IS EPA BANNING COAL?
MAKING IT RAIN: WATER TECH FOR THE OIL PATCH
Q&A WITH CONGRESSMAN STEVE DAINES
SUMMER 2013
CHANGING THE WORLD: Montana Exports in the Global Market
PAGE 1
PAGE 2
PAGE 3
“IT IS WORTH REMEMBERING THAT THE TIME OF GREATEST GAIN IN TERMS OF WISDOM AND INNER STRENGTH IS OFTEN THAT OF GREATEST DIFFICULTY.” – DALAI LAMA
4 I SUMMER 2013 I MONTANA ENERGY REVIEW
PAGE 4
TABLE OF CONTENTS
SUMMER 2013 VOLUME 1 NUMBER 2
COVER STORY
DEPARTMENTS
Powering the World: Is Montana Becoming a Player on the Global Stage? 24
POLICY& REGULATION Billings Battles EPA Over Sulfur Emissions ........13 Coal Under Attack .................................................16 FEDERAL REGULATIONS HAVE INDUSTRY REELING
TECHNOLOGY Making it Rain .......................................................29 WATER TECHNOLOGY IN THE BAKKEN
TRENDS Managing Federal Lands ......................................32 DOES MULTIPLE USE INCLUDE ENERGY?
IN EVERY ISSUE From the Editor........................................................6 Energy in Brief .........................................................8 Power Profile .........................................................10 CONGRESSMAN STEVE DAINES
Economic Insights.................................................20 From the Field........................................................37 KAREN A. HARBERT, PRESIDENT AND CHIEF EXECUTIVE OFFICER INSTITUTE FOR 21ST CENTURY ENERGY, U.S. CHAMBER OF COMMERCE
Calendar/Directory ................................................40
Photo by Larry Mayer
SUMMER 2013 I MTENERGYREVIEW.COM I 5
FROM THE EDITOR In recent months, friends and former colleagues have asked how I could go from being an attorney for renewable energy projects to a writer for fossil fuel development. For many, renewable energy and fossil fuels are simply incompatible – a battle for supremacy that requires one to take sides and stick to it. For me, there are some common threads that make the two fields equally compelling, and I reject the notion that one has to choose. What inspires me about energy production, regardless of the resource, is the marriage of innovation and stewardship. Montanans are defined by our love of the outdoors. Whether we are hunting, fishing, rafting, hiking or making a living, there is some part of nearly all of us that is connected to the most fundamental components of nature. Looking at the energy sector, the abundance of innovation – new technologies for producing energy from renewable resources, reducing consumption without limiting quality of life, and extracting minerals in a more efficient and environmentally friendly manner – is simply inspiring. Every day, innovators, entrepreneurs, and major companies are investing billions to give Americans more energy at lower cost and with less environmental impact, using the land for benefit without destroying it. Those who say innovation exists only in “green” technologies are missing the massive breakthroughs in oil and gas drilling that are transforming the U.S. energy industry today. Across the board, energy is among the most innovative sectors of the economy, constantly rising to meet new economic and environmental challenges. I am excited about the people who are working in labs across the country to make wind and solar serve a growing economy in a rational and sustainable manner, and I am inspired by the folks in the oil patch finding ways to extract petroleum with minimal surface disturbance. Whether it is wind blowing across the plains or oil bubbling up to the surface, we are powering
our economy by making the land work for us while ensuring that our Great Outdoors remain great for future generations. Being for new energy technologies doesn’t mean being against the fuels that have made our country great. As we encourage innovation in all energy resources, we create jobs, stimulate economic growth and maintain a robust private sector. Inevitably, when the debate between renewables and fossil fuels bubbles up, the role of the federal government is front and center. Some object to renewables because they see it as a proxy for a climate agenda that is really about centralized control of the economy. Some favor investment in research and development as a matter of global competitiveness. Others say that federal subsidies simply prop up uneconomic concepts in the name of slapping a “green badge of courage” on production and that heavy-handed regulations pick winners and losers. There is no question that the federal role in innovation can be catalytic – or catastrophic. The good news is that private sector energy R&D far outstrips anything the federal government puts on the table, meaning that our nation’s best and brightest continue to deliver benefits to the U.S., regardless of the mess in Washington. Targeted federal investments in early stage R&D can set the stage for real breakthroughs, but long-term subsidies and overaggressive regulation create enormous inefficiencies, hamper genuine growth and create political battles where none need exist. We are fortunate to have the depth of natural resources in this country that we can look to a portfolio of energy sources and derive the benefit of making our lands work for us, without having to pick and choose. I am excited to see Montana forge a path forward on energy, embracing all that is good about wise use of energy resources. We can be an example for the nation in energy development – an example, as this edition explores, that leadership could have global consequences.
jowen@mtenergyreview.com
6 I SUMMER 2013 I MONTANA ENERGY REVIEW
Business Sales, M&A, Consulting
#1 IN BAKKEN! (701) 651-6053
Spring 2013 • volume 1 • Issue 1 publisher Michael Gulledge •
657-1225
dIRECTOR OF niche publications /Marketing allyn hulteng •
657-1434
• • • • • •
editor Jennifer Owen •
657-1305
advertising Sales & Marketing Director
Dave Worstell •
657-1352
Classified / digital media director
Ryan Brosseau •
657-1340
Sales MANAGER
shelli rae scott •
With a dedicated team of Merger & Acquisition professionals, PCS brings over 23 years of business sales experience to the table.
657-1427
Advertising Coordinator
LINSAY DUTY •
657-1254
production
M & A ADVISORS
SUPPORT STAFF
Zac Griffin
Kathy Sturgeon
Partner
production manager/traffic artist
mO lucas •
Oil Field Roustabout Pipeline Trucking Manufacturing Commercial & Industrial Real Estate
www.oilfieldbiz.com
657-1202
Sales CONSULTANT
JESSICA TUCK •
We sell many types of businesses:
657-1204
Robert Heffner CBI, CExP Partner
Designers / Paginators
Scott Lester
katherine jore • 657-1382 Christine cleveland • 657-1266
MBA, CBI Partner
John Suprock
Managing Partner/Founder
Partner/Operations Manager
Amy Kroon Marketing Coordinator
Marilyn Noonan Noonan Properties ND Real Estate Affiliate ND Lic #3030
contact us:
Montana Energy Review 401 N. Broadway Billings, MT 59101
MTENERGYREVIEW.COM
The content of this magazine is designed for general informational purposes only and does not constitute legal or financial advice. These materials are intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results. They are not offered as and do not constitute legal advice, legal opinions, or investment advice. You should not act or rely on any information contained in this magazine without seeking the advice of an attorney or financial professional. MONTANA ENERGY REVIEW is published QUARTERLY by Billings Gazette Communications Copyright© 2013 Billings Gazette Communications All rights reserved. Reproduction in whole or in part without express written consent is prohibited.
Missoula, MT - Corporate Office
406-274-2152
info@oilfieldbiz.com
Williston, ND | 701-651-6053 Plentywood, MT | 406-478-1549 Douglas, WY | 307-359-5265 Boulder, CO | 303-818-2413 SUMMER 2013 I MTENERGYREVIEW.COM I 7
USGS Releases CO2 Sequestration Assessment
The Sage Grouse council was established to develop a statewide habitat conservation plan, in an effort to prevent the bird from being listed under the federal Endangered Species Act
On June 26, 2013, the U.S. Geological Survey released the first-ever national assessment of potential sites for geologic carbon storage, determining that the U.S. has the technical capacity to store roughly 3,000 metric gigatons of carbon dioxide. The study found the highest potential for storage to be in the Gulf Coast region, Alaska, and the Rocky Mountain region. The report is a key component of the Administration’s stepped up efforts to combat climate change. President Barack Obama has called for strict carbon emissions reductions from new and existing power plants, a goal which some suggest could only be achieved through commercialscale carbon capture and sequestration projects.
Interior Extends Fracking Deadline
On June 7, 2013, the Bureau of Land Management (BLM) announced it would
8 I SUMMER 2013 I MONTANA ENERGY REVIEW
extend the public comment period on its proposed regulation of hydraulic fracturing on federal lands to August 23, 2013. BLM originally published draft rules in May 2012, but was forced to revise the proposal after receiving heavy industry criticism. The new draft rules were published on May 25, 2013, with just a 30-day comment period. The proposed regulation requires public disclosure of the composition of hydraulic fracturing fluid, establishes engineering standards, and addresses management of flowback waters from fracturing operations. The extension allows interested parties additional time to submit comments, which can be done through the website www.regulations.gov. A summary of the new proposal rule and a link to the complete draft can be found at www. mtenergyreview.com.
Sage Grouse Council Holds First Meeting The newly established Governor’s Advisory Council
on Sage Grouse convened for the first time May 21-23 in Helena. The council was established to develop a statewide habitat conservation plan for the sage grouse in an effort to prevent the bird from being listed under the federal Endangered Species Act (ESA), a decision which could come as early as next year. The federal Fish and Wildlife Service determined in 2010 that the Greater Sage Grouse warranted listing under the ESA, but would defer action due to the backlog of other candidate species. The sage grouse’s status is reviewed every 12 months to determine if immediate action is needed. The council has until Jan. 31, 2014, to develop the plan. Council members include Paul Callahan, Missoula; State Representative Pat Connell, Hamilton; Janet Ellis, Helena; Gary Forrester, Billings; Jay Gore, Missoula; Robert Lee, Forsyth; Glenn Marx, Helena; Bill McChesney, Miles City; State Representative Ray Shaw, Sheridan; Carl Wambolt, Bozeman.
Sierra Club Sues BNSF
The Sierra Club filed suit in federal court on June 5, 2013 against Burlington Northern Santa Fe (BNSF) railroad and U.S. coal producers, accusing the entities of violating the Clean Water Act by allowing coal and coal dust from rail cars to pollute waterways in Washington State. The suit seeks a court order requiring the company to use covered rail cars, plus fines and remediation costs. The plaintiffs request fines of $37,500 per violation per day, and ask the court to determine that each separate rail car constitutes an individual violation. A spokesperson for BNSF says the lawsuit is simply a stunt to prevent the construction of West Coast export terminals (see related story page 24).
Keystone XL Legislation Advances Exasperated by continued delays from the Administration, the U.S.
House of Representatives passed legislation in May to expedite the Keystone XL pipeline, declaring the environmental work already completed to be sufficient for purposes of the National Environmental Policy Act, and stating that the pipeline does not need a Presidential Permit to cross the U.S.Canadian border. Senate Majority Leader Harry Reid (D-Nev.) has said that the legislation will get a vote in the U.S. Senate, but he has not set a date for the vote. Meanwhile, industry representatives say the State Department, the lead agency for permitting the pipeline, is considering holding another public hearing this summer on the environmental analysis for Keystone XL. State has not confirmed the possible hearing.
