OIL & GAS AND INDUSTRIAL PRODUCTS
Wagner Power Systems is built to provide you with the engines and related equipment you need to generate power for oil and gas exploration, recovery and transmission and with engines that power applications in several industrial market sectors, including construction, mining, agriculture, forestry/waste, material handling, light/ construction/general industrial, irrigation and other pumps. It’s our people who make the difference by standing beside you and our products. We know specific power requirements, fuel consumption, fuel tolerance, and overall operating cost are vital to your production. That’s why we are there from system design to operational support. Wagner Power Systems will take you as far or as deep as you need to go, while delivering the lowest owning and operating costs in the business.
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Give us a Call
WagnerPower.com
1-877-654-1237
2 ENERGY PIPELINE JANUARY 2016
WELD COUNTY GARAGE • TRUCK CITY
“GMC MEANS BUSINESS”
3 FLATBEDS 3 UTILITY BODY TRUCKS 3 PICKUPS 3 CUSTOM BODIES
SERVING WELD COUNTY FOR OVER 100 YEARS Special Certifications • ASE Certified Technicians • GM World-Class Technicians • Isuzu Certified Repair • Workhorse RV Warranty Center • Allison Transmission Repair Center • IMPCO CNG Certified Installer
We Service All Makes & Models • • • •
GMC Ford Isuzu Trailers
• Chevy • Dodge • Recreational Vehicles • CNG & Propane Units
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Benefits To You
• Fleet Discounts Available • We Work With Enterprise Fleet, ARI Fleet & Other Fleet Management Companies • Quick Turnaround On Our Parts Means Less Vehicles Downtime • Scheduled Preventive Maintenance Minimizes Costly Breakdowns
34 Bypass & 47th Avenue 970.352.1313 www.WeldCountyGarage.com
DRIVEN TO DO WHAT’S RIGHT
JANUARY 2016 ENERGY PIPELINE 3
Features
28
32
BETTER, FASTER, STRONGER
DANGEROUS WORK
Innovation, technology leads to improved drilling efficiencies in DJ Basin.
Vehicle accidents, machinery remain leading causes of worker fatalities.
By Sharon Dunn
By Dan Larson
16
CONSUMERS MARKET
EIA: Low gas prices drive up consumption, emissions.
24
18
DRIVE TO BE DIFFERENT
Weld County ‘an energy leader’ with electric growth in Colorado.
By Linda Kane
26
22
Despite downturn, Weld County continues to see build up in necessary infrastructure.
TECH TALK The rise of smart truckfill stations.
Photo by Sharon Dunn
Departments 8
Support Company Profile
10
Field Worker Profile
12
Executive Profile
38
News Briefs
38
MAKING HOLE
46
Data Center
Project Gasbuggy tests nuclear fracking. By Bruce Wells
By Linda Kane
4 ENERGY PIPELINE JANUARY 2016
Colorado Crude Carriers
By Gary Beers
By Allison Dyer Bluemel
HOLDING STRONG
COUNTER POINT
NAPE Speakers: Education, communication still needed to reach misinformed public.
By Linda Kane
ON THE COVER
Meet John Schriner, Ensign Energy
Meet Michael Hodges, Ward Petroleum, CFO
See What We’re Made Of. Storage, separation and control solutions when you need them, where you need them.
Let us show you the Worthington difference.
1.800.835.9136 Energy@WorthingtonOilandGas.com
Columbus, OH
Skiatook, OK
www.WorthingtonOilandGas.com
Wooster, OH
Bremen, OH
Dickinson, ND Garden City, KS JANUARY 2016 ENERGY PIPELINE 5
ENERGY is your
BUSINESS PUBLISHER Bart Smith EDITOR Randy Bangert GENERAL MANAGER Bryce Jacobson ACCOUNT/PROJECT MANAGER Bruce Dennis BUSINESS MANAGER Mike Campbell MANAGING EDITOR Sharon Dunn CONTRIBUTING WRITERS Gary Beers Allison Dyer Bluemel Linda Kane Dan Larson Bruce Wells
You need an electrical distributor that provides more than just inventory. From engineering support to inventory management solutions, we focus our energy on your success. Contact your local Border States location for more information. Greeley CO
ADVERTISING DIRECTORS T.J. Burr Sabrina Poppe ACCOUNT MANAGERS Cristin Peratt Mary Roberts Kristy Zado CREATIVE MANAGER Alan Karnitz CREATIVE TEAM SUPERVISOR Afton Pospíšilová ART DIRECTION & DESIGN Darin Bliss
ENERGY PIPELINE MAGAZINE 501 8th Ave. P.O. Box 1690 Greeley, CO 80632 For all editorial, advertising, subscription and circulation inquiries, call (970) 352-0211.
970.356.1150 Send editorial-related comments and story ideas to: editor@energypipeline.com For advertising inquiries, contact: bjacobson@energypipeline.com
borderstates.com Supplying products and services to the construction, industrial and utility industries.
6 ENERGY PIPELINE JANUARY 2016 30-250 (2015-06)
January 2016, Volume 3, Issue 5. Published by Greeley Publishing Co., publisher of The Greeley Tribune, Windsor Now, the Fence Post, and Tri-State Livestock News.
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JANUARY 2016 ENERGY PIPELINE 7
SUPPORT COMPANY PROFILE
Colorado Crude Carriers
CORPORATE HEADQUARTERS 20739 Colo. 392 Greeley, CO 80631 970.339.9105
NUMBER OF EMPLOYEES 49
WEBSITE www.coloradocrudecarriers.com
SERVICES OFFERED Crude oil transportation
8 ENERGY PIPELINE JANUARY 2016
HOW LONG HAS YOUR BUSINESS BEEN OPERATING IN WELD COUNTY? We have been part of the Weld County community for what will be 20 years in March 2016.
WHY SHOULD CUSTOMERS DO BUSINESS WITH YOUR COMPANY? We pride ourselves in providing our customers with exceptional experience, quality and dedication. We are constantly striving to be better in all aspects of our company. All of our employees participate in regular safety meetings to keep
them up to date and informed about our operations as well as the latest safety information and regulations. We have received numerous awards for highway safety. Making sure we do not have spills or accidents is crucial and we make sure to recognize our drivers that exceed that expectation.
HOW LONG DO YOU ANTICIPATE BEING IN BUSINESS IN NORTHEAST COLORADO? We have always called this area home and plan to be here as long as there is a need for us in the industry. We believe in our
community and the local economy.
IS YOUR COMPANY IN A GROWTH MODE? We have grown 50 percent in the last five years and we will continue to grow as the need arises. We out grew our previous shop location and have recently built a new 17,500-squarefoot building for our mechanics and office personnel, as well as a larger yard for our trucks.
WHAT KIND OF SKILLS, EXPERIENCE OR EDUCATION DO YOU LOOK FOR IN EMPLOYEES? We look for related
driving experience as well as a clean driving record. A strong work ethic and a great attitude are also very important to us in each of our employees. Specific skills can be taught, but the willingness to improve on them is all a personal choice. We are a family business that considers each of our employees as part of our family and we are dedicated to their longevity within our company for we
want to see each of them succeed.
HOW SHOULD INTERESTED APPLICANTS APPLY? Our hiring, so far, has been through word of mouth, as our drivers are great ambassadors for our company and what we believe in. We also have a website that potential applicants can visit for more information.
MITCHELL INSURANCE AGENCY LOCAL OFFICE IN GREELEY
• Oil & Gas Servicing • Blow Testers • Pumpers • Pipe Dealers / Contractors • Roustabout • Flow Testers • Oil Related Construction Businesses • Trucking
COLORADO CRUDE CARRIERS To learn more about the company, visit www.coloradocrudecarriers.com
We insure most oil & gas related businesses Mike Mitchell
3835 West 10th Street Greeley, CO 80634
JANUARY 2016 ENERGY PIPELINE 970-352-6418
9
FIELD WORKER PROFILE
John Schriner ENSIGN ENERGY STAFF REPORT • FOR ENERGY PIPELINE
HOMETOWN Moorcroft, Wyo.
