAPHY

vices division that serves the Bakken, and the elements of the industry that KLJ follows to understand the current and future state of the industry. Before the roundtable discussion, all participants were given a list of questions including, but not limited to: How would you describe the 2013 oil and gas industry in the Williston Basin, and what has made your company so successful in the Bakken?

Bruce Hicks, assistant director for the North Dakota Department of Mineral Resources Oil and Gas Division, in a keynote address spoke about the success the DMR has had with developing spacing units and energy corridors in North Dakota.

To frame his presentation, Hicks sbe-

gan with an explanation of how development in the Bakken, and now the Three Forks formation, has changed both above and below ground in the past eight years.

Randomly sized spacing units were once commonplace in the play, but through an image of what today’s spacing unit network looks like—equally spaced rectangles in a grid pattern—Hicks provided a picture of how the DMR’s efforts have made a more uniform and organized play. Uniform spacing has drastically increased and benefited the orderly development of the surface and subsurface regions within the oil-producing areas of the state, he said.

In addition to 1,280-acre spacing units—a practice that may someday evolve

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EVENT

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to 2,560-acre units or even mega-units in the 25,000-acre range—Hicks described the impact that multiwell pad drilling has had. “We are getting more wells drilled with less rigs,” he said. The practice has helped to establish energy corridors. The corridors offer an effective way to reduce surface impacts by integrating infrastructure and truck traffic into specific roads, or corridors. The Grail-Bakken Unit, a 25,000 acre unit shows what a megaunit and energy corridor could look like, Hicks said. But, although the unit was recently approved by Hicks and his team, Gov. Jack Dalrymple has yet to sign off on the unit. The merits of larger spacing units are directly linked to greater oil recovery and future enhanced oil recovery methods, according to Hicks. And, since the event took place in February, QEP Resources Inc., the operator planning the megaunit, has since withdrawn its attempts to make the unit possible.

As for future drilling, Hicks estimates the rig count may have leveled off at its current levels of roughly 185 to 190 rigs.

Nearly every well in the Bakken is productive, and, other formations are showing

The BAKKEN MAGAZINE MARCH 2014

promise including the Tyler formation and others. Wells in the Bakken are 99 percent productive, he said, “and the other 1 percent is due to mechanical failure.”

If the future of the Bakken revolves around larger spacing units or the development of energy corridors, then Tyler Farley, project engineer for Halker Consulting, knows how to make it happen. Farley delivered a presentation that explained how onshore oil and gas operators could, or should, mimic the efforts of offshore operators. Doing so, she said, will help operators in the Bakken improve efficiencies and safety through multiwell facilities. Offshore operators are forced to make a single facility handle the needs for multiple oil producing wells. “Multiwell facilities make sense, but there are some challenges,” she said. The onshore challenges include difficulty handling greater amounts of crude or water, unitizing safety standards, creating an acceptable engineering plan and working with underdeveloped infrastructure.

“In the Bakken and Eagle Ford, producers are still looking at ways to optimize well production. New techniques are always being tried,” she said. Because new

EVENT

techniques and retrieval infrastructure are still being tested and tweaked, when creating a multiwell facility, it’s essential to have an engineered approach, even if it takes longer to construct and bring online. The benefits of designing a multiwell facility can be tremendous, however. The key is to understand how well location and well testing protocols work in unison to create cost savings spread over multiple wells. Farley showed a 12-well facility that had two stages of separation per well. In total, the 12-well facility had 63 permanent pieces of major process equipment on the location.

After the operator learned the benefits of engineering a multiwell facility, a facility was put together that had 26 wells but only 55 major equipment pieces in comparison to the 12-well facility. By combining well pressure data and equipment specs, the operator was able to design

a larger facility that utilized less equipment.

Will Gosnold, a professor at the University of North Dakota’s Harold Hamm School of Geology and Geological Engineering, isn’t opposed to adding a few extra equipment pieces to a well site or a multiwell facility.

Gosnold presented on the merits and possibility of generating electricity from oil field fluids such as crude oil or produced water. Gosnold has partnered with Continental Resources, Slope Electric Cooperative and Access Energy on a project that will demonstrate electrical power production from oil field fluids.

The idea is based on a geothermal system. “We take hot water or oil and run it through a heat exchanger,” Gosnold explained.

The exchanger then heats an organic liquid that is turned into a gas, and, to create power, the gas is run through a power turbine that in turn powers a generator.

ROCK TALK: The North Dakota Geologic Survey had its Bakken core samples on display for a firsthand look at the subsurface rock.