EIA Confirms U.S Oil and Gas reserves on the Rise
On June 10, 2013, the Energy Information Administration (EIA) released a new estimate of global technically recoverable shale oil and shale gas reserves, indicating the U.S. proven reserves are increasing at a rate faster than most global competitors. According to EIA, U.S. shale oil reserves have increased by 35 percent since 2011, while shale gas has increased by 38 percent
in the last year. Technically recoverable resources are those petroleum resources that can be extracted using currently available technology – it does not represent the economic viability of producing that energy. The report states that the U.S. has the second largest global shale oil reserves, second only to Russia, and the fourth largest shale gas reserves. The full report can be accessed at www. eia.gov/analysis/studies/ worldshalegas/.
Bay Ltd. Announces New Contract
Bay Ltd., a Texas-based manufacturer of equipment for petroleum production, announced in May a new contract for 89 steel modules to be fabricated in Billings and shipped to Canada for oil sands production. The new contract will allow Bay Ltd. to expand hiring in the Billings region, putting its total employment between 300 and 400 people by the end of the summer. Bay Ltd’s 82,000-square-foot fabrication facility in Billings is designed to serve primarily Canadian export markets.
NWE to Purchase Natural Gas Assets in Montana Northwestern Energy (NWE) announced an agreement with Devon Energy Production Company
U.S. shale oil reserves have increased by 35 percent since 2011, to purchase natural gas production assets, including 916 wells, in Montana’s Bear Paw Basin. Under the deal, NWE will control nearly 64.6 billion cubic feet of proven natural gas reserves, 82 miles of transmission line, 576 miles of gathering lines and 21 compressors in Blaine, Choteau and Hill counties. “We believe this purchase adds value, reliability of supply and future long-term rate stability for our customers.
In addition, the purchase of the majority interest in the Havre Transmission Pipeline will provide access to additional sources of natural gas necessary to meet future needs,” said Bob Rowe, CEO of Northwestern Energy. NWE estimates that the production from this area will be approximately 5.6 billion cubic feet in 2013, representing more than a quarter of the utilities average annual demand in Montana.
while shale gas has increased by 38 percent in the last year.
SUMMER 2013 I MTENERGYREVIEW.COM I 9
Q&A WITH:
CONGRESSMAN STEVE DAINES 1. What is your energy agenda for your first term in Congress? What are your top three priorities for the energy industry? I support an all-of-the-above approach to securing American energy independence that includes alternative sources of energy – hydropower, wind, and solar – along with coal, oil, natural gas and biomass. Montana will continue to lead the way, through the pending construction of the Keystone XL pipeline, promoting exploration and sustained development of the Bakken oil shale, continuing to lead in domestic coal production, and expanding our renewable energy production. Montana is setting an example of how domestic energy development can be done in a responsible manner to reduce our dependence on foreign energy while sustaining our resources for generations to come. 2. As a freshman Congressman, getting attention of House Leadership can be a challenge. But as Montana’s only Congressman, you are the lone voice for more than a million people in the House of Representatives. What steps are you taking to make sure Montana issues get the attention they deserve? I represent more people than any other member of Congress, and it’s a responsibility I take seriously. My number one priority is to put Montana first. A key part of that is working with Senators Max Baucus and Jon Tester to do what’s best for the people of Montana. We work together, because at the end of the day, it’s not the “R” or the “D” behind our names that matter – it’s the MT. As a member of the House Natural Resources Committee, I’ve taken on issues of critical importance to Montana – from opening up hydropower development in Courtesy photo
10 I SUMMER 2013 I MONTANA ENERGY REVIEW
Montana’s irrigation canals to finding solutions that revitalize our state’s timber industry and combatting duplicative federal government energy regulations like the proposed hydraulic fracturing rule. The House recognizes the role that the responsible development of natural resources plays in growing our economy. 3. How will Montana’s energy industry be impacted by the evolving battles over sequestration, budget cuts, debt reduction, and federal spending? Montana’s energy industry holds tremendous potential for creating good-paying jobs, growing our state’s economy, Montana’s energy and generating millions of dollars industry will continue in revenue for the U.S. Treasury. As to play a key role in we work to get our country back on getting our economy track, we must take necessary steps to back on track, reduce rein in Washington’s spending and reduce our country’s debt, our nation’s debt. A key part of this and get Americans is encouraging economic growth back to work. and removing the overreaching regulatory barriers that hold back job creation. Developing Montana energy and U.S. energy will not only provides jobs and financial security for families – it will significantly grow our economy and the tax base. Montana’s energy industry will continue to play a key role in getting our economy back on track, reduce our country’s debt, and get Americans back to work. 4. Do you believe that reform of oil and gas permitting on federal lands is a) necessary and b) possible in the near-term? Just as Montana holds rich oil and gas reserves throughout our state, much of those reserves exist beneath federal and tribal lands which encompass 30 percent of our state’s landscape. From 2000 through 2008 there have been 101 wells per year averaged, started on Federal lands in Montana. In 2011 there were 23 Federal drilling permits issued. Last year the State of
Montana issued 329 permits on private lands while only 29 Federal permits were issued. We cannot attract energy investment in our state while the federal government takes hundreds of days to process drilling permits and threatens to exasperate those delays with a pending duplicative rule to regulate hydraulic fracturing on federal and indian lands. The best and easiest way to help permitting on federal lands is for the Dept. of Interior to extend the comment period for this rule. A 30-day comment period for a rule that will affect oil and gas production on lands throughout our country is simply unacceptable. The comment periods for the Miles City, Billings, and Hi-Line Resource Management Plans must be extended as well. Additionally, in my capacity as a Member of the House Natural Resources Committee, we continue to exercise our oversight authority over the federal permitting agencies for resource development. Keeping the Administration accountable to the American people and streamlining the process where possible will turn our oil and gas development on federal lands in the right direction. 5. How concerned are you about possible executive action on climate change, without Congressional approval? What can be done to ensure that major climate or energy initiatives from the Administration are considered through a transparent process? I am very concerned about an executive order on climate change. Our Founding Fathers created our representative democracy to tackle issues like this by utilizing our full transparent legislative process. While Congress can override an executive order by a two-thirds majority vote, the Administration should not be abusing executive orders to create and enforce controversial policies without Congressional approval, especially when these policies would harm America’s economy while having an insignificant or uncertain benefit to the environment. Regardless, I have remained a vocal advocate in opposing any climate change or carbon tax policy. This year I co-sponsored H.Con.Res 24, legislation expressing that a carbon tax would be detrimental to the United States economy. 6. Environmentalists have raised concerns about the impacts of coal exports and the
possible construction of export facilities on the West Coast. Montana has some of the largest coal reserves in the world and is well-positioned to serve that growing global demand. Do you think that Montana should be developing coal resources for export? Just exporting one million short tons of coal produced in the U.S. in a year could create over one thousand good paying jobs. In 2011 in Montana alone, coal exporting created 500 direct jobs. Meanwhile, our country is running a $69 billion trade deficit compared to China in 2013 so far. While our goods like coal remain onshore and undeveloped, jobs are moving offshore to China, India, and others. It’s important to Montana and our entire country to be able to export our Montana coal. Additionally, coal production provides critical funding for Montana schools, as much of our state’s coal is located on school trust lands. Development of our coal reserves produces millions of dollars for Montana public education every year. 7. Do you believe that Montana’s tribes have the flexibility and support from the federal government that they need in order to develop energy resources on tribal lands and bring economic growth to their people? While Montana’s tribes are making gains in developing their natural resources, barriers still remain. Most recently, the Dept. of Interior released a revised draft proposal for a new burdensome hydraulic fracturing rule that would apply to development on Indian lands. I oppose this rule and support H.R. 1548 the Native American Energy Act that would exclude tribal land from this rule unless the Dept. has expressed consent of the tribe. As a Member of the House Natural Resources Indian Affairs and Energy and Mineral Subcommittees, I will continue work to expand economic opportunities for tribes and all Montanans through the responsible development of our natural resources. A great example of how tribes can develop energy resources is found in the partnership between Cloud Peak Energy, Big Metal Company, and the Crow Tribe allowing for the development of coal reserves located within the borders of the Crow Reservation. I believe agreements such as these can help build a strong foundation for Native American communities to thrive in our state. SUMMER 2013 I MTENERGYREVIEW.COM I 11
BILLINGS BATTLES EPA OVER SULFUR EMISSIONS BY JENNIFER OWEN
At-a-Glance
• EPA is threatening to designate Yellowstone County as out of compliance for national sulfur dioxide emissions standards, an action which could have significant economic consequences. • The State of Montana and others argue that EPA’s analysis is flawed, and note that SO2 has plummeted in the region in the last 20 years. • DEQ and PPL Montana have reached an agreement to substantially reduce SO2 emissions at the Corrette plant in Billings. PPL’s Corette coal fired power plant in Billings. The Montana Department of Environmental Quality reached a major accord with PPL Montana to reduce sulfur emissions from the plant, in the hopes of staving off an EPA ruling on air quality in Yellowstone County. Photo by Larry Mayer.
Living in Big Sky Country means loving the out-of-doors – wide open spaces, shimmering lakes and streams, and most of all, fresh, clean air. Understandably, when the federal government attempts to suggest that our air quality isn’t all that clean, local folks take umbrage.
In June 2010, the Environmental Protection Agency (EPA) issued new National Ambient Air Quality Standards (NAAQS) for sulfur dioxide (SO2). The standards, promulgated under the Clean Air Act, limit the amount of SO2 in the air in a particular region during any one-hour period. Later that year, the ExxonMobil plant in Billings began testing SO2 reduction additives, pursuant to a 2005 consent decree with EPA. The agreement required the ExxonMobil plant to begin testing various additives to be used at
the plant to reduce emissions so that a decision could be made and implemented by January 2011. The required testing process resulted in a temporary spike in SO2 emissions, which were flagged on an air quality sensor nearby. When the EPA establishes new NAAQS for a particular air pollutant, states are required to file designations with the agency, indicating whether a particular region is achieving the new standard, known as attainment; failing to achieve the standard, known as nonattainment; or unable to be classified due to lack of data. In SUMMER 2013 I MTENERGYREVIEW.COM I 13
The ExxonMobil refinery in Billings, lower right, has been at the center of an ongoing debate between the Environmental Protection Agency and both the Yellowstone County and the State of Montana. EPA alleges that sulfur emissions from the facility place the region out of compliance with air quality regulations, a determination that could have widespread economic consequences for the area. Photo by Larry Mayer.