WHERE DO YOU LIVE? Moorcroft, Wyo.
HOW LONG HAVE YOU BEEN WORKING IN NORTHEASTERN COLORADO? About five years.
HOW DID YOU GET INTO THE INDUSTRY? I got out of the Army in 1979 and took a job within the industry. I have been a part of it ever since.
10 ENERGY PIPELINE JANUARY 2016
WHAT IS YOUR JOB TITLE AND DUTIES?
WHAT IS THE MOST INTERESTING THING ABOUT YOUR JOB?
WHAT IS THE HARDEST PART OF YOUR JOB?
Rig Manager/Rig 121. My duties are to supervise drilling crews in their daily duties, ensure all safety policies and regulations are followed, oversee and schedule maintenance, order parts and supplies, oversee third-party personnel to perform various repairs and services to keep operations running as effectively and safely as possible, and to communicate and work effectively and efficiently with the customer and their on-site representatives.
People and personalities. I spend as much time if not more with my crews than I do with my family. In addition, I live at the rig my entire hitch so it could be said that I have 20 or more brothers that I work alongside. The constant change in drilling technology and downhole tools certainly keep it interesting and keeps us continually challenged.
Safety is a priority and is a constant focus on the rig. The hours can get pretty long at times as well.
WHAT IS THE BEST PART OF YOUR JOB? The people I work alongside.
WHAT ARE YOUR FUTURE AMBITIONS IN THE INDUSTRY? To keep working until I retire. I enjoy my job immensely.
WHAT DO YOU DO IN YOUR SPARE TIME? VOLUNTEERISM, SCHOOL, SPORTS?
WHAT DOES THE WATTENBERG FIELD AND THE DJ BASIN MEAN TO YOU?
Anybody who works away from home knows that when you finally get home on days off, there is always a “honey-do” list to complete. After that, I enjoy working in my wood shop.
Eastern Colorado is a great place to work. I hope to remain here until I decide to retire.
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JANUARY 2016 ENERGY PIPELINE Visit us at 2985 1st Avenue, Greeley, CO 80631 or call 970 353 3770
11
EXECUTIVE PROFILE
WARD PETROLEUM Chief Financial Officer
Michael Hodges BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM it’s not an easy seat in the front office
these days. The financial guys at today’s oil and gas companies have some extra pressure weighing on them, with the collapse in crude prices and global glut of oil putting pressure on their very foundations. For Michael Hodges at Ward Petroleum, today’s environment is a nice challenge, though he admits in his younger days, it would have caused him some heartburn. “I think I’ve gotten better (at) learning there are things you can control and things you can’t,” said Hodges, the newly appointed chief financial officer for Ward, based in Enid, Okla. “We’re trying to make decisions for two, three or four years down the line. If prices are up 5 percent one day, or down 5 percent the next, that will not change our thought on how we run our business. I’d be lying if I said it didn’t give me heartburn earlier in my career, or that I don’t follow prices daily.” Hodges, 37, is young but no stranger to the oil and gas industry. The son of a banker, he came to Ward last fall after a three-year stint from the financial helm of Rex Energy. He spent the first six years of his career at Chesapeake Energy with increasing levels of responsibility in the accounting department, followed by five years at SandRidge Energy as the company’s controller. Those stints made him what he’d call aggressive. Ward, on the other hand, is different in its conservatism - a trait that has put the company in a top financial position to weather the downturn, he said. Ward Petroleum is a family-owned company with more than 50 years under its belt. The company has been focused on the area called 12 ENERGY PIPELINE JANUARY 2016
the stack and scoop in the Anadarko Basin in western Oklahoma since Lew Ward drilled his first well in the Sooner Trend in 1963. It also has assets in the DJ basin. “I’m probably more aggressive than perhaps some of the small, private, familyowned companies I worked for what would be considered aggressive companies,” Hodges said. “I like this opportunity because it’s conservatively run and financed, and I appreciate the prudence that was used to build this business. I hopefully can bring some of the positives of being dynamic and aggressive and blend that.” But, indeed, the financial seat is a hot one these days, with hedges ending, debts mounting and prices continuing their now year-long slump, in addition to the continual challenge of finding upfront capital to drill the wells that pay the bills. The companies that make the wrong financial decisions in today’s environment won’t make it. “As the industry goes through this cycle like now, the ability to keep accessing the needed amounts of capital to keep drilling wells will become more and more challenging,” Hodges said. Banks, especially, are getting more and more conservative in their lending, Hodges said. Bankers have been scrutinizing loans much more closely in the oil and gas industry as the prices continue to fall, and regulators also have increasingly strained a watchful eye. “It makes accessing capital needed to keep drilling wells more difficult,” Hodges said. “That becomes a bit of a self-fulfilling prophecy and becomes a bit of a cycle. The companies that have stretched themselves with too much debt, that will become a bigger and
bigger problem.” Ward, he said, has been conservative in its financial picture, and is in a position, even in the downturn, to look for growth. That’s where the DJ comes in. The company has not been in the DJ very long, and is working on developing some acquired assets along the Colorado/ Wyoming border and in Adams County, just south of the core Wattenberg acreage. “We feel like we’re in a good position to ride out this cycle,” he said. That puts them in the position to look for some of the expected asset sales that could eventually come out of the downturn, which creates a perfect acquisitions and divestiture environment. “We’ve been looking for opportunities to buy rather than sell,” Hodges said. “We’ve been successful on a small transaction here and there this year, not as many as we might expect. Maybe it’s a little further into the down cycle that assets come up for sale. We’re looking for opportunities to buy assets at the right price.
QA &
with Michael Hodges
Energy Pipeline talked further with Hodges about today’s market and how it will affect companies going further, and the global world market:
Read his answers on page 14
We haven’t seen as much as we thought” would be there. So far, Ward has drilled about three wells in Adams County, and has some acreage up north. The company has five full-time employees working out of its Fort Collins office. Growing further, he said, will just be an issue of finding the right assets at the right price. “We’ve got a full-time team exploring, picking around, trying to see what’s available,” Hodges said. “We’re very early in our assessment of where we want to be in the DJ.” As with others in his seat, he watches those tumbling oil prices. He admits, sheepishly, he probably checks about 10 times a day. He can’t help it. He’s human. He’s just learned to keep the heartburn at bay. “I will tell you when I wake up in the morning, the first thing I do is grab my phone next to the bed and look at what oil and natural gas prices are doing,” Hodges said. “That’s probably more than I should be looking. But it’s just an important part of the business. It’s hard not to look at those things all of the time.”
ABOUT
Michael Hodges AGE 37.
CURRENT JOB TITLE Chief Financial Officer.
YEARS WITH WARD PETROLEUM Joined in 2015.
SPOUSE AND FAMILY Adrianne (wife), Claire (daughter - 5) and Graham (son - 2).
CITY YOU GREW UP IN Austin, Texas.
HIGH SCHOOL YOU ATTENDED Round Rock Westwood High School.
COLLEGE ATTENDED/ DEGREES Bachelor of Business Administration (major in finance), University of Oklahoma / certified public accountant, state of Oklahoma.
CITY YOU LIVE IN NOW Oklahoma City, Okla.
WHAT DO YOU DO IN YOUR SPARE TIME? Play golf, watch sports, spend time with family.
LAST GOOD BOOK YOU READ “The 4 Disciplines of Execution” by Chris McChesney, Sean Covey and Jim Huling.
Corporate Accounts Welcome • Coats • Bibs • Coveralls • Jeans • Shirts (30 colors/styles) • Winter Hats/Balaclava • Safety Glasses • Vests • Hard Hats • Women’s FR • Boots • Gloves
Embroidering & Printing Available
SOMETHING ABOUT YOU THAT FRIENDS AND COWORKERS DON’T KNOW “Even though I do not do any cycling, my favorite sporting event to watch each year is the Tour de France.