PHOTO: MIKE HESS PHOTOGRAPHY

“It is very easy to run this and the infrastructure already exists. You simply piggyback off of the existing infrastructure,” he said. “If we use the amount of oil and water that is coming out before separation, we can generate a significant amount of electricity.”

The partnership will bring a geothermal power plant online in May in Bowman County, N.D.

The power plant will consist of two high-efficiency organic Rankin cycle engines manufactured by Access Energy that will convert heat from a Continental Resources water production well all to generate 250 kW of electricity. The electricity will be used on site to power producing oil wells and water injection wells. According to Gosnold, North Dakota has the power

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EVENT

potential of roughly 4 GW from oil field fluids.

The topic of water was a major portion of the event. Grant Slick, principal engineer for AE2S Water Solutions, joined representatives from GE Power and Water and Halliburton, to discuss efforts each was working on to handle, transfer, treat or recycle water in the Bakken. Slick explained the engineering firm’s efforts with operators to develop pipeline systems for transferring fresh and produced water to and from several wells in a single operator’s fields.

One of the main factors that Slick and his team deal with today is the operator practice of flushing wells. In areas around Williston, N.D., and Watford City, N.D., operators use freshwater injected in continuous or batch solutions to flush out a well bore in an effort to maintain production levels. The practice has greatly impacted the way operators look at water, he said. A typical long-term produced water

EVENT

cycle curve has changed from 20 barrels to 30 barrels per day, to possibly quadruple that on a daily basis.

AE2S is now working with operators who own large lease tracts to develop pipeline systems that provide fresh water and remove produced water to a recycling facility setup with water crystallization technology. Slick provided pipeline economics estimates that showed as more water is used on a well site, the overall cost of the water goes down even when initial investment costs are calculated in.

Jim Sorenson, senior research manager for the Energy & Environmental Research Center provided some intriguing calculations of his own. Sorenson presented on the potential of CO2 as a vehicle for enhanced oil recovery. Based on preliminary research, Sorenson said that CO2 can effectively extract additional hydrocarbons from both the Middle (over 90 percent) and Lower Bakken (over 60 percent) rock matrix.

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EVENT

To fully apply enhanced oil recovery (EOR) in the Bakken, roughly 2 billion to 3.2 billion tons of CO2 would be needed, an amount that would yield roughly 4 billion to 7 billion barrels of oil, he said. The EERC is already working with Continental Resources, Marathon Oil, the U.S. DOE and others on its CO2 EOR research. By this spring, all of the project partners will be finalized. With partner-supplied data, Sorenson and his team will be able to apply in-house modeling with key Bakken and Three Forks lithofacies to understand potential injection methods and production schemes.

During the two-day event, attendees from 41 U.S. states and five Canadian provinces listened to presentations from

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The BAKKEN MAGAZINE MARCH 2014

Slick and others. Local media outlets featured newscasts, printed news or radio segments on the show during the week of the show. Next year’s event will follow the same structure and theme of innovation, adding more topics and industry experts, researchers and operatoraffiliated speakers to talk about the innovative technologies or strategies responsible for making the Bakken and Three Forks formations global hotspots for shale oil development.

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

BUSINESS EVENT Oilfield-related 155 Management 188 Information Technology 54 Engineering 60 Manufacturing 255 Finance 58 Sales & Marketing 112 Customer Service 152 Other 128

FIND RESUMES IN THE FOLLOWING FIELDS Data for Minot, N.D. in 2013.

THE BAKKEN

BUSINESS WORLD POPULATION & GROWTH ESTIMATIONS Data for Minot, N.D. in 2013.

60,000 50,000

50,000 to 53,000

60,000

FY 2014

FY 2017

49,000 43,700

40,000 30,000 20,000 10,000 0

FY 2012

FY 2012

By Luke Geiver

This could be the golden age for economic development offices in North Dakota. Jerry Chavez, president of the Minot Area Development Corp. has information that he commonly shares that illustrates why development in the state may have never been better. In a four year time frame, the Bakken-based community has seen 14 years’ worth of growth. Chavez joined a group of economic developers, business leaders and decision makers during a one-day event, titled, "Building Business in the Bakken."

Although Minot has seen tremendous growth in the past four years, Chavez is helping to lead several efforts that will bring additional growth to the city. After successfully bringing an energy park online, the

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27

BUSINESS EVENT

SHALE PLAY GROUND RULES

Jerry Chavez

Keith Lund

Joe Rothschiller

1

You are dealing with real people.