“I think that if they do classify it as nonattainment it could probably have a pretty severe impact on business growth in Yellowstone County,” — JOHN OSTLUND, YELLOWSTONE COUNTY COMMISSIONER
May 2011, the Montana Department of Environmental Quality (DEQ) sent a letter to EPA, designating all 56 Montana counties as attainment or unclassifiable, and specifically requested that Yellowstone County be treated as unclassifiable. Attainment is measured over a three-year period, and DEQ requested that 2011 be excluded for Yellowstone County, due to the EPA-required testing of emissions reductions additives. DEQ instead recommended that compliance be measured during 2009, 2011 and 2012, or alternatively 2011-2013. Because the data was not complete for those time periods, an unclassifiable designation was recommended by DEQ. EPA did not reply to DEQ’s 2011 letter until Feb. 6, 2013, when the agency informed Governor Steve Bullock that it was rejecting the state’s analysis and intended to designate Yellowstone County as nonattainment. EPA indicated that the designation would be announced no later than June 3, 2013. EPA argued that Yellowstone County continued to exceed allowable SO2 standards into 2011, after the additive testing was complete, and thus rejected the Montana’s rationale. “I think that if they do classify it as nonattainment it could probably have a pretty severe impact on business growth in Yellowstone County,” said John Ostlund, Yellowstone County Commissioner. “And it’s really not true. Actually, our emissions are 80-90 percent better than they were 20 years ago. We’ve done a great job cleaning up.
14 I SUMMER 2013 I MONTANA ENERGY REVIEW
It seems a little heavy-handed.” On April 3, 2013, the Bullock Administration responded, arguing that EPA’s analysis was not representative of the emissions trends in Yellowstone County, which have reduced emissions from 35,000 tons per year to 6,287 tons per year over the last 20 years, and that the agency was continuing to erroneously include time periods of required additive testing in its analysis. “This could have a huge impact on recruitment,” said Greg Kohn, chairman of the Billings Chamber of Commerce Board of Directors. “A lot of companies wouldn’t want to come to an area with air quality problems.” As of press time, EPA had not responded to Bullock’s April letter, nor had the agency published a final nonattainment finding. “We don’t have an answer from them yet, and now it looks like we may not hear from them until sometime later this summer,” said DEQ spokesperson Lisa Peterson. On June 10, 2013, DEQ announced a major agreement with PPL, Montana, owners of the coal-fired Corette Electrical Generating Station in Billings. The company agreed to reduce SO2 from the plant by 60 percent by April 2015. DEQ says EPA is aware of the agreement, but has not indicated whether the accord is sufficient to avoid a nonattainment designation. DEQ is confident, however, that Yellowstone County will be in compliance with the new NAAQS because of the agreement. “This is going to ensure that we
are meeting the federal air quality requirements,” said Peterson. The impact of a nonattainment designation could be far-reaching. Companies may be reluctant to move to an area perceived as having poor air quality, new industry or manufacturing plants may not be permitted, and operations of existing facilities could be constrained or controlled. Additionally, a nonattainment designation can be difficult to remove. The Laurel area was designated nonattainment in 1979 – a designation that remains in place today. “What that shows you is how difficult it can be to get that designation removed or changed, regardless of how much you put into air emissions equipment,” Ostlund said, expressing concern about the potential economic harm to the Billings area. “It means no new equipment at the refinery. It will be very difficult going forward to get any permits done.” If EPA moves forward with a nonattainment designation for Yellowstone County, it is unclear what recourse the county or the state would have to challenge EPA’s determination. “We need help of our two senators, congressman and our governor,” said Ostlund. “Quite honestly, the recourse would be a legislative process that changes the rules. Right now, you have EPA making the rules and not a legislative body. You’ve got bureaucrats implementing climate change rules and not going through the House or Senate.”
COAL UNDER ATTACK:
FEDERAL REGULATIONS HAVE INDUSTRY REELING BY JENNIFER OWEN
• EPA has recently issued a slate of new regulations related to the coal industry in the U.S., the most controversial of which is proposed restrictions on carbon emissions that some say coal-fired power plants can not achieve. • The Montana PSC opposes the rule, and the state has joined litigation pending in front of the Supreme Court, alleging EPA has overstepped its authority on carbon regulations. • President Obama has announced he intends to impose carbon regulations on existing power plants as well, but no timeline has been set.
An aerial view shows Colstrip power plants 1,2,3 & 4 and the Westmoreland coal mines near Colstrip. Federal regulations targeted at the coal industry are creating challenges for power plants. Photo by Larry Mayer.
16 I SUMMER 2013 I MONTANA ENERGY REVIEW
As Gina McCarthy, the White House’s nominee for Administrator of the Environmental Protection Agency (EPA), sits in limbo, awaiting confirmation by the U.S. Senate, a growing group of industry representatives are pushing to get a pivotal question answered: Does EPA want to ban coal in the U.S.? EPA wields enormous power over energy production in the United States, much of that authority based in the sweeping mandates contained in the Clean Air Act and Clean Water Act. A slew of recent proposed and pending regulations from the agency have sparked the coal industry to ask whether EPA is slowly trying to eliminate coal as a viable energy source in the U.S. The Montana Public Service Commission (PSC) recently underscored the depth of concern, stating in an April 23, 2013 letter to the EPA that pending regulations to reduce power plant emissions would “make it impracticable to construct any new coal-fired generation in the U.S.” “I’m very concerned that, besides the fact that it is a de facto prohibition on coal plants, it comes at a time when we are still reeling from the previous coal rules,” said PSC Chairman Bill Gallagher. “Regrettably, EPA is the Employment Prevention Agency. I have no faith in the federal executive. They’re not necessarily acting in a way that is best for Montana’s interests.”
“I’m very concerned that, besides the fact that it is a de facto prohibition on coal plants, it comes at a time when we are still reeling from the previous coal rules,” — BILL GALLAGHER, CHAIRMAN, MONTANA PUBLIC SERVICE COMMISSION
Courtesy of Public Service Commission.
At the center of the controversy lies EPA’s proposed New Source Performance Standards (NSPS) for electricity generation, also referred to as greenhouse gas rules. In April 2012, EPA proposed new performance standards for existing power plants in the U.S., requiring all facilities to reduce emissions to a level of 1,000 pounds of carbon dioxide per megawatt-hour, a level that some say solely natural gas-fired plants could achieve. Coal plants would only be able to achieve this level of emissions reductions by including carbon capture and sequestration, a technology that has not yet been proven at commercial-scale. “It is a very flawed proposed rule. If they were really trying to encourage ‘all-of-the-above’ and really want clean energy from coal, I don’t see how they could propose something like this,” said Ben Yamagata, executive director of the Coal Utilization Research Council, an industry organization that promotes the efficient and environmentally sound use of coal. “No one is going to undertake and finance a plant under the assumption that, a decade from now, there will be technology available to retrofit.” Additionally, EPA is taking the unusual step of lumping all fuel sources together – creating a single category for natural gas plants and coal plants, rather than setting performance standards for each source, as is standard practice and, according to some, a legal requirement. Opponents of the rule suggest that this decision by EPA will force power plants to stop using coal and switch to natural gas, a decision that has consequences throughout the power generation system. “A significant amount of our native load is
served by coal. I don’t understand why we would self-impose these kinds of constraints,” said Gallagher. “The costs associated with revamping are going to be huge. And that gets passed on to the consumers.” Gallagher notes that electricity moves along transmission wires rapidly and that the distribution system is designed around this pace, meaning that load scheduling, reliability requirements, maintenance schedules – every part of the current electric system is based on a set of existing assumptions about the speed of transmission. Pipeline constraints in the region mean that natural gas brings a different set of timing assumptions that have cascading impacts throughout the system. While these impacts may be manageable, Gallagher says the compliance timelines EPA has imposed in previous rules and is now proposing in the greenhouse gas rule are impossible to achieve. That means that in addition to compliance costs, consumers can expect to bear the costs of fines from federal agencies for missed deadlines – and those systemic costs are simply not captured in EPA’s cost-benefit analysis for regulations. “They expect everyone to react and figure out the tertiary problems – and who is going to pay for them,” said Gallagher. EPA has yet to finalize the controversial greenhouse gas rule, prompting a group of states and environmental organizations to serve EPA in April 2013 with a notice of intent to sue if the agency doesn’t promptly issue the final rules. The coalition also demands that EPA go a step further and issue proposed rules to reduce carbon emissions from existing power plants. The coalition later announced it would hold
off on the litigation, based on the White House’s recent announcement of a series of executivelevel actions on climate, including a commitment to issue carbon regulations for both new and existing power plants. Industry experts are saying that the EPA plans to reissue the controversial rule for existing power plants this fall, separating coal-fired and natural gas-fired generation into two categories. EPA has not, as of press time, confirmed those rumors. Legal commentators had suggested that including the two sources into the same category contravened the plain language of the Clean Air Act. Montana Attorney General Tim Fox announced on May 23, 2013 that Montana would join in a “friend-of-the-court” brief for litigation led by the State of Texas, challenging EPA’s underlying rationale for its attempts to regulate carbon dioxide. In a move seen as laying the foundation for aggressive carbon regulation, the White House issued in June an order raising the “social cost of carbon” (SCC) estimate that agencies use in rulemakings. The SCC number is designed to capture the harm to health, property and environment cased by carbon emissions and is used by agencies to quantify the estimated benefits stemming from carbon reductions in rulemakings. The order, issued by the Office of Management and Budget, raises the SCC from $21/metric ton to $35/metric ton. For Montana, a reduction in coal-fired power generation has serious consequences. Montana has the number one coal resource in the nation, representing 25 percent of total U.S. coal reserves and 8 percent of global coal reserves. Industry representatives say that if EPA finalizes SUMMER 2013 I MTENERGYREVIEW.COM I 17
greenhouse gas rules for new power plants, it would represent not only a serious setback for industry but may also potentially have adverse environmental impacts. Yamagata notes that, by failing to set an achievable carbon standard for coal plants, the rule has the effect of blocking construction of new plants that may offer reduced emissions of other pollutants, such as sulfur or particulate matter. “That’s what you really want if you want to start addressing coal emissions. You want new coal units that are as efficient as you can get them, replacing old ones,” he said. “We’re not going to be replacing anything with new coal plants because we can’t meet the new standard that has been proposed.”
President Barack Obama gestures during a speech on climate change at Georgetown University on Tuesday, June 25, 2013, in Washington. Obama is proposing sweeping steps to limit carbon emissions from both new and existing coal-fired power plants and to boost clean energy production on federal property. (AP Photo/Evan Vucci)
Coal Regs: Not Just About the Air
In addition to tackling air emissions, EPA is also using its authority under the Clean Water Act to address pollution related to power plants. On April 19, 2013, EPA issued proposed rules to limit chemicals in runoff from steambased electric generation, including coal, nuclear, oil and natural gas. Targeted pollutants include oil and grease, arsenic, mercury and nitrates. EPA issued the proposed rule under the terms of a consent decree stemming from a 2010 deal between the agency, the Sierra Club, and the Defenders of Wildlife. Under the terms of the order, EPA must finalize the rule by May 22, 2014.