PROFESSIONAL BACKGROUND 2001-07 - Chesapeake Energy Corporation - Accounting Manager/ Supervisor/Coordinator/Accountant (increasing levels of responsibility) 2007-12 - SandRidge Energy, Inc. - Controller, Exploration and Production/Assistant Controller/ Special Projects Manager (increasing levels of responsibility) 2012-15 - Rex Energy Corporation - Chief Financial Officer JANUARY 2016 ENERGY PIPELINE 13
QA &
ENERGY PIPELINE: Hedging, or locking in sales prices, has long been company insurance against sudden price collapses. As hedging contracts come to a close, what effect will that have on companies in this most recent market downturn? MICHAEL HODGES: Prudent producers take advantage of strong prices and lock in those prices. ... Other companies are more aggressively hedged, and maybe more conservative and lock in prices. Others aren’t hedged and can ride it out. Certainly the challenge in my role is making the right decision on how much to hedge, when and what price. A lot of producers tend to hedge a year in advance. A lot of producers had hedges in place to cover a good portion of 2015, and that really protected companies in the last year. ... Companies that have a higher level of debt should be looking at hedges more aggressively because they need to ensure a certain cash flow. There will be examples where hedges are especially important. Those who (have less debt) may have the flexibility to be a little less hedged. I absolutely believe some guys will survive because of their hedges and others may not. It’s all dependent on how long the cycle lasts. Hedging varies a lot: certainly some public companies, their boards will set a policy for hedging, banks in certain situations may require a certain amount of hedging. For private companies like ours, it’s really a strategic decision. The largest major oil and gas companies, like Exxon Mobile an Shells and BPs, they’re so large, a lot of time they do very little or no hedging because they feel they can ride out these cycles. Much smaller producers with significant debt may do more hedging because they feel they need certainty of cash flow. They’re willing to give up some of the upside, to have that insurance policy that prices won’t go below a certain point. 14 ENERGY PIPELINE JANUARY 2016
continued from page 12 A great example is from Antero Resources. They have one of the best hedging positions I’ve seen. They hedged a lot of production at prices that are much above what prices are today. Compliments to them when they made those decisions. That’s an example of company that prospers despite low commodity prices. I’m not an expert, but (hedging) could put companies in positions where they can’t survive. EP: Will opening crude exports be the answer? And, with prices the way they are globally, how could America compete with a glut on the market anyway? MH: I think that’s part of the answer. I’m probably a little more conservative. I don’t think there’s a singular answer. Unfortunately, the industry, we’re a victim of our own success. We’re producing so much more oil domestically, and the number of rigs operating has come way down, but really the production, if you follow the numbers from EIA, hasn’t come down nearly at the rate of the rig count. Domestic production will come down ... and certainly demand is the key part of it. Chinese demand is thought to be an ever-increasing number, so to the extent it continues to rise and exports meet that demand, that could be part of that. I’m a believer in the idea that we have to balance the market domestically. Until domestic production comes down, we’ll probably still be in tough position. If you look at the prices of Brent, the worldwide price, and it used to be $8 above WTI, that gap has started to narrow, as well. I don’t know that the U.S. exporting some of its own oversupply does a lot for the price of oil in the U.S. There’s a supply glut from OPEC, domestically, and until those things start to change,
or decline more quickly, I don’t necessarily think just the exporting will resolve the issues we’re seeing. EP: What do you think of OPEC’s recent move to keep up its production, rather than lower it as many had hoped? MH: I was surprised by the market’s reaction. Really, they made a nodecision. From every thing you read, they didn’t come out with an official position. I was a little surprised that oil reacted the way it did. It was off 4-5 percent for the first couple days. I thought that was what everyone expected OPEC to do. If you look at the way oil traded after that, some folks were looking for a cut, and when they didn’t see it, felt it was a reason to trade oil down a bit. EP: How do you think OPEC’s decisions will affect markets in the longer term? MH: I do feel countries in OPEC are feeling pain as much as U.S. companies are. I have a hard time believing they can meet their own financial needs. I do think that it’s pretty painful, especially the Venezuelas and guys like that cannot afford to sell oil at these prices, to live through this cycle. I expect some change in the future, but when that happens or how... I don’t think they can continue on producing the way they are on now. EP: Theres a saying going around now: Careers are made in times like these. Do you agree? MH: I think that’s certainly a possibility. Careers can be made and also be negatively affected in this environment. The companies that make the right decision in these environments will come out of the cycle even stronger. In my career, the saying has been, “Any idiot can make money in oil
and gas when prices are high.” The guys who survive and prosper in this environment can make a name for themselves and really demonstrate quality of leadership and technical ability. Unfortunately, the poor decisions made years ago probably manifest in this environment, the guys who got over-aggressive in their financial positions. Unfortunately, that works in $90-$100 oil. It’s likely not to work at $40. EP: What are your thoughts on the industry today? Is it smarter or reckless? MH: I think we’re learning to be smarter. There was some recklessness over the last eight to 10 years with the success of the industry. We’re victims of our own success, whether in the DJ or Marcellus or Utica. The industry has been so successful with applying technology and geology that really made the oil and gas business a pretty good business to be in for a long time. So probably there was some recklessness introduced. This cycle will certainly ... flush that out. EP: What is some of the best advice you’ve gotten that’s become your mantra today? MH: A couple of things come to mind. Early in my career, I was fortunate to work for Chesapeake. Back in 2000 it was much smaller than it is now, but it was growing. I took the approach early in my career that anything I could do to learn something new is something. My education was in finance and economics, and I chose to take accounting role to learn more about accounting. At Chesapeake, when opportunity to work on an acquisition came, I’ll do that. One thing I’d say is volunteer for everything, because you learn so much doing a variety of things.
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Reclamation Products and Custom Seed Mixes Sharp Bros. Seed Co. 101 East 4th Street Rd. Greeley, CO 80631 JANUARY 2016 ENERGY PIPELINE 15
CONSUMERS MARKET EIA: Low gas prices drive up consumption, emissions BY LINDA KANE • FOR ENERGY PIPELINE u.s. energy-related carbon dioxide emissions increased 1 percent
last year due to an increase in gasoline consumption. Lower prices at the pump, along with continued economic recovery, led to higher gasoline consumption, along with higher consumption of other fuels, according to a study by the U.S. Energy Information Administration. The growth in energy consumption more than offset improvements in the fuel economy of the vehicle fleet, according to the EIA. “There are year-to-year fluctuations and a lot of this is just part of that,” said Perry Lindstrom, senior energy environmental analyst for EIA. “We show the short-term energy outlook and I think right now we are predicting that for 2015, the increase in 2014 will be offset by a similar decrease. So, we’ll be back to where we were in 2013.” Fluctuations in weather, such as a cold first quarter in 2014, led to higher energy emissions, he said. “The other area was transportation where as you know the price of fuel has been going down and that induces people to spend more,” Lindstrom said. “Those things can fluctuate from year to year.” The largest absolute increase in 2014 energy-related carbon dioxide emissions was from the transportation sector. Emissions from petroleum and other liquids, which have been the largest source of energy-related CO2 in recent decades, plateaued from 2004-07, generally decreased through 2012, and increased slightly thereafter, the EIA reported. Since 2008, coal emissions also have generally declined. While total coal emissions are below those from petroleum and other liquids, there is more CO2 released per British thermal unit of energy. The decline in coal emissions has contributed to a lower carbon intensity of U.S. energy consumption, the EIA reported. Natural gas emissions have generally increased since 2008, primarily reflecting growth in the natural gas share of electricity generation, largely through displacement of coal-fired generation, the EIA reported. As for the long-term, Lindstrom said more natural gas being consumed for electricity generation - as opposed to coal - will help keep emissions steady or lower. Renewable energy, such as wind power and solar energy, with also play an important role in keeping emissions from spiking. 16 ENERGY PIPELINE JANUARY 2016
Wind operators already have many farms in place so “the growth rate of even just a few percent adds a fair amount of generation” keeping emissions down, Lindstrom said. Solar energy isn’t quite as popular yet, but growth is pretty strong in that market, Lindstrom said. “It has fairly high growth rates right now,” he said. Growth in wind and solar electricity generation has been a key component in the decreasing carbon intensity of the electricity supply, the EIA said. • While nuclear power remains the dominant source of non-fossil electricity generation, growth in wind and solar generation since 2008 has also contributed to a decline in the carbon intensity of electricity generation. • Nuclear’s share of non-fossil generation has generally declined since reaching 75 percent in 2001. • Hydropower, which historically has been the largest source of renewable electricity generation, has also lost share, falling from 34 percent of non-fossil fuel generation in 1997 to about 20 percent in 2014.