Weather and housing constraints affect how business is done.

Use Bakken as training ground to do better. Find efficiencies to improve quality and performance because someone else will.

Tom Rolfstad

Todd Mitzel

city is now in the process of building and attracting businesses to a second energy park.

The Great Plains Energy Park is designed for the petroleum industry, and comes equipped with water, sewer, electricity and a gas supply. The Port of North Dakota, the largest rail distribution hub between Seattle and Chicago, will offer crude oil, condensate, frack sand and other distribution capabilities.

Keith Lund, vice president of the Grand Forks Region Economic Development Corp., another economic developer in tune with creating Bakken-based business, provided a keynote address at the event. His presentation, “Beyond the Bakken,” offered examples of successful companies, such as, Steffes Corp. that have expanded business opportunities in the Bakken by relocating parts of its business outside of the region.

Joe Rothschiller, president of the Dickinson-based manufacturing company, spoke on his vision for building the compa-

28

Anne Smith

ny’s capabilities. For Rothschiller, the business model focuses on providing solutions has been a boon to the company. “We design, build and market sustainable, high-value added, innovative manufactured solutions for the energy, construction and other industries,” he said. The company has already designed several well pad products, including a proven flare handling product. In 2014, the company is focused on bringing more products to market, including tank-to-tank piping and UL listed oilfield control panels.

Tom Rolfstad, executive director for the Williston Economic Development Corp., spoke to the question all developers have: How long will this last? His opening, safe harbor provision (delievered in a joking manner) was his answer. “Everyone in the Bakken is struggling to keep up with things, so in the interest of time, please use this presentation as a means of learning what is happening.

Please use your own judgment

The BAKKEN MAGAZINE MARCH 2014

3

2

The Bakken deserves the best you have to offer. “Our business model is to do things our competitors are not willing to doto.” Anne Smith

in evaluating what it means to you. This is the way I see the world at present time. Change is constant here, so I can assure you that how I see the world will change again in 30 days,” he said. “It will just get bigger.”

Icon Architectural Group’s Todd Mitzel spoke about his company’s efforts to deal with the enormity of the Bakken. The group, which has designed several schools and corporate offices for Neset Consulting Inc., Hess Corp. and Whiting Petroleum Corp., tries to stay focused on its core competencies, and, “not chase the crazy stuff,” Mitzel said. Although Mitzel’s team is not oblivious to the staffing constraints on all businesses in the play, Icon has found success by attracting those that want to work and live outside the region.

And, to maintain its success, the company puts a heavy emphasis on the quality of its works. The

industry is heavily committed to referrals, he said, a commitment that can be good or bad for some.

In total, the one-day event featured more than 15 speakers, including a luncheon video presentation delivered by U.S. Sen. John Hoeven, R-N.D. “Thank you for the opportunity to speak today about the important work happening today in North Dakota and the Bakken,” he said.

“We are producing more energy here at home in large part because of American entrepreneurship and technologies like hydraulic fracturing, directional drilling and the innovative work happening in the Bakken and Three Forks shale.”

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

April 2-4, 2014

N EW E

Reaching New Heights in Recoveries

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DATES

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Harold Hamm

James J. Volker

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Chairman and CEO Whiting Petroleum Corp.

Taylor L. Reid

Steve Herod

President and COO Oasis Petroleum Inc.

President Halcon Resources Corp.

From upstream drilling and completions to midstream gathering and transportation, Rockies producers enjoy out-sized potential to maximize returns from oil-heavy shale plays and economical tight-gas development.

The entire nation benefits as producers pursue efficiency and employ new technologies. Lean methods, like multi-well pad drilling and “frac factory” completion programs, trim expenses while midstream operators remain in “build mode,” creating new storage, rail terminals and pipelines to provide all-of-the-above takeaway options.

Register to hear industry leaders describe how they’re staying competitive – and where investment is heading. Network with peers and prospects on the exhibition floor at what’s become the Rockies’ biggest unconventional resources event – DUG Bakken and Niobrara.

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Scott Reasoner

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VP, Western Operations PDC Energy Inc.

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DUG Bakken and Niobrara conference attendees* will have an exclusive opportunity to hear an eyewitness account of Operation Redwing and the lost heroes of SEAL Team 10 from team leader Marcus Luttrell, retired Navy SEAL and author of the best-selling book “Lone Survivor”. Peter Berg, writer and director of the movie “Lone Survivor”, a film adaptation of Luttrell’s book and one of 2014’s hottest box-office hits, will join him on the DUG stage to give a behind-the-scenes look at the making of the movie and offer tribute to the men who made the ultimate sacrifice for their country. Seating is limited — register today to reserve your seat at the Keynote Luncheon on Thursday, April 3.