A 60-day public comment period closed in June. Related to EPA’s proposed runoff rules is the yet-to-be-finalized Coal Ash Rule, a regulation the agency has had pending since 2010. The rule seeks to regulate residuals from coal combustion, which are often stored in pits or ponds and could
potentially result into materials leaching into groundwater. Finally, the Mine Health and Safety Administration is in the process of finalizing a new coal dust rule, widely criticized by industry for relying on faulty technology and flawed science, as well as failing to achieve any actual worker safety benefits.
A Stillwater River Weekend Getaway • Spectacular River Views • Blue Ribbon Trout Fishing • Whitewater Rafting • Atv Rentals • Hiking For Rental Details See
www.vrbo.com/324845
Call 406-855-2908
e l a S r o F
Stillwater Group, LLC • Contact Mike Hennessy • (406) 855-2908 18 I SUMMER 2013 I MONTANA ENERGY REVIEW
NEEDAPIPELINETO MONTANA’SENERGYTRENDS?
ECONOMICS • ANALYSIS • REGULATIONS EXPORTS • POLICY • TRENDS • COMMENTARY • INSIGHTS
YOUR INDUSTRY. YOUR NEWS.
ONLINE • ONFACEBOOK • ONTWITTER
mtenergyreview.com
SUMMER 2013 I MTENERGYREVIEW.COM I 19
ECONOMIC INSIGHTS
BILLINGS’ GROWTH PRESENTS OPPORTUNITIES, CHALLENGES Look at an unemployment rate graph and you’d think you were looking at a heart monitor. These key economic indicators naturally seem to go up and Jeremy Vannatta down over the course Big Sky Economic of a year, creating Development Authority peaks and valleys similar to the beat of a heart. Like that heart monitor, unemployment rates provide a pulse on the overall health of a community. And if Billings’ “heart rate” is any indication, our economy is growing, while presenting some very real challenges. In September 2006, Billings’ unemployment rate was at an all-time low, at just 1.8 percent. In the depths of the recession ( January 2010), it grew to a high of 5.8 percent. Today, unemployment is just under 4 percent and continues to fall. Low unemployment rates are the sign of a healthy economy – many businesses are growing and new businesses are moving in, all hiring additional employees. At the same time, as the unemployment rate falls, so can the number of applicants for any given position. For some, this can mean not finding the ideal candidate or not finding any candidates at all. Big Sky Economic Development (BSED) recently completed a Target Industry Analysis – a look at what industries are clustered in Yellowstone County/Billings and what industries our region should work to attract. The results? Billings should continue to recruit upstream and midstream oil and gas, healthcare and health supply chain, and regional headquarters and back office operations. Three additional industries were recommended as our second tier of new potential include data centers and IT services, manufacturing (including value-added food products, machinery, equipment, chemicals and plastics), and warehousing transportation and logistics. 20 I SUMMER 2013 I MONTANA ENERGY REVIEW
BSED hired Development Counsellors International (DCI) who partnered with RDA Global to complete the Target Industry Analysis. Having compared hundreds of cities, states and even countries, the consultants were able to attribute four reasons businesses do well here: 1. Our Growing Regional Labor Force. Yellowstone County is growing at twice the national rate of growth. The county’s workforce is highly-skilled with 22.2 percent of residents holding a bachelor’s degree versus 17.9 percent nationally. In addition, Billings’ wages are cost-competitive, traditionally 25 percent less than the U.S. average. 2. Billings Location & Infrastructure. Billings is a regional service hub for professional services, distribution, retail, health care, entertainment, and transportation. The community offers good infrastructure, including rail, highway and air transportation. And the city is strategically located halfway between Calgary and Denver, in proximity to energy developments, and with several major cities within eight hours travel time. 3. Reasonably Low Cost of Doing Business. Yellowstone County offers low operating costs for both corporate offices and manufacturing, reasonable costs for real estate development, and good incentives for income tax, property tax and workforce training offsets. 4. Excellent Quality of Life. The community offers a high quality education for K-12, technical education and universities, excellent breadth of services and affordable cost of living for workers. Additionally, as part of the Target Industry Analysis, DCI conducted a workforce assessment to understand the current labor market. The company sent the survey to 1,523 companies and received a strong response from 12 percent of companies. Of the companies responding,
57.1 percent responded they planned to maintain their current number of employees. A solid 40.7 percent, however, indicated they anticipated increasing their workforce. When asked what key challenges companies face in developing their workforce, the top three responses were: 1) finding qualified workers; 2) economic uncertainty; and 3) costs related to labor, including wages and workers compensation. Companies also cite a need for additional training opportunities for prospective employees, such as obtaining a commercial driver’s license, developing work ethic and soft skills and specific software training. BSED has partnered with the Billings Job Service, MSU Billings, Billings Chamber/ CVB, labor unions and many private employers like Sanjel, ExxonMobil, Billings Clinic and St. Vincent Healthcare to start a major initiative to work on those issues. The workforce council is identifying specific goals in which the group can have the most impact. This council will be tasked with helping businesses find and retain quality employees. The keys for retention include an above average livable wage, access to affordable housing, quality schools, health care and potential for advancement or growth. Additionally, many workers need trade-specific training as well as soft skills such as communication and customer service – basics which can be addressed by the numerous partners joining in the workforce council. We must offer certifications that help employees get the training they need efficiently, so they can start working as quickly as possible. Additional priorities include expanding the pool of talent regionally and looking at transferable skills that can be brought to our ever-growing job market. This effort will take extensive collaboration and both a short-term and longterm vision to maintain our vibrant workforce. But with dedicated partners in a strong, growing community, Billings’ future won’t skip a beat.
inspection, llc
888-846-8886 applynow@csiispection.com
An oil drilling rig near Williston, North Dakota in the Bakken oil play.Energy production in the Bakken is creating new economic growth in Billings, bringing unemployment down to 4 percent. Photo by Larry Mayer.
Locations Nationwide
Towanda, PA • Odessa, TX Spring, TX • Victoria, TX Broussard, LA • Williston, ND Greely, CO • Grand Junction, CO Casper, WY
For the Land & mineral Owner.
AT TO R N E Y AT L AW P: 406-839-9764 • F: 855-574-9846 P.O. Box 537, Story, Wyoming 82842 www.mezimmerman.com • E: mikE@mEzimmErman.cOm
Envi Road Montana “Serving Central & Eastern MT”
Earthbind 100 for all your dust abatement requirements Call 406-697-3895 www.enviroadmt.com SUMMER 2013 I MTENERGYREVIEW.COM I 21
WORLD
POWERING THE
IS MONTANA BECOMING A PLAYER ON THE GLOBAL STAGE? BY JENNIFER OWEN • PHOTOGRAPHY BY LARRY MAYER
Somewhere today, in Seoul, South Korea, a mother switches on a light, flooding her family kitchen with a warm morning glow. A plant operator checks a boiler, ensuring the facility has the power it needs to continue chugging along. A young entrepreneur boots up a computer, eager to start his day. 24 I SUMMER 2013 I MONTANA ENERGY REVIEW
The thread that connects these individuals, and millions more across the Korean peninsula, may surprise you. Daily Korean life is powered heavily by coal, and due to limited domestic reserves, Korea is the world’s sixth largest importer of coal. In 2012, the United States exported approximately eight million metric tons of coal to South Korea, nearly half of that coming directly from Montana’s Spring Creek Mine outside of Decker. “South Korea is actively building coalfired generation, using the latest technology available. They are doing so based upon the
fact that they believe coal will be a primary source of electricity for them into the foreseeable future,” said Todd O’Hair, senior manager of government affairs for Cloud Peak Energy, owner of the Spring Creek Mine. Asia is the destination for approximately 26 percent of all U.S. coal exports, with Korea being the fifth-largest recipient in the world of U.S. coal. The Asian region is dominated by coal exports from Australia and Indonesia, but interest in U.S. coal is growing. Montana coal is particularly compelling for export markets, based on geographic proximity to West Coast
Right: The Westmoreland coal mine near Busby. Above: Trucks are loaded with coal at Cloud Peak Energy Spring Creek Mine near Decker, Montana.
SUMMER 2013 I MTENERGYREVIEW.COM I 25
importance of access to transportation for coal. “If it doesn’t happen, that will certainly diminish the market opportunity.” Nationwide, the impact of coal exports is substantial. According to an Ernst & Young study published in May 2013, every million short tons of coal exported results in approximately 1,320 jobs in the U.S. On average, the U.S. exports about 10 percent of its total annual coal production. Domestic market projections for coal are gloomy, with the percent of electric generation from coal expected to decline from 51 percent in 2003 to approximately 42 percent today to about 35 percent by 2040, according to the Energy Information Administration. At the same time, U.S. coal exports hit a record-high 125 million short tons in 2012. “The demand is there for coal, globally. The supply is here in the U.S., specifically in Montana. We have the supply and the quality of coal they are interested in, for a variety of reasons,” said O’Hair. Left: Traffic streams through the small town of Alexander, North Dakota, in the heart of the Bakken petroleum play. As U.S. energy production expands, exports of domestic energy have the potential to bring significant economic benefit to the U.S., as well as have an impact on global power structures. Above: Aerial view of the Cloud Peak Energy Spring Creek Mine near Decker, Montana. The Spring Creek Mine produces nearly 4.5 million short tons of coal for export, in addition to serving domestic markets.
export facilities and the fact that Montana has low sulfur, low ash coal with a competitive heat value. In other words, coal produced in Montana has a lower emissions profile than some global competitors, and a facility can burn less Montana coal to get the same amount of energy. “The good news story for Montana, in all of this, is that there is a tremendous amount of interest globally in Montana coal,” said O’Hair. That is good news for Montana. Each year, coal mines send more than $1 billion in taxes to the state, in addition to the millions in private sector impact through jobs and purchases of goods and services. But coal 26 I SUMMER 2013 I MONTANA ENERGY REVIEW
demand in the U.S. is declining, and without access to global customers, the 42 million tons of coal produced in Montana each year would have no place to go. “They [coal exports] are extremely critical. We don’t have anything on the drawing board for power plants in Montana. If they keep shutting down power plants, our number one natural resource has to go somewhere,” said Greg Kohn, a spokesperson for Count on Coal Montana, an industry group that promotes coal production. U.S. Senator Jon Tester (D-Mont.) agrees. “From a coal mining perspective, exports are critically important,” he said, noting the
Getting to Market
Cloud Peak Energy sells substantial portions of its Montana-mined coal into the domestic market, primarily to Detroit Edison, which supplies power to the Big 3 automakers. But development of additional coal resources, expansion of production, and growth of the company’s role in Montana’s economy depends largely on the ability to access hungry global markets. The only thing standing between more Montana coal serving overseas demand? Ports. “We are limited, almost entirely and exclusively, by export terminals,” said O’Hair. Montana has a geographic advantage for coal export markets, because it is located closer to West Coast export terminals than, for example, Wyoming, which products nearly 10 times as much coal as Montana on an annual basis. Because transportation is such a large part of the delivered cost of coal, Montana’s portion of the Powder River Basin is more competitive, as it eliminates nearly 200 miles of rail transportation costs. “Because we are closer to states like Washington, Oregon and the western seaboard of Canada, that gives us a leg up over Wyoming,” said O’Hair.