EIA SHORT-TERM ENERGY OUTLOOK EIA forecasts that Brent crude oil prices will average $56 a barrel in 2016. Forecast West Texas Intermediate (WTI) crude oil prices average $5/barrel lower in 2016. The current values of futures and options contracts for March 2016 delivery (Market Prices and Uncertainty Report) suggest the market expects WTI prices to range from $30/barrel to $63/barrel (at the 95 percent confidence interval).
• Wind and solar (combined) accounted about 15 percent of non-fossil electricity generation in 2014 after rising to 2 percent in 2005 from less than 1 percent in 2000. • Other renewables such as biomass have remained at about 4 percent. It is difficult to draw conclusions from one year of data. Specific circumstances such as the very cold first quarter of 2014 and the increase in coal generation relative to 2013 (while natural gas generation remained flat) affected the year-to-year change, as did the growth in transportation emissions influenced by lower fuel prices, EIA said. In the longer term, other factors (such as improvements in vehicle fuel efficiency and increased use of natural gas and renewable generation) could help mitigate future emissions growth.
EIA forecasts U.S. regular gasoline retail prices to average $2.36 a gallon for 2016. EIA predicts that total U.S. crude oil production will decrease through the third quarter of 2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.3 million b/d in 2015 and 8.8 million b/d in 2016. EIA expects the Henry Hub natural gas spot price to average $2.47/million British thermal units (MMBtu) this winter (October 2015-March 2016) compared with $3.35/MMBtu last winter. Source: EIA Short Term Energy Outlook, published Dec. 8.
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Peckham Development Corporation 2850 McClelland Drive, Suite 2400; Fort Collins, CO 80525 / Phone: (970) 689-3155 • (970) 797-2187 PeckhamDevelopers@gmail.com JANUARY 2016 ENERGY PIPELINE 17
The interior of a Tesla Model S at the showroom in Lone Tree, Colo.
DRIVE TO BE DIFFERENT Weld County ‘an energy leader’ with electric growth in Colorado BY ALLISON DYER BLUEMEL • FOR ENERGY PIPELINE sitting behind the wheel of the
Tesla Model S P85D is a testament to the immediate, silent and overwhelming power developed by electric car companies. The driver doesn’t hear any sound from the car’s electric motor aside from a quiet whining - similar to that of an aircraft during take off - when accelerating up on ramps onto the interstate. It’s hard to believe that the technology has caught up to that of traditional automotive engineering so successfully. While the electric supercar is not entirely representative of driving other, more economical electric car models on the market, the attention and success it has garnered represents an overall shift in favor to non-traditional transportation means. And the increasing number of fully electric vehicles on Weld County roads aren’t just passing through, but instead calling the northern Colorado roads home at a growing rate. 18 ENERGY PIPELINE JANUARY 2016
THE COLORADO MARKET FOR ELECTRIC VEHICLES - BOTH FULLY AND HYBRID - GREW FROM 20 VEHICLES IN 2011 TO 4,567 IN EARLY APRIL 2015 The trend follows a statewide increase in more efficient modes of transportation. “It is booming,” said Wes Maurer, Colorado Energy Office transportation program director. The Colorado market for electric vehicles - both fully and hybrid - grew from
20 vehicles in 2011 to 4,567 in early April 2015, according to a study by the Colorado Energy Office. “It’s a market that is definitely moving really rapidly and moving really rapidly in Colorado that we certainly don’t want to get behind in terms of accommodating folks on the road,” Maurer said. The study looked at the good and bad of the Colorado market and recommended changes to build the market in the state. Among the state’s 64 counties, 57 have at least one registered EV. The cars are most frequently found on the Front Range due to population density and a higher number of people who are likely to buy EVs. “Weld County is really keeping up with some of the bigger counties,” Maurer said. “Weld has really come a long way with their infrastructure. The Greeley and Evans area is really important. It gives people options to go to Fort Collins and utilize that regional infrastructure.”
RESPONDENTS’ OPINION ABOUT EVs Somewhat Unfavorable
Unfavorable
3%
Neutral
2%
9%
Somewhat Favorable
18% Favorable
68%
COLORADO MONTHLY NEW EV CAR SALES
Number of EV Sales
250 200 150 100 50
3
N
ov
n-
-1
13
13
Ju
Ja
n-
g-
12
2 M
Au
t-1
ar -1
1
1
M
Oc
ay
cDe
Ju
-1
10
0 l-1
10 b-
09
Fe
pSe
Ap
r-0
9
0
Sales Date
COLORADO EV STOCK GROWTH TO 2030 BY SCENARIO 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
High Scenario Medium Scenario
30
20
29
20
28
20
27
20
26
25
20
20
24
20
23
22
20
20
21
20
20
20
19
18
20
20
17
20
16
20
15
14
Low Scenario
20
20
Weld County came in ninth in terms of number of electric vehicles on the road at 117 registered. “I wasn’t surprised by it,” Maurer said. “Weld County is an energy leader by default. It’s part of the county.” Larimer County ranked seventh with 221 electric vehicles registered. The study defined typical EV consumers as those making more than $100,000 a year, having a bachelor’s degree or higher, owning two or more vehicles and being between the ages of 38 and 78. Though Weld has residents within that demographic, the local dealerships don’t quite reflect the growing demand in Weld, with some not even carrying their make’s electric vehicle options. Ehrlich Toyota and Scion occasionally sees residents come in looking for EVs, though their corporate headquarters didn’t identify Greeley as an area for their sale, said Used Car Manager Brad Ambrozevitch. Toyota Corporate would not comment on why the area hadn’t been identified for EV sale. The rise of the vehicles’ popularity in Weld and across the state stems from fluctuating gas prices, more political support, a greater range of vehicles offered by car companies and numerous local efforts from organizations such as Charge Ahead Colorado, Refuel Colorado Fleets and ALR Fuels Colorado. “The electric vehicle has come a long way,” Maurer said. “There’s everything from the Tesla to a really practical Nissan leaf with a household, middle-class perspective. There are a lot of makes and models in Colorado now. We’re really getting to the point where there will be a practical use as a light-duty vehicle.” Despite being relatively new on the market, the study reported that the number of electric vehicles on Colorado’s roads has had a net positive impact on the state. Based on the total number of registered electric vehicles, as of February 2014, all of the EVs in the state would equate to a reduction of approximately 5,922 tons of carbon dioxide.