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EXPLORATION & PRODUCTION

WHY LIBERTY

IS BACK IN THE BAKKEN

An industry-leading completion design has Liberty set to shine again.

By Luke Geiver

Following Liberty Resources II LLC’s re-entry into the Williston Basin through a $455 million oil and gas asset acquisition earlier this year, the stage is again set for the Denver-based exploration and production company to shine. Before Liberty sold its assets to

Kodiak Oil & Gas last year for $680 million, the team was recognized for its unique, industry-leading well recovery rates. After selling its Williston Basin assets, energy investment firm Riverstone Holdings LLC committed $350 mil-

ORGANIZED FRACKS: Liberty's completion design utilizes two different sizes of ceramic proppant. The smaller-sized 40/70 proppant is used to prop deep into a fracture network. The moderately sized 30/50 proppant is used to enhance conductivity near the wellbore. The ceramic element of the proppant helps to add strength at fracture network pinchpoints and helps them remain open.

PHOTO: LIBERTY RESOURCES II LLC

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The BAKKEN MAGAZINE MARCH 2014

EXPLORATION & PRODUCTION

THEBAKKEN.COM

31

EXPLORATION & PRODUCTION

Shale Oil Innovation CONFERENCE & EXPO Produced by The Bakken magazine

January 12-14, 2015 Alerus Center Grand Forks, ND

'The best producing wells are not driven by the reservoir, they are driven by the completion design.'

Leen Weijers Vice President of Technology & Sales, Liberty’s Oilfield Services

www.BakkenOilConference.com The Bakken/Three Forks Shale Oil Innovation Conference & Expo is the nation’s premier event featuring innovations that are driving new efficiencies and the profitability of oil recovered from shale formations.

lion to Liberty to redeploy its talents in other shale plays. Based on the success of its work in the Williston Basin, Liberty chose to return to the Bakken.

In October 2013, Liberty released a Society of Petroleum Engineers paper explaining its completion strategies titled, “The Value Proposition for Applying Advanced Completion and Stimulation Designs to the Bakken Central Basin.” The paper described the variety of completion methods used in the Bakken.

“As a consequence, it is not uncommon for different operators to have over a $2 million difference in their authorizations for expenditures, solely because of the differences in approach to the well’s completion and stimulation design.”

The Liberty SPE paper described the company’s method as one “designed to maximize reservoir contact area and optimize the conductivity.” The methodology can result in roughly $1 million to $2 million in additional costs, but the choice can result in greater production during the well’s first year on production, and, the additional costs are paid for through higher IP rates in just a few months.

During a two-year period, Liberty had drilled and completed 29 wells in the Bakken and Three Forks formations before selling its assets, some of which recorded the highest initial production rates of any wells in the play. With 53,000 net acres spread throughout the North Dakota counties of Williams, McKenzie, Divide and Burke, Liberty will once again have the chance to prove that a completion design focus on conductivity and contact area can result in great wells.

The Two C’s Design Approach The completion design methodology championed by Liberty is actually more similar to a three-legged stool. First, the team emphasizes the importance of stimulating the wellbore us-

32

The BAKKEN MAGAZINE MARCH 2014

EXPLORATION & PRODUCTION

In the harsh world of oilfield operation, IT’S SURVIVAL OF THE FITTEST.

ing plug and perf. The process creates distinctly distributed initiation points along each stage section of the lateral. “The idea is to create as much surface area as you can,” says Leen Weijers, vice president of technology and sales for Liberty’s Oilfield Services division. Second, the team uses slickwater-based fluids in order to maximize the contact area the fluid touches. Using slickwater also has low matrix permeability damage. The slickwater fluid—a thin viscosity fluid—allows more fractures to be opened during pumping that might not have opened under the normal pumping stress rates applicable to other fluids. “Using a thin viscosity system creates a fracture system that advances the fracture network not only in length direction, but also in the direction perpendicular to the main fracture,” Weijers says. Liberty has proven the benefits of five offset wells in the roughrider area near Williston, N.D., he says. “If you have a fluid with very good proppant transport capability, you are better able to prop that entire fracture open.”