Current export terminals are operating at full capacity for coal exports, meaning new markets can only be accessed by the construction of new export terminals. Currently, three export terminals are under discussion in Washington and Oregon, and all three are facing heavy opposition. Environmental and community organizations allege that increased coal exports would cause significant damage, including increased risk of climate change, a risk of coal dust in communities and waterways, and expanded rail traffic “Restricting through cities and towns. Originally, six international trade new export terminals were proposed for in fossil fuels is not the West Coast; three have been scuttled. an effective policy Opponents of the export terminals to reduce global suggest that the proposals are simply greenhouse gas not economically sustainable, emissions or to regardless of the environmental advance domestic concerns. “You have to look economic interests, at the global situation to understand where and we recommend Montana stands. We are competing against any such in a world market for Chinese demand restrictions,” that is declining,” said Anne Hedges, program director — BYRON DORGAN for the Montana FORMER U.S. SENATOR E n v i r o n m e n t a l Information Center. TESTIFYING ON BEHALF OF “The world is BIPARTISAN POLICY CENTER changing, and it is rapidly leaving coal behind.” The largest of the three proposals remaining is the Gateway Pacific, in Cherry Point, Wash. The facility is proposed as a multi-commodity terminal, meaning that in addition to coal, it would also ship other bulk commodities, such as Montana wheat, to overseas markets. The
project would provide 4,400 construction jobs, 1,250 permanent jobs and $11 million a year in taxes to Washington State. Cloud Peak Energy has an agreement to ship up to 16 million tons of Montana coal through the terminal, if constructed. Ambre Energy, an Australian coal company, is currently negotiating to purchase outright the Decker Mine, located near the Spring Creek Mine in Montana. The company currently owns a 50 percent stake in the mine, but is seeking to control all operations, with an eye toward serving Asian markets. Hedges asserts that the projections of global demand for coal are faulty and that the proponents of coal exports are simply trying to convince investors to back projects that won’t likely succeed. “This ‘build it and they will come’ is a very juvenile perspective on a very complex issue,” said Hedges.
Understanding the Controversy
All three of the proposed West Coast export terminals require federal and state approval. The U.S. Army Corps of Engineers has jurisdiction, under the Clean Water Act, of any discharge into federal navigable waters, including the deepwater ports on the West Coast. The port proposals are thus subject to environmental review under the National Environmental Policy Act, as well as a “public interest review” – a process somewhat similar to the approval needed for the Keystone XL pipeline. In addition, the export terminals are subject to state and local regulations. “The big holdup [on terminal development] is the environmental impact studies to be done,” said Kohn. Environmental opposition largely centers on the potential global carbon emissions associated with extraction and combustion of coal, and many groups are demanding that federal environmental reviews include a global analysis of the climate change impacts that could be attributed to more coal exports. Hedges says that a comprehensive review of climate change impacts is “absolutely doable. That is not a Herculean task.” According to O’Hair, the constantly changing nature of business decisions, the
variety of mixes of coal in power plants, and emerging technology all mean that analyzing carbon impacts of a single action is actually a massive undertaking, and not likely one that agencies would be able to reasonably manage. “Every coal-fired generating unit emits different CO2 based upon construction of the plant, the technology of facility, the quality of coal and the output of the plant. Take South Korea for example. They’re not just burning Montana coal,” said O’Hair, noting that power plants in Asian markets may be blending with coal globally and that those blends change daily. “Trying to determine what global CO2 impacts would be just from shipping into global markets is incredibly complex. We would argue that environmental community knows that. They will argue that the analysis is flawed and then they will litigate on that.” On June 18, 2013, Jennifer Moyer, the acting regulatory chief of the Army Corps, testified before the U.S. House Energy and Commerce subcommittee on Energy and Power, stating that there is “no compelling justification” to conduct a programmatic, broad environmental review for the three pending export terminals. Moyer stated expressly that the climate impacts of burning coal in Asia would not be considered, and that the projects will be evaluated independently. In addition to climate change, opponents of new export terminals suggest that coal exports can emit coal dust into the air, could potentially pollute waterways and will create nuisances for cities and towns with increased rail traffic. Kohn pushes back on those concerns, stating that Montana coal can access export markets with existing rail infrastructure, and that the rail lines can only support about 15 coal trains per day, not the 60-90 new trains that some export opponents have suggested. O’Hair concurs that rail expansion is not a necessary component of getting Montana coal to export terminals. “We are not concerned, at this point, that rail transportation would be a limiting factor,” O’Hair said. Kohn also asserts that coal dust is not a problem for cities along the route. Coal dust SUMMER 2013 I MTENERGYREVIEW.COM I 27
generally settles within a mile of the mine site, and a recent study by the City of Missoula listed coal dust as the fifth most common air pollutant, well behind rubber particles from ordinary vehicle tires. Kohn suggests that cooperation can resolve any concerns that communities may have. “If we all work together, we can achieve the same outcome – more money for schools, more money for roads, more money for infrastructure and good paying jobs,” he said. Sen. Tester echoes that sentiment. “I hope they talk to actual people about environmental issues,” he said. “They need to talk to folks along the route to find out how to mitigate impacts.”
Exports: More Than Just Coal
While coal export debates have dominated the headlines, they represent only a portion of the potential global market for energyrelated products. As coal companies push for more access to exports, so too are natural gas producers looking to expand into world markets for liquefied natural gas (LNG). Increased U.S. exports of natural gas have the potential to significantly alter global market power. The International Energy Agency predicts that the U.S. will soon pass Russia as the world’s largest producer of natural gas. If the U.S. increases its natural gas exports, the impact on Russia’s near monopoly over European markets could be substantial. U.S. exports are limited by regulation – all LNG exports must receive approval from the Department of Energy (DOE) and the Federal
Energy Regulatory Commission (FERC). Currently, DOE has 16 export applications pending, and the agency has suggested it will proceed on a case-by-case basis in evaluating each, in the order in which companies filed a FERC permit. Some in the industry have suggested this is unlawful and are considering legal challenge. Earlier this year, former U.S. Senator Byron Dorgan (D-N.Dak.) testified before a House Committee on behalf of the D.C.-based Bipartisan Policy Center, in favor of increased LNG exports. “Restricting international trade in fossil fuels is not an effective policy to reduce global greenhouse gas emissions or to advance domestic economic interests, and we recommend against any such restrictions,” he said in his May 7, 2013 testimony to the House Subcommittee on Energy & Power. Montana produced about 75 million cubic feet of natural gas in 2011, ranking it 21st in U.S. production. Texas leads the nation, with Louisiana and Wyoming following behind. North Dakota gas production is increasing along with oil production in the Bakken, although large volumes of Bakken natural gas are being flared off, rather than gathered and sold. “With the Bakken coming on, things have changed. There is a significant amount of gas available in Eastern Montana and Western North Dakota,” said Dennis Haider, executive vice president, Business Development and Gas Supply, MDU Resources. MDU Resources is the largest producer of natural gas in Montana,
HoHn EnginEEring, Pllc PROFESSIONAL CONSULTING SERVICES TO THE OIL AND GAS INDUSTRY SINCE 1984
2708 1st Avenue North, Suite 200 Billings, MT 59101 Phone (406) 655-3381 Fax (406) 655-3383 Contact: Tom Hohn e-mail: hohneng@hohneng.com • www.hohneng.com 28 I SUMMER 2013 I MONTANA ENERGY REVIEW
Tired of living
Too far
away from your
family?
through its subsidiary Fidelity Exploration and Production. Haider suggests that while LNG exports are drawing significant attention, the impact for Montana is likely minimal as the total U.S. exports likely wouldn’t exceed 10 percent of U.S. production in the near-term. The benefits to Montana may be more indirect. “If it incentivizes producers to produce more gas, that could be beneficial to Montana,” said Haider. Ralph Spence, an independent natural gas producer with holdings in Montana and throughout the West, argues that expanding natural gas exports is not nearly as important as accessing the massive transportation market in the U.S., through the deployment of natural gas-powered vehicles. “We’ve got to get natural gas into our transportation markets,” said Spence. “ The best thing for consumers is natural gas in transportation.” Spence says that increasing the use of natural gas in transportation would do more to stimulate infrastructure investment and exploration for natural gas than would allowing LNG to be exported. Spence believes that the long-term consumer benefit lays in using clean natural gas in vehicles, rather than shifting to renewable energy. “If you look at how to get energy to the working man the cheapest way possible, it’s not wind, it’s not solar, it’s not even electricity. It’s oil and gas,” he said, noting that shifting U.S. transportation to more reliance on domestic natural gas could have a global impact.
Frazer Mt.
20+ Lots With All Utilities Only $15,000 Per Lot
• Fine K-12 School • 118 miles to Williston • 111 miles to Sidney • 29 miles to the Fort Peck Spillway
• 15-30 miles to the Keystone Pipeline • Factory built homes are allowed • 73 miles to Culbertson or Circle
Call 4 0 6 • 5 2 4 • 3 1 5 8
motherlode@nemont.net R.S. Box 60, Saint Marie Mt. 59231
MAKING IT WATER TECHNOLOGY IN THE BAKKEN
BY JENNIFER OWEN
Technology innovations have led to an explosion of oil and gas production in the Bakken shale and across the United States. The combination of horizontal drilling and hydraulic fracturing are making previously unattainable petroleum reserves accessible and economical. Yet as one natural resource proliferates, another begins to feel the strain. Oil and gas production, in particular hydraulic fracturing, uses large volumes of fresh water. Fracking, as hydraulic fracturing is often called, is the process of injecting a mixture of water and chemicals at high pressures to create fissures in rock formations, allowing trapped oil and gas to escape. Thus, the fracking process both requires a significant amount of water going in and results in a large volume of water flowing back out of the well, presenting the twin challenges of finding enough water for injection
Battelle scientist measures extractant levels after mining wastewater is cleaned using their patented Floatation Liquid-Liquid Extraction (FLLX) process. Battelle is partners with Winner Water in a joint venture to treat wastewater from industrial process so that it can be used in hydraulic fracturing operations for oil and gas production. Photo courtesy of Battelle.