TOP - In a recent study from the Colorado Energy Office, 68 percent of Colorado residents surveyed felt favorably about electric vehicles. Only 2 percent of respondents placed the cars into the unfavorable category. For Energy Pipeline/ Colorado Energy Office MIDDLE - Since 2009, Colorado has seen a large boom in consumer purchasing of electric vehicles, peaking in June 2013. For Energy Pipeline/Colorado Energy Office BOTTOM - The Colorado Energy Office predicted three growth scenarios - from low to high growth - for the state’s electric vehicle popularity increase between now and 2030. Under the high growth scenario, drivers could see over 900,000 EVs on the road in 2030. For Energy Pipeline/Colorado Energy Office
JANUARY 2016 ENERGY PIPELINE 19
ELECTRIC VEHICLES BY COLO. COUNTY
A Tesla charging unit frames a Model S at the showroom in Lone Tree, Colo. Photos by Allison Dyer Bluemel/abluemel@greeleytribune.com
More electric vehicles also lower the amount of petroleum consumption. In the U.S., 75 percent of all petroleum consumed is in the transportation sector with 33 percent of it imported from foreign markets. “Even as low as abnormally and bizarrely low as gas is, you’re losing money burning it compared to an electric vehicle,” Maurer said. “Whether you’re a new business or individual, you’re saving money on something (you) would otherwise be burning.” As of February 2014, Colorado electric vehicles were displacing approximately 44,926 barrels of crude oil annually. In terms of fueling electric vehicles versus traditional cars, drivers spend an average of $1,311 per year on gasoline and $221 on electricity per year to charge electrical vehicles, an annual savings of $1,090. The calculation assumes that 20 ENERGY PIPELINE JANUARY 2016
hybrids would use electricity as power 56 percent of the time. “As Colorado vehicles move toward a higher percentage of electric-powered vehicles and its electric portfolio is increasingly generated from cleaner sources, the state is well positioned for (the electric vehicle) market growth to provide environmental, economic, and energy security benefits,” the study reported. However, there are a couple of barriers to entry into the market for some residents of the state. Those barriers include a higher upfront cost - despite rebates from the state and other incentives - vehicle range, charging convenience and performance. “Colorado offers some of the richest tax incentives and grant programs in the United States to support and drive the EV market,” the study stated. “However, there are many policy endeavors that could be
COUNTY NUMBER Jefferson 452 Boulder 427 Denver 387 Arapahoe 369 Douglas 319 El Paso 266 Larimer 221 Adams 180 Weld 117 Broomfield 56 Pueblo 51 Mesa 44 Eagle 30 Pitkin 30 Summit 20 La Plata 17 Elbert 14 Garfield 14 Montrose 12 Park 8 Clear Creek 8 Fremont 7 Montezuma 7 Gilpin 6 Delta 6 Grand 4 Chaffee 4
COUNTY NUMBER Ouray 4 Saguache 3 Routt 3 Morgan 3 Otero 3 Custer 2 Moffat 2 Huerfano 2 Teller 2 Las Animas 2 Alamosa 2 San Miguel 1 Logan 1 Gunnison 1 Lincoln 1 Lake 1 Hinsdale 1 Baca 1 Phillips 1 Yuma 0 Sedgwick 0 Rio Grande 0 Prowers 0 Conejos 0 Bent 0 Archuleta 0
pursued through the Colorado General Assembly, which could continue to make EVs accessibly for more drivers in our state.” Particularly unique to the state of Colorado, consumers felt concerned about the availability of EV fast-charging stations that allow them to drive across the state using the interstates. Under a low growth estimate, the study predicted that there would be approximately 38,056 electric vehicles on Colorado roads by 2030. On the opposite end under a highgrowth estimate, the study reported that there could be approximately 937,216 EVs on the road by the same time.
JANUARY 2016 ENERGY PIPELINE 21
HOLDING STRONG Despite downturn, Weld County continues to see build up in necessary infrastructure BY LINDA KANE • FOR ENERGY PIPELINE
infrastructure in the oil and gas industry continues to be
ago, companies are forging ahead in Weld County. Commissioner Sean built in Weld County despite the current economic downturn in the Conway said downswings are an ideal time for oil companies to take a industry as a whole. step back, assess their businesses and get ready for the next boom. The slump actually helped one Greeley business explore new It helps the DJ Basin, primarily located in Weld County, is a steady options for income. All Around Roustabout serves the oil industry with play that keeps companies in place, even during downswings. completions, maintenance, tank battery construction, drilling services “The DJ Basin is probably one of the most valuable holdings of any and just about anything else related to the oil business. oil and gas company not just in the U.S., but the world,” Conway said. During the current downswing, however, the company has struggled. Operation costs are lower and many oil and gas rights are actually “What I’ve done due to the downtrend and how things have gone owned by the oil company, making its production costs lower, too. lately is offer companies a place to store their equipment until the “I think what’s going on is, the DJ Basin is one of the most valuable orders come in,” said Troy Bonnell, trucking-drilling manager for All holdings you can have right now. It’s a proven field,” Conway said. “We Around Roustabout in Greeley. understand the cyclic nature of this commodity. I’ve seen many ups and “We’ve been struggling for a while with what to do with equipment downs in my lifetime and I’m 50 years old. that’s been laid down until the market picks up,” Bonnell said. So, he “Everybody knows it’s cyclic and they do what they gotta do to got a permit with Weld weather the storm in the County to use his personal short-term.” ranch as a storage facility. With permit applications “It’s not a permanent continuing to flow into storage yard, but temporary Weld County, Conway said in a sense that companies oil companies are smart to can use this space until the continue with infrastructure. market picks back up.” “I think what they’re doing His ranch, located is looking at the long-term. primarily in a flood It’s a smart, forward-looking zone which prevents way in the industry because it from being farmed, what they’re doing is SEAN CONWAY, Weld County Commissioner currently has tank battery investing,” he said. equipment, piping The industry in Weld equipment - about three rigs worth of equipment. His income was hit County at least is saying it can make investments now that will pay off so hard, Bonnell had to take a pay-cut and come up with this idea to handsomely in the long-term, Conway said. help subsidize his income. One of the focuses of businesses right now is getting pipeline He rented ranch land six months ago to a drilling company that had in place, Conway said. Magellan Midstream Partners LP, based in no place to put its rigs when production slowed. The company would Tulsa, Okla., is working on a 550-mile pipeline from Weld County to have had to move equipment out of state and then moved it back when Cushing, Okla. The 550-mile Saddlehorn pipeline is expected to be the demand returned, Bonnell said. His ranch saved them the hassle. operational in late 2016. Bonnell gives thanks to his neighbors for being understanding “You see other pipeline projects that are really about not just getting during this downturn in the market. They tolerate his temporary the product from well heads to the market place, but also looking at storage area though it can prove an eyesore to some. reducing truck traffic - looking at reducing emissions,” Conway said. “It “Thank God we have good neighbors,” he said. “Everybody knows my all plays in to making the industry more friendly.” family and what-not. We’re blessed with good neighbors. They’ve been He reiterated that many oil-related businesses are in the planning real understanding.” process on projects. Although permit applications are nearly half what they were a year “Another thing that’s reassuring to me as commissioner is we have
“What has amazed me, in the last 90 days we’ve had conversations with all these companies and they’re not curtailing their activities.”