The combination of plug and perf with slickwater fluids creates a more complex fracture network that in return calls for a more complex proppant mixture to maintain the fracture network’s conductivity. Liberty uses smaller proppant in the size of 40/70 to prop deep into the complex network. Then, it uses a moderate 30/50 proppant to provide enhanced conductivity near the wellbore. And, the team also emphasizes the use of ceramic proppants that can provide extra strength to keep partial proppant monolayers and proppant bridging at pinch points sufficiently conductive.

To prove the benefits of the two C’s design methodology, Weijers compares a number of wells completed by various operators in the Rough Rider area. Some of the wells were completed using cross-linked gels, sliding sleeves and a combination of frack sand or ceramic proppants. Another group of wells was completed using a hybrid fluid design with plug and perf with both frack sand and ceramic proppants. And, the Liberty wells in the area were all

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EXPLORATION & PRODUCTION

Liberty wells shown in red.

Now Available • Customer service center, development-ready business park, and warehouse space, with additional land for further expansion • Business incentives to minimize start-up costs • Quality workforce • Easy access to the Bakken (via road, rail, and air) • Leading petroleum research and engineering centers at the University of North Dakota

Expand East.

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Visit us at www.accessthebakken.com or call Keith Lund at 701.746.2720.

34

The BAKKEN MAGAZINE MARCH 2014

completed using slickwater fluids, plug and perf and ceramic proppants.

On a 180-day oil production comparison, Liberty’s completion design was superior, yielding almost 85,000 barrels of oil. In second place was the hybrid design at nearly 51,000 barrels of oil, and in third was the cross-linked gel approach at 31,000 barrels of oil. “One of the shortcomings of that analysis is really that I’m just comparing one completion parameter to an overall production response in 180 days of production,” Weijers says. “What you really have to do is determine which parameters are dependent on each other.”

To provide a more comprehensive analysis of the Liberty well completion approach to other’s in the same area, Weijers compiled data sets from the North Dakota Industrial Commission’s Oil and Gas Division and the Geologic Survey. “We looked at a variety of different geologic parameters and completion parameters,” he says.

“In general, we would see from the analysis that water cut was a very good proxy for overall reservoir quality.”

In most cases, the wells from the Rough Rider area were completed by different operators using different methodology. “You would think that based on production performance, if reservoirs mattered a whole lot, that some of the best wells would be in the best type of reservoir, but you can see that that is actually not the case,” he said after compiling reservoir data to go along with well production results. “The best producing wells are not driven by the reservoir, they are driven by the completion design.”

Weijers belives that his comparative analysis of wells in the Rough Rider area shows that applying the right completion techniques can more than double the value of an asset, and, that although completion jobs that create larger reservoir contact areas and higher conductivity are more costly, they will increase profitability even more in the Bakken. In the Three Forks, Weijers is

EXPLORATION & PRODUCTION

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Both graphs were created using well completion data from wells around the 13-mile corner near Williston, N.D.

analyzing the results of Liberty’s frack designs. Although testing is inconclusive at this point, he believes the same approach will again yield higher production values when compared to other methods.

Weijers and the entire Liberty team will have the opportunity to prove its completion designs through the company’s re-entry into the play. The acreage purchased by Liberty is outside of the operation region in which the company previously worked.

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

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LOGISTICS

THE BIG RAIL PICTURE: New crude classification standards means more testing of crude before it ever reachs a truck.

PHOTO: OVERLAND AERIAL PHOTOGRAPHY

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The BAKKEN MAGAZINE MARCH 2014

LOGISTICS

THE SAFEST ROUTE Rail industry perspective on the changing crude-by-rail transport option

By Luke Geiver

Since 2008, the number of crude-carrying railcars in the U.S. has risen from 9,500 crude carloads per year to over 415,000. Shale energy development, particularly from the

Bakken and Three Forks shale plays, has been the main cause for the increase. Currently, more than 70 percent of all North Dakota-based crude is shipped to refiners via rail, and, every day approximately 800,000 barrels of oil are moved with rail. One tank car holds about 30,000 gallons, or 714 barrels of oil. More than 99 percent of all carloads carrying crude reach their destinations without a release caused by an accident, according to the Association of American Railroads. Because of the serious implications related to that remaining 1 percent, however, the way Bakken crude is handled, classified and transported from the well site to the refiner is in the midst of change. For every operator, association, community or business linked to the Bakken-by-rail industry, changes to the process will create new and different factors in need of attention.