SUMMER 2013 I MTENERGYREVIEW.COM I 29
GE Water is working to develop a portfolio of water treatment solutions for petroleum production in the Bakken, including mobile treatment equipment and large-scale centralized treatment plants. Photo courtesy of GE.
and treating or disposing the flowback water after fracking. Each fracking event requires approximately 2 million gallons of water, placing substantial short-term demand on local rivers, aquifers and water treatment facilities. Water prices in North Dakota range between 50 cents to 85 cents per barrel – a barrel equates to approximately 31.5 gallons of water. Options for managing flowback water include disposing of it in pits or diluting the produced water with fresh water and recycling • Because hydraulic it for use in another fracking fracturing consumes large operation. amounts of water and Just as with results in wastewater petroleum output, large and small companies are innovating production, water solutions to reduce costs in the oilfields is and water usage in the oil on the cusp of field. a technological revolution. • Water in the Bakken often Investors and has high saline levels, innovators have requiring specialized recognized the solutions. challenges created by high energy • Reducing demand for fresh demand and water can save producers limited water hundreds of thousands of resources, and dollars per well. are increasingly bringing to 30 I SUMMER 2013 I MONTANA ENERGY REVIEW
market new solutions to treat, reuse and recycle water resulting from fracking operations. In March 2012, Halliburton announced it had commercialized technology to recycle flowback water, reducing water costs by $400,000 per well in the Bakken. The technology allows companies to use less fresh water while reducing contaminants that can harm well efficiency. Other companies are investing in processes to remove contaminants from flowback water or are exploring the purification and use of produced water from other industrial processes. Some of these technologies are in the earliest stages of development or deployment, but signal a new future for resource use in the Bakken.
GE: Imagining a Better Oil Patch
Eight years ago, industrial giant GE acquired a small technology company that specialized in zero liquid discharge technology, a method of treating wastewater that results in no liquid discharge. Because of that acquisition, GE Water now offers a suite of technologies for treating, recycling and reusing produced water in the oil field. In a state like Montana, where water is scarce and disposal options are limited, the ability to efficiently and effectively reuse water from fracking operations is vital. “In Montana, the lack of ability to dispose of large volumes of water has really gotten the attention,” said Bill Heins, general manager of GE’s thermal business line. “If you’re able to
come up with a system where you need much less freshwater, that’s going to help not only public perception, but helps the producers as well, because you don’t have to fight over freshwater use.” GE is currently deploying what is known as evaporative treatment options in Pennsylvania’s Marcellus Shale and throughout Texas, and is in talks with four potential clients in the Bakken region to bring its technology to the area. Assuming those talks move forward, GE systems could be operational by 2015. An evaporative system operates on a simple principle: heat produced water until it evaporates, leaving behind all the solids like salt and minerals, and then condense the water back into a liquid for reuse. Heins says this process results in 98 percent to 99 percent water recovery, with only a small portion lost in the treatment process. “Basically you are recovering all that water so you don’t have any wastewater to dispose of,” he said. For the oil field, GE has developed three distinct evaporative options: a small, mobile evaporator which can process up to 50 gallons per minute and is typically used for oil field operations where equipment can be moved from one well pad to another; a fixed produced water treatment facility, which typically processes about 500 gal/minute and is used for sites with concentrated number of wells in one area, central facility; and finally a crystallization system, which recovers nearly all the water, crystallizes all the salts, and then offers two produces: reusable water and road salt. In the Bakken, particularly on the Montana side, flowback water from hydraulic fracturing has a high saline content – as much as six or seven times sea water, according to Heins. Accordingly, a crystallization system has significant potential benefit for the region. That also means that the technology has to be modified and designed specifically to handle the unique composition of water produced from Bakken operations. Heins notes that produced water disposal costs can run as high as $2-$3/barrel, making treatment options that allow large volumes of water to be reused economic for oil and gas regions. “With a crystallizer you are really minimizing that cost because you are recovering and reusing the water,” he said.
Winner Water: Delivering Industrial Synergies
John Ontiveros, CEO of Winner Water Services, has a very different vision for water treatment and reuse in petroleum production. Rather than recycling flowback water for reinjection during a fracking operation, Ontiveros is looking to treat water from related industrial production and deliver it to water-hungry oil fields. “The oil and gas industry uses a lot of fresh water,” said Ontiveros. “That’s starting to put a real strain on water sources.” Winner Water’s treatment system uses liquid ion exchange technology, a water treatment process that uses an organic extractant to attract minerals and salt in wastewater, resulting in a cleaner water output. The process recovers about 95 percent of the water that goes through the system. Winner Water’s process also uses no heat or pressure, so it works at ambient conditions without extra energy inputs.
Currently, Winner Water is developing a treatment system that would take acid mine drainage water from Pennsylvania’s coal mines, treat it, and deliver it to nearby fracking operations in the Marcellus shale. In 2008, Winner Water tested a demonstration-scale facility, treating more than a million gallons of water in three months to near potable standards. The company is in the process of designing and fabricating a small commercial-scale facility for the same site, scaling from 30 gallons/minute tested to 100 gallons/minute for the new plant. Winner Water partnered with Battelle to develop and test the technology. Ontiveros believes that having a larger plant in place will help industry embrace the technology. “This will allow us to establish our business, demonstrate our technology, show that it works, and show that we meet the requirements of the oil and gas industry,” he said. “What we’re finding out is that each company has its own requirements.
Obviously, they’d like to have it like fresh water. We are pretty close to fresh water.” Winner Water’s process results in treated water with less than 1 part per million (ppm) of iron and 100 ppm of sulfate, resulting in a higher quality product than the common solution of simply diluting and reusing flowback water. Currently, Winner Water is focused on deploying its system in the Pennsylvania area, where acid runoff presents a serious environmental hazard and water prices of $12-$16/thousand gallons make new technology cost-competitive. However, Ontiveros notes that his technology has multiple uses and has been tested in environments as varied as Norwegian copper mines and U.S. agricultural sites where runoff is common, such as large-scale feeding operations. He notes that Montana has similar industrial synergies and a growing demand for water in energy production. “If there is an opportunity, we would love to go to Montana,” he said.
SUMMER 2013 I MTENERGYREVIEW.COM I 31
MANAGING FEDERAL LANDS: DOES “MULTIPLE USE” INCLUDE ENERGY? BY JENNIFER OWEN • PHOTOGRAPHY BY LARRY MAYER
• Energy production on federal lands is dropping, while production on private and state lands continues to grow. • Producers complain that the process for leasing is slow and complex, and continuing regulatory uncertainty stalls investment • States like Montana share in royalties collected from production on federal lands, meaning that less production reduces revenues to the state.
Bidders try for oil leases on Bureau of Land Management properties in Montana and North Dakota at the Billings BLM office.
Nearly 30 percent of Montana is owned by the federal government. Naturally, when development of energy resources is at issue, the topic of production on federal lands is a central concern. Stories abound on all sides of the issue – permitting delays that last months or even years, environmental damage that takes years to restore, economic investment delayed or lost. 32 I SUMMER 2013 I MONTANA ENERGY REVIEW
But what is the real story? What does it really mean to produce energy – be it oil, gas or coal – on federal lands in Montana? Who is looking out for the public interest, and is it really a regulatory nightmare to work with the federal agencies? Producers routinely complain that the federal agencies, primarily the Bureau of Land Management (BLM), operate too slowly to encourage investment and that agency processes are often unreasonably delayed by public protests and lawsuits. Producers also suggest that uncertainty related to the regulatory environment and unnecessary rules, such as the currently pending federal regulation of hydraulic fracturing, create excessive obstacles.
“I can’t wait these things out. I have to feed my family,” said Tom Hauptman, an independent petroleum producer in Billings, Mont. According to the Congressional Research Service, concerns about delays and regulatory hurdles are starting to have an impact. From 2007 to 2012, total U.S. oil production increased by 1.1 million barrels per day – all of which was produced on nonfederal lands. The overall share of crude oil production on federal lands has dropped by seven percent and by 23 percent for natural gas. BLM representatives counter that they have a statutory obligation to engage the public extensively, in order to resolve competing land use desires.
Aerial view of the Cloud Peak Energy Spring Creek Mine near Decker, Montana, showing current mining and reclaimed lands. Land located directly to the left of the coal seam is early reclamation of a previous surface mine at Spring Creek, while the lands on the right and bottom left of the photo are untouched land.
“We’re a multiple-use agency. We have to balance the uses,” said Pascual Laborda, section chief and supervisory petroleum engineer at the BLM Montana State Office. “Otherwise, we’re not protecting our public.” Leasing federal land for energy production is a complex, lengthy, and often expensive process. The federal coal program and the oil and gas program have some similarities, but generally operate on separate tracks. Both, however, have their origins in the land use planning process.