22 ENERGY PIPELINE JANUARY 2016
Annual Drilling Permits as of Octber 2, 2015 9000
8,027
WELD TOTAL
8000
7000
5,904
2011
1,397
2010
2,294
2009
2,303
2008
2,468
1,826
2007
4,190
4,025
3,773
2006
2,262
2005
1,448
2004
2,152
2,340
2003
1,527
2002
1,418
2001
832
757
760
702
509 2000
901
1000
2,249
1,529
2,008
2,273
2,917
3000
2000
4,659
4,364
4000
0
5,159
5000
5,996
6,368
6000
2012
2013
2014
2015
Annual Well Starts by County as of October 2, 2015 5000
WELD TOTAL 4,048
4,456
4500
4000
3000
2,776
3,004
3,222
3,542
3500
2,235
1,976 1,558
859
2011
2012
2013
2014
1,145
1,312
2010
1,457
2009
1,672
31 oil and gas companies operating in Weld County and we make it a point to meet with them annually or twice annually,” he said. “We like to have a dialog on where they’re going and where we’re going. What has amazed me, in the last 90 days we’ve had conversations with all these companies and they’re not curtailing their activities. The rig count is not as high as it once was, but 89 percent of the oil in Colorado gets produced in Weld County.” And, despite the downturn, Weld County is expected to have record oil production for 2015. Oil production in 2014, was at 95.2 million barrels and is currently on track to produce more than 100 million barrels in 2015. That’s according to Troy Swain, oil and gas liaison for Weld County. Those numbers come at a time when the number of drilling permits in the county has dropped nearly in half. In 2014, Weld County issued 2,303 drilling permits. As of October, 2015, the county had issued only 1,397. One of those permits went to National Western Holdings of Longmont, which specializes in cleaning frac tanks. The company needed permission for a storage and staging area for frac tanks. Mark McDonald said his company actually owns the property in Weld County, but had to be zoned for temporary storage for frac tanks for their own use and for a handful of customers while they wait for the market to turn around. McDonald can feel a definite swing in the market, he said. His company cleans maybe two frac tanks a month while before they were cleaning 15-20 a week. “As far as that end, it’s slowed down a lot, but we try not to keep all our eggs in one basket.” It’s also obvious the market has slowed when driving on dirt and county roads, he said. “A lot of the roads are nice and quiet now,” McDonald said. “You get out on some of those county roads a year and a half ago and you darnnear needed a stoplight on every road. Permitting tempo can not only be influenced by increases or decreases in rig counts but also by how quickly wells are being drilled,
2008
1,209
2007
878
2006
1,314
2005
1,222
2004
931
2003
718
2002
632
2001
406
2000
403
237
522
500
0
2,070
2,092
992
1,254
1,472
1,630
2000
1500
2,292
2500
2015
changes in plans for which areas are being drilled on, and regulatory changes, the county’s liaison said. “When the rig count goes down, the number of drillings, completions, field construction and support jobs declines,” Swain said. “But Weld County will see record oil production this year and the product needs to be moved for sales, so infrastructure will continue to be built. The midstream natural gas infrastructure projects are expected to continue to catch-up and keep-up with increased natural gas production.” Moving crude oil via pipeline instead of by truck is becoming more and more popular, Swain said. “Though the grouping of horizontal wells with long laterals results in less overall surface impact, operators are also permitting the individual tank battery locations with fewer on-site crude oil storage tanks to decrease their foot print and over-all size (appearance),” Swain said. If it weren’t for the rich oil production in the DJ Basin, downsizing would be much worse. “I’ve had more oil and gas experts tell me that,” Conway said. “Meanwhile, what I think companies are doing is looking at this as an opportunity to look at pipelines - ways to take trucks off the roads. I think they’re looking in terms of making some investments for the longterm for when this pricing environment turns around. And it will.” Weld County is more fortunate than most in terms of withstanding the current bust. “I’ve heard it from a number of people - energy experts, analysts, oil and gas leaders - the DJ Basin is one of the most valuable holdings you can have. And it’s only going to become more valuable,” Conway said. “That’s what’s driving these applications for new pipelines and other infrastructure applications.” He described Weld County as a gift that keeps giving. “We are just very fortunate to be positioned in a really good place,” Conway said. “Every day I come to work with the idea, let’s not screw this up.” JANUARY 2016 ENERGY PIPELINE 23
COUNTER POINT NAPE Speakers: Education, communication still needed to reach misinformed public BY LINDA KANE • FOR ENERGY PIPELINE denver - Communication and education is
the only way to keep the oil and gas industry on a level playing field with an increasingly misinformed and “anti” public, industry leaders concluded in December at the North American Prospect Expo at the Colorado Convention Center. The conference is a market place for the buying, selling and trading of prospects and producing properties. It’s the largest oil and gas prospect expo in the United States and was expected to have 2,500 attendees from all over, including Alaska and Canada. The conference featured several speakers who explained Colorado’s overall importance to the industry, but a growing trend of a public that doesn’t understand the industry. Tim Wigley, president of Western Energy Alliance, spoke to the changing dynamics in oil and gas advocacy. He said he gives speeches 80 times a year across the country and attendees always want to know, “What’s going on in Colorado?” “Everyone else in the country is looking to see what Colorado does in environmental development,” Wigley said. They see Colorado as a leader politically and a state with strong industry regulations. The industry needed to get organized so in 2013 created CRED or Coloradans for Responsible Energy Development. It was developed to educate the public on how the oil industry is regulated, Wigley said. He presented what he termed, “Some scary numbers.” • In 2013, 90 percent of Colorado voters had seen, read or heard something about fracking.
24 ENERGY PIPELINE JANUARY 2016
• Of those 90 percent, what they’d seen, read or heard was a 2:1 ratio of negative to positive. • Their knowledge of fracking was very little, but perceived as bad. • Colorado leads the nation in the most new residents who have lived here less than five years. • There was zero connection or understanding of the land ... and where their “stuff” comes from.
OIL AND GAS PRODUCTS ARE IN EVERYTHING, (TIM WIGLEY) SAID: BEER, CLOTHES, CELL PHONES, BIKES, MEDICATION AND TRANSPORTATION TO NAME A FEW Those points “lead to a dangerous brew,” Wigley said. “The industry was losing the social media/digital war by a 50:1 margin when this campaign began in late 2013,” he said. “That’s scary for the industry when people don’t understand the level of compliance and regulations we have.” Those opposed the oil industry have since launched a “Keep it in the Ground”
campaign, citing opposition to fracking and oil production overall. “The competition for space inside the human brain is so incredible right now,” Wigley said. “That’s why we have to focus on where they’re getting their information.” So, his group posed the question: Do you think you could survive five days without fossil fuels? Opponents said they could ride their bikes to work to save on energy or telecommute from home to preserve resources. But Wigley pointed out that bikes are made from fossil fuels and to telecommute, a worker needs electricity - all stemming from some sort of fossil fuel. Oil and gas products are in everything, he said: beer, clothes, cell phones, bikes, medication and transportation to name a few. “We must make Americans truly think about how dramatically our lifestyles would change without the use of fossil fuels,” he said. Polling data shows the public is on his side, Wigley said. People support increased domestic energy production and fracking, he said. “The world is controlled by those who show up,” he said. “It’s time we all show up in this important debate.” Dan Haley, president and CEO of the Colorado Oil and Gas Association, also spoke to the importance of communicating with the public regarding the industry. “We have a long history of oil and gas here in Colorado,” he said. “This is part of our history here in Colorado.” Of course there’s been much controversy to come along with it, he said. “As Colorado grows (in the industry) it’s important we are out having conversations
with people about what’s happening in their neighborhoods,” Haley said. He said people in general are confused about the industry, largely due to misinformation. If an industry were moving to his neighborhood, for example, he’d want to know what it meant, he said. Another big impact on the industry right now is of course commodity prices. In July 3, 2008, the price per barrel peaked at $145.31. When he checked in early December, Haley said it was in the high $30s. Natural gas was similarly depressed. Part of his job at COGA is making sure there’s good communication between communities and the industry, Haley said. “What does it sound like, smell like, look like,” he said. “We have to help educate as many citizens as we can.” His group strives to provide facts, science and reports. “We also help our developers talk to the public.” Haley stated he attended hearings at the Supreme Court earlier in the day regarding Colorado towns wanting to ban fracking. “These cases are about state law, not the merits of fracking,” Haley said. “At COGA, we feel our path is clear ... we need to continue to go out into the public and educate.” He wants the public to have clear
information on the importance of the industry to everyday lives and to understand it’s highly regulated. “This is not the Wild West,” he said. “There are safeguards in place to protect our air and water.” Hickenlooper reiterated the importance of Colorado in leading the charge within the oil industry. He cited that geopolitical instability around the world makes finding resolutions tough. The industry is clearly facing challenges right now, he said, but it’s going to come back around. He said Colorado and the United States must get a fair share of the predicted increasing demand. Lifting the ban on oil exports is merely one of the steps necessary in that plight, he said. “We want to make sure we’re on the cutting edge of energy modernization not only in Colorado but in the United States,” Hickenlooper said. Oil is an industry with a rapidly changing landscape and one in which innovation continues to improve. “This is a science-based industry based on talent,” Hickenlooper said. He added, oil has a “long, fruitful role in the economy of the state of Colorado.”
BY THE NUMBERS THE OIL AND GAS INDUSTRY IN COLORADO SUPPORTS: • 38,650 direct jobs • 63,350 indirect jobs • 102,000 total jobs supported • $105,000 average salary two times the state average • $31.7 billion to the state economy Source: Colorado Oil and Gas Association.