The Changes Accepted railcar design and prerail crude classification protocols are the main issues facing everyone involved with the Bakken crude-viarail industry. The U.S. Department of Transportation recently issued an Emergency Order requiring all shippers to test product from the Bakken before it is transported to ensure the crude is transported in the proper packing group. The DOT uses nine different hazard classes as a guide to properly classify each material, and the material type determines one of three possible packing groups.

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LOGISTICS

The recent DOT-issued order also stated that all Class III crude oil shipments need to be designated as Packing Group I or II, requiring the use of a more robust tank car. Packing Group III will no longer be available. The classification testing will include characterization of elements in the crude such as Reid Vapor Pressure, corrosivity, hydrogen sulfide content and the composition or concentration of entrained gases, according to the U.S. Pipeline and Hazard Materials Safety Administration. During its data gathering efforts aimed at depicting the way operators or those offering oil to the rail industry for shipment are classifying crude for shipment, the PHMSA inspected various points along

the crude oil transportation chain. The testing took place in areas from the cargo tanks to rail loading facilities to the pipelines connected to crudeby-rail loading facilities. Of the 18 samples collected from cargo tanks delivering crude oil to the rail loading facilities, the PHMSA said 11 tanks of crude were improperly classified.

Joe Delcambre, public affairs specialist for PHMSA, says that crude classification tests have to take place before the crude is put into transportation.

Shortly after announcing the emergency order, the PHMSA organized workshops in North Dakota for anyone who fills, marks, labels, placards, creates shipping documents, offers, transports or manufactures packaging for hazardous mate-

rials in commerce. The workshops focused on requirements

by PHMSA regarding transporting hazardous materials including training requirements, packaging, hazard communications and security, according to Delcambre.

For Ed Hamberger, president and CEO of the AAR, the big unknown in the Bakken and the rail industry right now is the mitigation, or those crude classification efforts taking place.

The process is still being vetted and understood by portions of the supply chain. The DOT is working with the industry and oil producers to ensure proper classification, he says, as evidenced by the workshops.

Three Bakken operators—Hess Corp., Whiting Petroleum Corp. and Marathon Oil Corp.—were

cited for improperly classifying crude during the PHMSA’s efforts to verify testing methods used by the industry.

Hamberger is working with oil and crude pipeline representatives to make the transport of crude oil safer than it already is, he says. “The rail industry is safe and we are doing everything we can to become even safer,” he says, “We understand that in the public’s mind there is a little bit of shaken confidence.” Speaking on behalf of the railroad industry, Hamberger has recently provided testimony before the U.S. Senate and House on the topic of railroad safety, including crude-by-rail safety.

Among many topics he has testified on, railcar standards has been a major area for those impacted by crude-by-rail in the

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LOGISTICS

Bakken. Currently, DOT-111 tank cars, or the workhorses of the industry, according to Hamberger, are facing major change.

The AAR has proposed a new standard design for hazardous material capable cars and also the elimination of DOT111 cars for crude transport.

The new standard created by AAR and currently under consideration by the DOT, would include a double hull featuring a layer of nine-sixteenthinch steel surrounded by a one-eighth-inch-steel jacket. A full-height heat shield would be included at both ends of the car, and between both layers of steel, thermal insulation would be added. If a breach does occur and results in a fire, he says, the car next to it that wasn’t breached would be able

40

to withstand the heat as new pressure relief valves allow the car to vent out the crude as it becomes a gas.

For BNSF, one of the main rail operators in the Bakken play, the potential railcar changes and classification efforts put forth by the DOT are welcome. BNSF does not actually own any of the railcars used on its lines, says Amy McBeth, spokesperson for BNSF. Like Hamberger, BNSF has worked with state and federal officials to ensure rail safety, McBeth says. To help advance the development of the next generation of tank car, the rail giant has also issued a request for proposal to all major railcar manufacturers to submit bids for the construction of 5,000 next generation cars suitable for

The BAKKEN MAGAZINE MARCH 2014

transporting crude oil. There is currently a two-year backlog for new railcar construction. The RFP “represents a significant voluntary commitment that may help accelerate the transition to the next generation tank car and provide tank car builders a head start on tank car design and production,” McBeth says, “even as the DOT, railroads and shippers continue to engage in the formal rulemaking process. BNSF believes that the RFP process will provide market participants more certainty, sooner.”