Resource Management Plans
Currently, three of the 10 BLM field offices in Montana are updating resource management
plans (RMPs), documents that outline how federal surface lands and subsurface mineral estates in a particular region will be managed. The process began a few years ago, and public comment periods on updated drafts closed in June. Montana’s Congressional delegation requested that BLM extend the comment period, but that request was denied. “The Bureau of Land Management’s refusal to allow Montana residents even a few more weeks to offer their opinions about these plans is disappointing,” Congressman Steve Daines (R-Mont.) stated in a June 4, 2013 press release. “Montanans must have an active voice in the management of our state’s resources. Moving
forward with a management plan that lacks sufficient public input not only shows poor judgment on the BLM’s part, but holds serious implications for the affected communities.” RMPs set forth the various public land uses that will be permitted in a specific region, including grazing, recreation, conservation and energy development. In the document, the BLM makes determinations as to whether or not land will be made available for leasing for energy production. Certain lands, like National Parks, are excluded by law from leasing. Other lands are evaluated on a discretionary basis to judge the compatibility of energy development on the particular parcels. “Our mandate is multiple use, but that doesn’t SUMMER 2013 I MTENERGYREVIEW.COM I 33
mean every piece of land has every use,” said Jim Albano, chief of the BLM’s Fluid Minerals Division in Montana. Albano notes that evaluation of land uses can change over time, as energy production evolves. New technology, like directional drilling, reduces the amount of surface disturbance needed to produce oil and gas, and thus changes the BLM’s
analysis of development impacts. “New technology is a huge thing,” said Albano. “Even if we are seeing huge resource conflicts, we consider whether you could develop the resource with a no surface occupancy stipulation.” In the planning process, BLM often applies stipulations to balance competing demands for the public resource. These conditions include
COAL
controlling the timing of surface disturbances to avoid sensitive wildlife needs, limiting the amount of surface disturbance that will be permitted, and prohibiting surface occupancy entirely. Once the planning process is complete, BLM shifts its attention to leasing lands identified for energy production. Here’s a look at the processes for each energy resource:
OIL AND GAS
Producers who want to mine coal on federal lands begin with an exploration license, a two-year permit that allows limited drilling to take coal samples and evaluate the quality of coal in a particular parcel. The exploration process is public and collaborative – the BLM publishes notice of an application for an exploration license so that other companies can participate in the exploration. The license fee is $320. If a company identifies a coal seam worth pursuing, the next step is a lease application. This is a two-step process, consisting of both a land appraisal and an environmental review under the National Environmental Policy Act. Both actions are paid for by the potential lessee and are generally undertaken in parallel. Applicants work directly with BLM during this process, but any leasing in the Powder River Basin (PRB) must also pass through a special PRB Advisory Board with representation from both Montana and Wyoming. According to the Montana BLM office, the average time between submitting a lease application and the lease issuance is four years. After land value is established and the environmental work is complete, BLM then opens the process to public bidding for the parcel. In the event that the original applicant does not win the bid, the winner must reimburse the costs of processing the lease application. Sealed bids are submitted, opened in public, and then evaluated by a five-member panel of BLM staff. Bids must meet or exceed the established fair market value of the lease. Earlier this year, U.S. Senate Energy Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Lisa Murkowski
The process of leasing federal lands for oil and gas production follows a similar process to coal. After land use planning is complete, the agency undergoes a process of leasing, permitting, production inspection and monitoring, and finally abandonment and reclamation. Even though environmental impacts are assessed during the planning process, BLM again conducts a NEPA review during leasing to ensure that the conditions of the land remain the same as identified during RMP development. Oil and gas lease sales are generally held four times a year, and are usually an open bidding, competitive process. Like coal, bonus bids are required – at least $2/acre in addition to rental rates and royalties that must be paid. Like coal, federal oil and gas royalties are set at 12.5 percent of gross production. Slightly less than half of those royalties go to the State of Montana. BLM held a lease sale on May 8 for a variety of tracts in Montana and North Dakota. While many recent lease sales have been aggressively bid, in May, only 16 percent of the parcels on the list received bids, representing less than 8 percent of the available acreage. While some parcels in Richland County had bids as high as $3900/acre, many were of no interest to industry. “It is sort of a frontier area for people to be looking at,” said Albano, the Chief of Fluid Minerals at Montana’s BLM state office. “There’s not a lot of production in those areas.” When lands offered for competitive leasing are not bid, the process then shifts to a non-competitive bid process. For lands in which the surface owner is a private or state entity, the landowner may protest lease sales and assert his or her interests to protect the surface land. Once the land is leased, lessees must submit an application for a permit to drill (APD). Delays in the APD process over the years have resulted in various Congressional efforts to expedite the process. Under current law, the BLM must make a decision on an APD within 30 days of receiving a complete application package, or must notify the applicant that additional information is needed. The Miles City Field Office currently has more than 100 pending
CONTINUED ON THE NEXT PAGE
CONTINUED ON THE NEXT PAGE
34 I SUMMER 2013 I MONTANA ENERGY REVIEW
COAL
OIL AND GAS
CONTINUED FROM PREVIOUS PAGE
CONTINUED FROM PREVIOUS PAGE
(R-Alaska) sent a letter to the Department of Interior, expressing concern that taxpayers aren’t receiving the full value of federal coal reserves. “As companies seek to ship more coal overseas, taxpayers must be confident that the Bureau of Land Management and the Office of Natural Resources Revenue have stringent royalty collection and auditing controls in place as coal markets become increasingly oriented toward international buyers,” the senators wrote in a January 4 letter. BLM staff say they attempt to capture the value of coal in both the land valuation process and the royalty process. Potential lessees are required to include a bonus bid in their land bids – an amount in excess of royalties that would be collected. “Our focus is to make sure there is maximum economic recovery,” said Phillip Perlewitz, chief of the Solid Minerals branch of the Montana BLM office. A winning bidder for a parcel of land must put up a bond equal to one year of annual rental rates, three months of required royalties, and one-fifth of the bonus bid, unless the bonus was paid in full upfront. Annual rental rates are set at $3/acre, and royalties for surface mines are 12.5 percent of the gross value of coal produced. Winning bids are also subject to antitrust review by the Department of Justice. Once leasing is complete, the lessee moves into the production phase. The company must submit to BLM a resource recovery and protection plan, which is evaluated to ensure the company is pursuing both maximum economic recovery of coal and adequate conservation of resources. Compliance with this plan is verified by monthly reporting requirements and quarterly on-site BLM inspections. Surface mines in Montana are also subject to regulation by the Montana Department of Environmental Quality (DEQ), which enforces the federal Surface Mining Control and Reclamation Act. DEQ also takes the lead on compliance with the federal Clean Air Act and Clean Water Act. Mines must also comply with federal safety regulations through the Mine Safety and Health Administration. Post-production, lessees must comply with federal and state reclamation standards, restoring the land to its pre-production condition, including sowing native grasses and returning to the original grade. Currently, the Montana BLM has no proposals for new mines, underscoring the potential challenges of energy production on federal lands. The agency expects to see a proposal for development of tribal lands stemming from the recent deal between the Crow Tribe and Cloud Peak Energy, but at this time, private sector interest in developing federal minerals appears limited, despite growing global demand for coal.
APDs, some more than a year old. In 2011, the national average processing time for an APD was 307 days. During the permitting process, all potential environmental impacts must be addressed, including land management, cultural surveys, wildlife impacts, wetlands, erosion, grading and rights-of-way. In addition to mitigation, this assessment ensures the companies have all the information needed to return the land to its original condition post-production, as required by the lease. When the surface land is not held by the federal government, known as a split estate, the surface owner is directly engaged in the process. “It is their land. We want to make sure the land is restored to the conditions that are out there,” said Laborda. BLM requires producers to actually move toward production once an APD is issued, meaning that companies must begin drilling on the lease within the 10-year lease term. Once drilling has begun, the lease may be extended – a process referred to as “held by production.” After drilling is complete, the surface area must be restored to the extent practicable, even while petroleum production continues. BLM requires oil and gas lessees to employ both interim reclamation and full reclamation to original conditions at the end of production. Interim reclamation requires producers to minimize their surface footprint and restore areas of a lease that aren’t directly used for on-going production – an abandoned well on-site, for example, or a well pad that isn’t fully occupied. BLM regularly inspects leases, verifying production levels to support accurate royalty collection. The agency also evaluates environmental impacts and requires corrective action where needed – eliminating weeds or restoring a wash-out, for example. However, the employment boom in the Bakken is causing shortages for the agency. “Quite frankly, I don’t think we have enough personnel out there,” said Laborda. “We’ve lost a lot of staff to industry because we were not able to pay the salaries needed.” On average, a single well in the Bakken can cost between $8 million and $10 million. The challenges of geology and global markets aside, federal regulations, on-going compliance, and post-production reclamation requirements can cause producers to focus investments on state and private land. On the North Dakota side of the Bakken, far less land is held by the federal government. “Companies feel our regulations are burdensome, and it is maybe just easier to be on private land,” said Laborda.
SUMMER 2013 I MTENERGYREVIEW.COM I 35
Advice, expertise and solutions for your entire financial life I am committed to helping you pursue all of your financial goals with confidence-including those that go beyond investing. From helping you save for retirement to financing a purchase that enriches your life right now, we can deliver advice and solutions that address your entire financial life-starting with the financial plan we create together. Connect with me today to understand why I believe this holistic approach to wealth management is essential to helping you realize everything that’s important to you.
Accurate and efficient services for the energy industry. • All phases of Cultural Resource Inventories • NEPA & NHPA compliance assistance
Kevin J. Fiscus, CRPC® Vice President– Wealth Management Wealth Advisor 406-238-1716 kevin.fiscus@ubs.com
Fiscus Wealth Management Group UBS Financial Services Inc. 401 North 31st Street Suite 1700 Billings, MT 59101
• Interdisciplinary GIS services • Native American consultation Offices located in Bismarck, ND and Denver, CO
ubs.com/team/fiscusgroup Chartered Retirement Planning CounselorSM and CRPC® are registered service marks of the College for Financial Planning®. As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at ubs.com/workingwithus. UBS Financial Services Inc., its affiliates, and its employees are not in the business of providing tax or legal advice. Clients should seek advice based on their particular circumstances from an independent tax advisor. ©UBS 2013. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member SIPC. 7.00_Ad_3.937x4.31_UX0228_FisK
701-663-5521 | info@bcarch.org
www.bcarch.org
SPECIALIZED KNOWLEDGE FOR A COMPLEX INDUSTRY. Energy industries are booming. At PayneWest Insurance, we have dedicated advisor teams to help navigate the unique insurance needs of this industry. It’s more than just insurance, it is knowledge and experience.
PWI Natural Resources Division Brady Hoiness Sales Executive 406-238-1952 bhoiness@paynewest.com
Colt Palmer Sales Executive 406-327-6541 cpalmer@paynewest.com
2323 2nd Ave N Billings MT 59107
2929 Palmer, Suite B Missoula MT 59808
36 I SUMMER 2013 I MONTANA ENERGY REVIEW
EXPORT POLICY NEEDS TO MATCH DOMESTIC ENERGY POTENTIAL KAREN A. HARBERT, PRESIDENT AND CHIEF EXECUTIVE OFFICER INSTITUTE FOR 21ST CENTURY ENERGY, U.S. CHAMBER OF COMMERCE
If you haven’t noticed, America’s energy landscape has been changing dramatically over the last five years. Thanks to newer developments like the Williston Basin in Eastern Montana and Western North Dakota, domestic oil production has increased by nearly 50 percent since 2008, which in turn helped reduce oil imports by over 30 percent. Domestic natural gas production has increased by 27 percent since 2006. While increased production has caused exploration to take a momentary back seat, demand for natural gas is expected to grow over time with increased utilization to generate electricity and fuel some transportation. It’s now clear we have a lot more gas – as well as oil – than we previously thought. To be specific, the U.S. government estimates that our country has more than a 200 year-supply of oil, 115 years of natural gas and 545 years of coal. America has more fossil fuel resources than any other nation on earth. Thanks to American ingenuity and innovation, we have become an energy superpower once again. However, our energy policy is stuck in the 1970s, when we thought our resources were much more limited. Because we are producing more natural gas and coal than we currently consume, there is a tremendous opportunity to sell those resources on the world market where the demand, and the price, are much higher. Importing less oil has already helped reduce our trade deficit and selling coal and natural gas abroad will significantly reduce it even more. Moreover, increasing the demand for our abundant resources will also create new economic
growth and jobs that would not happen otherwise. A recent study conducted by ICF International estimated that exporting natural gas could create more than 230,000 jobs across the country and add nearly $40 billion to the American economy every year. Montana has been realizing tremendous benefits from the “shale boom” that is reshaping America. An IHS CERA study that the U.S. Chamber’s Energy Institute and other groups commissioned found that in 2012, shale development in the Treasure State supported almost 10,000 jobs, added $1.3 billion to the state economy, and generated $360 million in state and local government revenue. Access to foreign markets will only increase the economic benefits shale development has brought to Montana. Unfortunately, energy exports are a touchy subject in America. We all have spent years, if not decades, living with the assumption that we are an energy-poor country that is subject to the whims of exporting nations. Now, we must realize that this is not the case. Our policies should reflect our energy wealth in order to fully realize the economic benefits and take advantage of these trends to improve the competitiveness of business in the global market. Natural gas exports are regulated by the U.S. Department of Energy, and there are no guarantees that we will be able to realize the potential economic benefits that exports create thanks to restrictions. While two export facilities have been approved, there are as many as 18 more waiting for approval. Not all of those facilities will be built because the world demand for natural gas cannot support all of them. However, other countries like Australia and Malaysia are well ahead of the U.S. in constructing new natural gas export terminals, and if the U.S. government does not act quickly, the rest of the world is going to beat us to market and the window could close.