JANUARY 2016 ENERGY PIPELINE 25
TECH TALK
THE RISE OF SMART TRUCKFILL STATIONS BY GARY BEERS • FOR ENERGY PIPELINE
FIRE HYDRANTS - THE ORIGINAL, INEFFICIENT, AND HIGH-RISK TRUCKFILL STATIONS While hydrants connected to public water distribution systems originally serve to provide emergency water for fighting fires and a means for flushing out unwanted aged water, there has been widespread expansion of hydrants as a temporary water supply (truckfill stations) for a variety of users (i.e., city departments, city contractors, utility contractors, subdivision developers). In oilfields neighboring urban areas, the demand for water to hydro-fracture oil/gas wells has resulted in tanker trucks lining up at hydrants in the nearest residential neighborhoods to access water - which is not without objections from local residents. The growth in the use of this temporary water supply system generally has out-paced the practices that control water withdrawal, and significant problems can result. For example, backflow contamination can result from materials contained in connecting hoses; excess water can be withdrawn or wasted since many withdrawals are recorded based on a “honor system”; actual identity of the customer is not verified; and there is a time lag between actual water withdrawals and billings for water. Not a small concern is the vagueness of the water withdrawal operations and compliance with legal rights to use water, especially in states such as Colorado, where essentially all water is appropriated to identified uses.
SMART TRUCKFILL STATIONS During the past 15 years, smart truckfill stations have been developed to support the continued operation of the above temporary water system, 26 ENERGY PIPELINE JANUARY 2016
while reducing the problems, and they are used in hundreds of locations. Many are located in and near the oilfields in the Western states. The smart truckfill station is a stand-alone, automated bulk-water dispensing system with key capabilities supported by monitoring software: to receive water, users must enter an access code and report the volume of water; water heating and screening is available; backflow prevention devices are present at the connection; water usage reports and invoices can be rapidly produced and sent to the customer. Also, onsite payment with a credit card is an option; customers with unpaid accounts can be locked out; and operations are monitored in real time at location of station owner. The latter includes visual monitoring of activities at the truckfill station. One state requires that all records of dispensed water be concurrently transmitted via the Internet to their state water engineer for evaluation of compliance with water use laws. There are many types of smart truckfill stations - ranging from larger units in city utility yards to small units located to provide a temporary service. For example, a portable, skid-mounted, smart truckfill station can be
For over 50 years, GARY BEERS, has worked in numerous fields of environmental science as a consultant, regulator and educator. This career included senior management position with major consulting, nonprofit and public organizations. He has founded several successful firms to capture emerging resource management markets. One of his latest ventures, EnviroScienceINFO, provides content for public media.
installed over a fire hyrant. The power source is a solar panel on top of the unit. Likewise, a unit could be installed over a domestic water well and provide water to authorized users. For example, this arrangement is in place in remote areas of tribal lands in New Mexico. While most smart truckfill stations provide access to water, other liquids can be dispensed through these units. For example, dust suppressants and de-icing liquids can be withdrawn from storage
tanks; and treated produced water can be withdrawn for storage tanks for reuse in hydro-fracturing wells. The operation of the station can be expanded to provide for chemical addition, from onsite tanks, to the dispensed liquid. A limited version of the smart truckfill station can be a valuable asset to rural firefighting. The siphon load-out can provide access to a water supply upon receiving correct authorization codes.
SMART TRUCK LOAD-OUT STATIONS The above operation can be reversed and trucks can unload liquid into the smart unit, which can have add-on features (i.e., screens to remove solids). The most common example is unloading wastewater into municipal sewer pipeline. In southwestern Colorado, trucks can unload produced water to an injection well system through a smart unit.
PROUD
PARTNER
of the Greeley Community
Conserving the Environment Producing Energy Promoting Community Creating Jobs 33105 WCR 33 I Greeley, CO 80631 I 970-353-0407
www.billbarrettcorp.com
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JANUARY 2016 ENERGY PIPELINE 27
R E T S A F , R E T T BE
R E G N O STR ENERGYPIPELINE.COM BY SHARON DUNN • SDUNN@
INNOVATION, TECHNOLOGY LEADS TO IMPROVED DRILLING EFFICIENCIES IN DJ BASIN
C
olorado ended 2015 with fewer than 30 drilling rigs on the ground, less than half the number from the year before. Weekly headlines lamented the losses in the field, as they were sure signs that the boom had surely bust. While those in the oil and gas industry would prefer those numbers didn’t sink any further, they aren’t quite in a panic especially when one rig today can do the work of basically two a year ago. “Getting down to the level we’re at now, I don’t want to see it go any lower, but we’ve done all the cleansing we need to and highgrading of equipment and personnel. It’s healthy to go through these swings, as long as they’re not extended,” said Nick Spence, vice president of drilling for Synergy Resources, an oil and gas exploration company based in Platteville.
28 ENERGY PIPELINE JANUARY 2016
Colorado has seen its rig counts dwindle during the recent downturn, more than half what they were a year ago. In summer 2014, the state’s rig count was in the mid 70s and drawing the ire of residents tired of seeing a rig at every mile. Today, drill rigs dot the landscape sparingly throughout Weld County, the state’s largest oil and gas play. At its peak in 2008, Colorado oil and gas drilling had 123 drilling rigs on the ground. That was the year drilling permits in Colorado hit an all-time record. That’s also pre-shale boom, and the advances that came with it. The downturn hit in January 2015, and got progressively worse through the year. Almost simultaneously, rig counts began the plunge into some of the lowest numbers in the last decade. That’s
BILL EUSTES associate professor of petroleum engineering Colorado School of Mines
ABOVE A top-drive moves up the center of a drilling rig. Today’s drilling rigs are said to drill roughly twice as fast and efficient as rigs in the field just a couple of years ago. Photo by Sharon Dunn/sdunn@ energypipeline.com. OPPOSITE PAGE Roughnecks work the floor of a drill rig two years ago in Windsor. This rig was somewhat new to the field becaqse it was mounted on skids, allowing it to slide to the next wellhead. Rigs today, are said to be able to do twice the job as rigs of yesterday. Photo by Sharon Dunn/sdunn@energypipeline.com.
forced drilling contractors and operators to look within to find ways to get drilling times, and consequently expenses, down. “The technology, the efficiencies, the best of the best of rigs out there, and the most experienced workers on location. Those factors along with technology, all those things equate to days of savings,” said Craig Rasmuson, COO of Synergy Resources. “That equates to less money so at today’s commodity price you still get your payback.” The collapse in crude prices, now a year in, was just what the industry needed to kick-start its continuous belt-tightening, some say. Since 2010, innovation has been a daily progression in the DJ Basin. Companies consistently are working toward honing machinery, capabilities and processes. When coupled with the most experienced rig crews who know the field, drilling a horizontal well has become an art.
PIMP MY RIG
Like the Six Million Dollar Man of the ‘70s, today’s drilling rigs and processes are “better, faster, stronger.” Oil and gas production companies are constant innovators. Change has taken place so fast in every aspect of oilfield drilling, from spud to rig release.
“The learning curve starts steep any time you’re brand new, and as you learn more, the curve flattens out,” said Bill Eustes, an associate professor of petroleum engineering at the Colorado School of Mines in Golden. “We’re starting to understand the whole process.” Colorado’s shale boom shook up the entire industry in 2010, with the gusher that became known as Jake. Drillers perfected horizontal drilling with hydraulic fracturing and learned they could produce vast amounts more from a well with less surface impact. “I think today’s drilling rigs out there today are probably far more efficient than ones back in 2008,” Eustes said. “You’d expect it to be because of the knowledge you gain in that seven years has been pretty phenomenal.” There isn’t just one thing that has made drilling better. Companies have found ways to improve upon everything, from drill bits, to muds, to automation and horsepower. “Every aspect of the process has been perfected to a level it wasn’t,” Rasmuson said. “Is there still room for improvement? Boy, we hope so, especially in a downturn. We hope no one gets complacent.” The mechanical rigs have been laid down, leaving the automated rigs with the bells and whistles to do the work. “The rigs that are left are the best rigs that are available,” said Nick Schaneman, drilling manager for DJ Basin for Ensign Energy Services in Denver. “You have the highest technology and they are the best performing.” Rigs have morphed into the automated versions that run on natural gas or electricity. One could call yesterday’s mechanical rigs - though really reliable - the Model As of yesteryear, while today’s rigs are the Cadillacs. “It’s been quite an evolution to watch,” Spence said. “I wouldn’t say it’s very fast. It costs so much to build a drilling rig, so when you design one, you can’t take such quantum leaps that are unproven. You’ve got $30 million invested, and the steps are very measured I would guess in the progression.” Engineers learned how to put the rigs on skids, so they could slide to the next well site on a pad, taking away hours of tear down and set up time. Now they’re all over the DJ. For Anadarko, the last three years has been a time of consistent improvement.