The Retrofit Option Although many in the rail industry believe tank car changes are coming, there is no definitive date for the tank car changes on new cars to take ef-

fect, or, for DOT-111 cars to be officially eliminated from the crude-by-railcar fleet, Hamberger says. Watco Terminal and Port Services recognize the lack of timeline for new regulations, and also the reality that change is coming. The company has partnered with Great Northern Project Development to build and operate a multi-purpose rail transload and car retrofitting facility 12 miles from Dickinson, N.D. The retrofit facility will be the first of its kind in the Williston Basin region.

Mike Yanish, business development manager for Watco, says the basic idea behind the facility is to open another crude loading facility in the region that could also handle products such as sand, pipe and any other oilfield related product

LOGISTICS

in demand. In addition to the traditional transloading capabilities, the team also wants to develop a space large enough to house railcars in need of retrofit. “With the lack of rail shops out there, it really hit home with us,” Yanish says, “why not have one in the heart of the activity?”

The railcar facility, set to break ground this spring, will service tank car owners or lessees. The service package will include tank car inspections, testing qualifications, preventative maintenance, painting, lining and retrofitting. The shop will be a full service Class C facility. “We understand the need for this type of service in the area to avoid shipping cars long distances and losing extensive days in transit from other

shops,” Yanish says. “We plan to focus on a scheduling process with dedicated capacity for the customers who purchase time slots and turn cars around in a 30-day cycle from arrival to departure.”

Yanish and the Watco team are excited to be a part of a safer crude-by-rail industry, he says, as many on the team live and work in the region. Railcar companies have shown great interest in the facility because of its geographical location.

Cars won’t have to travel to Louisiana or Texas, a trek that would keep the cars out of service for months at a time, Yanish says. Hamberger says the retrofit option is feasible.

Any changes to the crude-byrail transport method will only effect throughput and velocity

of the overall rail network, he adds. “I think it can all be accommodated,” he says, citing the private investment the rail industry has already put into infrastructure.

With more than 70,000 railcars potentially needing retrofit and the long-term oil development linked to the Bakken and even the oil sands of Canada, Yanish says the South Heart, N.D.-facility will be in demand for a long time. The facility won’t be the first for Watco, either. The company has a large presence in the mechanical repair area, including an entire division that works on railcar repair.

Like Hamberger and McBeth, Yanish says his company is working effectively with regulators to make a transition

to a safer crude-by-rail industry possible, an industry that Hamberger says the rail industry clearly recognizes as only one of the many solutions to moving crude. “We are a necessary but not sufficient piece to keep moving this crude,” he says. The mantra adopted by the DOT on energy, one that calls for an all-of-the-above approach, is the same mantra that should be applied to crude transport.

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

M O N T A N A E N E R G Y 2 0 1 4 W I L L P R O V I D E INVIGORATING DISCUSSIONS FROM DIVERSE PERSPECTIVES AND INSIGHTS. Montana Energy 2014 is the largest avenue to discuss Montana’s energy potential. The two-day comprehensive conference and trade show includes energy industry representatives, suppliers of goods and ser vices, contractors and energy industr y professionals.

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BUSINESS LAW CONTRIBUTION By Anne Lockner

AVOIDING LITIGATION: What Every Growing Company

Should Know Before it is Too Late The growth of business opportunities in the Bakken region is impressive and looks to continue on an upward trajectory for years to come. Companies that might have been small—or nonexistent—just 5 years ago are growing at a considerable pace. And while litigation is the last thing people want to think about while business is booming, any growing business is almost inevitably going to find itself in a legal dispute at some point down the road. Yet there are several small things that companies can do now that will either help them avoid litigation altogether or better prepare them to handle it should it arise.

The sooner these options are considered and implemented, the more return on the investment that company will get for taking the time to put them in place.

The good news is that growing companies need not create full-blown legal and compliance departments to address legal risk. Being aware of potential risks and taking small steps to mitigate those risks can often be done with minimal expense. This article addresses how to avoid some of the most common mistakes that land smallbut-growing companies in litigation.

Nobody wants to think about a deal going bad when the parties are putting it together.

• What constitutes a default?

• How can one terminate the contract?

• Is your company adequately protected upon termination?

• Into what venue should a dispute be brought?

Contract Drafting Should Not Be Done Haphazardly One of the surest ways to land your company in litigation is to sign contracts without good legal counsel—or worse, fail to sign a contract at all. Nobody wants to think about a deal going bad when the parties are putting it together. Instead, everyone is understandably optimistic at the opportunity the agreement will provide to each side. But going in without adequate thought as to how the agreement will play out in the real world is what keeps litigators in business.

Again, these are just a few issues that should be considered. Depending on the nature of your agreement, there could be others.