The United States has more coal than any other country in the world. Coal has been the backbone of our electricity sector, providing cheap and reliable power, around the clock for decades, and looks to continue for decades to come. However, due to aggressive regulations from the U.S. Environmental Protection Agency (EPA), the economic downturn, and cheap natural gas, coal consumption has declined 27 percent over the past five years. Over that same period our coal exports have more than doubled. As the country’s sixth largest coal producer, Montana benefits from greater consumption, whether in the U.S. or abroad. As U.S. consumption declines, coal exports are becoming even more important to the entire Powder River Basin. However, there is not enough infrastructure to get all of the available coal in the region to markets clamoring for it, largely Asia. All of the ports able to handle coal vessels on the West Coast are already over capacity. With Asian demand for coal increasing, there is a tremendous market incentive to expand ports in the Pacific Northwest to enable exports. However, environmental groups have been lobbying Washington and Oregon to block any such efforts. Moreover, the EPA has inserted itself into the debate, adding an additional and unnecessary layer of bureaucracy that threatens to prevent any new coal export facilities from ever getting built. Already, three of the six proposed export facilities have been scrapped by their sponsors who fear permitting fights that could last for years. America is an energy superpower. Because of states like Montana that have chosen to safely and responsibly develop their abundant resources, the country has enough energy to meet domestic demand for centuries, while also adding economic growth through exports. We are overdue for an energy policy that matches our energy reality. SUMMER 2013 I MTENERGYREVIEW.COM I 37
OVER 800 PEOPLE ARE CURRENTLY ADDING THEIR ENERGY TO ENERPLUS. WE’RE LOOKING FOR A FEW MORE TO JOIN THEM. If you add your energy to Enerplus, you’ll be involved in some of the most exciting resource plays in North America. You’ll be taking on new and rewarding challenges that add energy to your career.
- Search for oilfield jobs in Montana & North Dakota - Join our FREE newsletter for daily Bakken updates - Readership of 10,000+ and growing
www.enerplus.com
Visit Bakkenshale.com/jobs or call 832-429-4790 for more info
This could be your business Place your employment ad here and get results! Contact Jessica Tuck at 406-657-1427 or 406-694-3169 to be in the next issue of Montana Energy Review.
38 I SUMMER 2013 I MONTANA ENERGY REVIEW
Commandcenter
real jobs for real people
Command Center has more than 50 locally-managed branches throughout the United States that serve as trusted partners to businesses and job seekers.
kljeng.com
Clients trust us to learn their business and to plan ahead to address their dynamic staffing needs. Job seekers trust us to understand their complete employment picture and place them in on-demand, temporary, temp-to-hire, or permanent placement positions. SERVICESPROVIDED ON DEMAND STAFFING EVENTS HOSPITALITY SKILLED TRADES DISASTER RESTORATION MOVING
www.commandonline.com
1.866.464.5844 (toll free) 701.572.8484 (Dwight Enget) information@commandonline.com
Now Hiring Installers
KLJ delivers multi-disciplinary engineering-based and planning solutions for private and public sector clients with complex needs. We have groups that focus specifically on surveying, transmission, oil and gas services among many other specialty areas. Join a growing team! KLJ offers: Great benefits Multiple locations Challenging project work Professional and personal growth Visit kljeng.com to explore opportunities!
NATIONAL PERSPECTIVE.
PUMP,TANK, PIPELINE & FILTRATION RENTALS
REGIONAL EXPERTISE. TRUSTED ADVISOR.
800 742 7246 rainforrent.com
Dickinson, ND 701 225 7117
SUMMER 2013 I MTENERGYREVIEW.COM I 39
Business 2013 Conference & Expo September 25-27, 2013 Billings, Mont. www.mackproductionsinc.com
Trac Regional Energy Conference July 31 – August 2, 2013 Billings, Mont.
URTeC: Uncoventional Resources Tech Conference August 12-14, 2013 Denver, Colo.
Bakken Oil Workers & Oil Service Expo August 20-22, 2013 Minot, N. Dak.
25th Annual Rocky Mountain Energy Summit August 5-8, 2013 Denver, CO
Energy Day at MontanaFair August 15, 2013 Billings, Mont.
Comment Period Closes For Federal Hydraulic Fracturing Rules August 23, 2013
Associations Billings Chamber of Commerce 406-245-4111 815 S. 27th St. Billings, MT 59107-1177 billingschamber.com visitbillings.com
Construction Services Knife River Yellowstone J Halvor Fuglevand 406-651-2524 james.fuglevand@kniferiver. com 1375 4th Ave. N Unit C Billings, MT 59101
Legal Services Michael E. Zimmerman 406-839-9764 PO Box 537 Story, WY 82842 mezimmerman.com mike@mezimmerman.com
Automotive Denny Menholt Terry Hanson 406-896-3101 3000 King Avenue West Billings, MT 59102 dennymenholt.com
Montana Petroleum Association 406-442-7582 P.O. Box 1186 Helena, MT 59624 montanapetroleum.org
HDC Contracting John Deneen 406-941-2410 115 W Bell Street Glendive, MT 59330 hdcservices2013@gmail.com
Crowley Fleck 406-252-3441 P.O. Box 2529 Billings, MT 59103-2529 crowleyfleck.com
Real Estate The Hennessey Group Vacation Home/ FOR SALE Mike Hennessey 406-855-2908 vrbo.com/324845
Economic Development Big Sky EDA 406-256-6871 222 N. 32nd St. #200 Bilings, MT 59101 bigskyeconomicdevelopment.org
Financial Services Fiscus Wealth Management Group UBS Financial Services Inc. Kevin Fiscus 406-238-1716 401 N. 31st. St. Suite 1700 Billings, MT 59101 kevin.fiscus@ubs.com
Engineering KLJ 1-800-213-3860 18 offices in 5 states with headquarters in Bismarck, ND kljeng.com Bartlett & West Colin Nygaard 406-200-6920 3470 Gabel Road, Suite 1 Billings, MT 59102 colin.nygaard@bartwest.com bartwest.com
PCS Brokers, LLC Amy Kroon, Marketing 406-247-2152 1001 SW Higgins Avenue #206 Missoula, MT 59803 support@oilfieldbiz.com OilfieldBiz.com
40 I SUMMER 2013 I MONTANA ENERGY REVIEW
Energy Services Beaver Creek Archaeology 701-663-5521 1632 Capitol Way Bismarck, ND 58501 info@barch.org Larson Electronics LLC Rob Bresnahan 1-800-369-6671 9419 E. Us Hwy 175 Kemp, TX 75143 Resirkulere USA Mark Gomez Cell: 720-775-7846 Office: 701-852-8029 4825 Broadway Suite 1 Minot, ND 58703 mark@resirkulere.com resirkulere.com
Oil & Gas Development in Montana The Seminar Group October 2, 2013 Billings, MT
Colleges & Universities Dawson Community College 406-377-9409 300 College Drive Glendive, MT 59330 dawson.edu Employment Bakken Staffing Dwight Enget 701-897-0873 10 1st. Ave. E. Williston, ND 58801 dwight.enget@bakkenstaffing. com bakkenstaffing.com KLJ 1-800-213-3860 18 offices in 5 states with headquarters in Bismarck, ND kljeng.com
Have an event you want listed? Email us at jowen@mtenergyreview.com. More details and links to events available at mtenergyreview. com.
Trade Shows, Conferences, & Tours Bakken Oil Workers & Oil Services Expo Blue 52 Productions Amy Voisard 937-479-4255 usasymposium.com/bakken/ avoisard@blue52productions. com The Seminar Group Chris Terp, President 1-800-574-4852 18850 103 Ave. P.O. Box 523 Vashon, WA 98070 chris@theseminargroup.net theseminargroup.net Bakken Field Tours Dawa Solutions Group Jeff Zarling 701-577-1100 jzarling@dawag.com dawasg.com Get your business listed in this directory today! For information call: Jessica Tuck, Sales Consultant, Montana Energy Review P: (406) 657-1427 M: (406) 694-3169 jtuck@mtenergyreview.com
PAGE 5
Light up your P O T S work area! K R A D g n i k
r o W
he t n
i
Remote control utility truck lights
y booth lights ED paint spra
L
Pneumatic light masts
Explosion proof high bay lights
Explosion Proof Power supplies
Browse our collection of products at
WWW.MagnaLight.com High pow powered spotlights
Portable, Outdoor LED Lights
to learn more about us and how we can help you find solutions for all of your sales or rental heavy duty and hazardous location lighting needs
LED Rig Lights
Larson Electronics LLC • 9419 9 E US HW HWY175 • Kemp TX 75143 800.369.6671 www.magnalight.com .magnalight.com • S Sales@magnalight.com
PAGE 6
If you are doing business in the Bakken, want to do business in the Bakken, work in the oil industry, supplier sector, or want to work in the industry, this event is for you.
Over 250,000 sq.ft. of exhibit space for over 1,000 exhibitors In addition to the expansive exhibit hall, the expo features networking opportunities, seminars and workshops, privately hosted meals, a reception, job opportunities, the ability to set up appointments in advance with current and prospective business clients, and a conducive environment to conduct volume business. Expo passes are only $5.
Register Today! www.usasymposium.com/bakken
PAGE 7
MONTANA ENERGY REVIEW 401 N. Broadway Billings, MT 59101-1242
PAGE 8