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

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Questions you should consider include:

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• What state’s law should apply?

• Are there adequate—or, depending on which side you’re on, excessive—limitations of liability?

• Is your company adequately indemnified?

• Should there be requirements that insurance policies cover your company?

And even if all the necessary provisions are present in the agreement, are they written in a way that is unambiguous and readily understood by all who might read it?

A well-drafted, unambiguous contract will protect you—even if you end up in litigation—because a judge will be able to look

BUSINESS LAW

at it and make a decision early in the case as to what the contract means. But if the contract itself is ambiguous and it is debatable about what the parties intended, there will be no opportunity for an early resolution—other than a settlement. The case would have to go to trial where a jury would ultimately decide what the parties meant.

Needless to say, paying the price to ensure that a contract is drafted correctly upfront is far better than paying a fortune to have a jury tell you what it thinks you meant.

Ensure Your Employees Know How to Avoid Antitrust Violations Small companies in a growing market—like that of the Bakken— almost always have one goal in common: to grow the company in a competitive market. But while many employees of companies understand the need to compete and stay ahead of their competitors, they often do not appreciate what conduct is acceptable competitive behavior and what conduct is illegal. It is absolutely necessary to make sure that employees understand that agreements with other competitors to fix prices, allocate jobs or territories, or rig a bidding process are strictly forbidden—indeed, illegal. And it is not just agreements with competitors that can get a company into trouble. Depending on a company’s market power, even unilateral conduct that is intended to drive out competition can prove problematic.

Even vertical agreements—agreements with distributors or others down the supply chain—can be problematic under certain circumstances.

There are various ways that a company can find itself in the crosshairs of the both federal laws and state antitrust laws. And this article is not intended to provide an exhaustive guide on what is and is not allowed.

But antitrust cases are particularly expensive to litigate. Plus, they can result in treble damages and if there are multiple defendants to

a case, each defendant can be held “jointly and severally liable” for the damages of all defendants. This means that if three competitors act together in a fashion that violates the antitrust laws, a plaintiff could sue just one of the competitors and obtain a judgment against the one competitor for the damages caused by all three competitors.

That competitor would then have to litigate further against the other two to recoup the damages attributable to them. Because of the magnitude of potential exposure, it makes far better sense for a company to pay for a few hours of antitrust-compliance training each year for its employees than to learn the lessons the hard way.

Your Data Can Grow Up To Haunt You Many companies who experience

significant growth over a relatively short amount of time end up with the same problem: a quagmire of technology and data that has little or no structure, making it difficult if not impossible, to manage in a cost-effective manner. E-discovery is one of the fastest growing and significant costs to litigation. But all too often, small, but growing companies have added data systems to their IT infrastructure with no forethought into (1) how they could be efficiently and effectively searched in the future; (2) how long they will be maintained; and (3) how they can be deleted when they are no longer necessary to run the business (or when they are no longer subject to a litigation hold).

The failure to consider these (and other) questions when a new data repository is brought on line will inevitably result in

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The failure to consider these (and other) questions when a new data repository is brought on line will inevitably result in high costs down the road when the company finds itself in litigation. high costs down the road when the company finds itself in litigation. Once litigation is “reasonably anticipated,” a company must preserve all documents—including all electronic documents and data—that could be relevant to the litigation. Can those relevant documents be isolated? Can they be

searched in a manner that will allow you to capture the necessary documents, but not over-capture irrelevant ones? The costs associated with processing and reviewing electronic documents often accounts for a large portion of litigation costs on a given matter.

Perhaps more troubling is that the failure to have adequate safeguards in place to preserve data and then collect and produce relevant data can result in significant monetary sanctions. Moreover, it is not uncommon for a company to have to either lower or increase the settlement value of a case to its detriment because its opponent has leveraged the company’s e-discovery weaknesses against it. If your company lands in litigation, the case should be decided on the merits—not on the basis of whether your company was capable of meeting its e-discovery obligations. But all too often, the latter is the case—all because the company failed to take some remedial steps a few years earlier that would have avoided the problem altogether.

we all have clients who look back and wish that they had only taken some of the above steps earlier. For so many growing companies doing business in the Bakken region, now is the time to take these steps so that you do not look back with regret.

Author: Anne Lockner partner Robins, Kaplan, Miller & Ciresi LLP 612-349-8470 amlockner@rkmc.com

Conclusion Imagining problems that could occur in the future is the part of a lawyer’s job. And while lawyers will never get a call thanking them for the litigation that did not happen,

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