JANUARY 2016 ENERGY PIPELINE 29
S WHAT IF RCILRLEW COULD D HOUR1,?000 FEET AN ESN'T THAT DOTOO FAR SOUND EN THAT OFF, GIV CASES IN SOMEARE TODAY CREWS G 300-400 DRILLIN HOUR. FEET AN “Horizontal well cycle times and drilling related costs have consistently improved in Wattenberg over the past three years,” said Robin Olsen, spokeswoman for Anadarko. “The reduction in cycle times and costs per foot have been a result of strong technical understanding of the basin, rigorous detail employed by our technical and field staff, training of our personnel and contractors, and partnership with our contractors.” When you have the best rigs being run by the elite crews that have survived the downturn, then it’s about pride. “You have the best of the best, because everyone’s trimmed any possible fat,” Schaneman said. The crews left, are there for a reason, Eustes said. “They’ve been working in the same area for decades, so the rocks are pretty well known to these folks,” Eustes said. “Of all wells that are drilled, you’d use that knowledge of what happened there to do better job on the next one. If you didn’t learn from it, frankly you shouldn’t be out there.”
DRILLING TIMES
Drilling times are a big deal in today’s world. With the cost of renting drilling rigs on a pad reaching into the tens of thousands per day, any little savings helps, especially when a full horizontal well can reach into the $5 million to $7 million range, depending on where the well is being drilled. In the DJ, companies are all chasing the lower numbers of competitors to maximize earnings for shareholders and themselves. Drilling costs in the DJ hover today around $3.5 million to $4.5 million per standard-length lateral, and drilling time is about six to eight days. Companies are increasingly moving toward mid- and longrange laterals that stretch up to two miles, and with rig, technology and crew improvements, even longer laterals are attainable at the lower figures. Anadarko reports it has made a ton of progress through the years. “Per-well cycle times have substantially improved through the years with more than 20 days per well in early 2012 when we really started the horizontal program to less than five days in many 30 ENERGY PIPELINE JANUARY 2016
cases in the third quarter of 2015,” Olsen reported. She stated the company has been able to drill the same numbers of horizontal wells with about half the number of rigs, all because of efficiencies crews have found, tried and perfected. “Reduction in cycle times has been a factor in reducing drilling costs nearly $70 per foot since the end of last year,” Olsen reported, “and we believe these operational improvements are sustainable and will become a permanent part of our business.” Noble Energy drilled 69 wells in the third quarter of 2015 with four rigs, and reports reduced drilling times. In 2011, in its annual report, Noble drilled 64 horizontal wells all year with five horizontal rigs. Rest assured, other companies are watching. The business is filled with copy-catting. “There’s no website with competition and new league records being set,” Rasmuson said. “It’s simply knowing that time is money and in this commodity environment, the best equipment, technology ... the best crews, those long in the tooth are still working, if you will.” But, his drilling vice president says, crews pay attention and know where everyone is. Being the best is a badge of honor. “Any time my engineers and myself self drilled the record, they get excited,” Spence said. “There’s a lot of pride out there between different contractors. Its fun to watch and a very healthy environment, as long as they do it safely, everyone watches.”
PUSHING THE LIMITS
Companies have shaved so much time from the drilling process, at some point, there can’t be much more to cut. Today, some believe the time saved is getting into the minutes rather than days. “I think a lot of it is you’re really getting where you push the limits of all the equipment,” Schaneman said. “We’ve always pushed it, but now, it’s kind of (the way it is) since the margin is so thin. ... I think it is one of those things now you’re pushing to save minutes instead of hours and days. It’s going to get harder and harder to be more and more efficient that this point.” But Schaneman admits, the environment is changing fast. Eustes at the School of Mines believes the limits are there to be broken. What if crews could drill 1,000 feet an hour? That doesn’t sound too far off, given in some cases crews are today drilling 300-400 feet an hour, he said. “I tell students, if you could instantaneously create a bore hole, you’d be going to the Hogwarts School of Mines,” Eustes said. “It ain’t happening. We’re coming up to limits, but in my mind they’re always designed to broken. People said we couldn’t go past the speed of sound in a jet, and we found a way to break it.”
GOING OLD SCHOOL
Wellbore designs are going back to the old days. Rather than drilling a vertical, stopping to drill the curve, and put a string down hole to help guide the drill bit down to the lateral part, companies are finding they can do the entire stretch in one shot, eliminating the intermediary step of a horizontal well. Some call it “monobore,” while others call it old school. What it has done has pushed the limits beyond what anyone
The rig crews left in the DJ Basin are the elite, the ones who know the rock and the area. Such crews are considered integral in the drilling improvements made in the DJ over the years. Photo for Energy Pipeline/Anadarko Petroleum.
thought was possible, using more conventional drilling methods in the unconventional plays. Horizontal drilling works like this, the company drills a 12-inch hole, puts in a 9-inch cashing and cements it. The next step involves placing a 7-inch string in the middle down to the entire vertical depth, then drilling at 5- to 6-inch hole for the lateral portion until they hit target depth, or TD. The process used to take weeks, as Olsen mentioned above. Today’s a different day. “You’re watching operators taking out that intermediate string, and gaining efficiency and time, that’s kind of the factor that will take you from under eight days, to under six days,” Rasmuson said, of drilling times on standard-length laterals. “It’s the conventional way of drilling. We’ve drilled like that for three decades.” Spence and Rasmuson assure this process is by no means cutting corners. That intermediate string, Rasmuson said, was essential to guide the drill-bit down the hole. Spence said that intermediate string allowed companies to hold off the unstable “Sharon Springs” formation, which sits just above the three Niobrara benches, where operators are seeing so much success in production. That layer has a habit of caving in and breaking up, he said. Improved drilling muds helped stabilize that formation, which made that intermediate step a non-issue. “If you take out the trip to get that casing string, and obviously run that casing string in and cement, you take all that time out, you cut at least a day, let alone quite a few dollars,” Spence said. Companies can perfect this method in horizontal drilling because it’s been around for decades. “Everybody looks at it as it’s something new, but in reality the vertical program out here was roughly 20,000 wells that were drilled this way,” Spence said. “The only things that really changed is the fact we learned how to deal with the Sharon Springs shale.” With the success this method already is showing out in the field
in horizontal drilling, it’s a sure bet companies will clamor to find their own savings. “I think for the time being we’re closing in onto getting to the most efficient process,” Rasmuson said. “You’re hearing of people doing them in five days, or even three to four days for standardlength lateral, that’s almost mind-boggling.” Anadarko is one of those companies that has hopped on the monobore train. “In regards to the significant efficiency improvements in 2015, while it is not a technological advancement, the single largest change was the implementation of an optimized wellbore design,” Olsen said. “The design change has led to a number of additional efficiency gains that have enabled us to be more efficient, while still providing multiple protective layers of steel and cement to shield potential sources of groundwater.” Spence said a four-day drilling time will become standard operating procedure. “That’s what everyone is going to be heading toward that point, taking necessary steps to get here and being cautious about implementing the process,” Spence said. “So it’s not going to happen overnight, but in the next two to three years, that will be the norm.”
WHAT COULD POSSIBLY COME NEXT?
In the late 1800s came the apocryphal quote, “Everything that can be invented has been invented.” It became the antithesis of American ingenuity, and it was used as a carrot, if you will, to encourage invention. Though oil companies have progressed in all facets of drilling, they are by no means done. Sensors will improve and big data will play a larger role, Eustes said. And there’s a large body of research on laser technology in drilling, he said. Ten years ago, the U.S. Army used what they called “the miracle laser” to see how fast they could drill. “You put 2 megawatts into a rock, and you’re going to drill,” Eustes said. “That thing was making 450 feet an hour, an ungodly number.” But there are inherent problems with lasers, he said. Drilling fluids are opaque, so how do you pump a laser through opaque fluid, he asked. How do you get laser power down to the bit? If you vaporize rock, where does the vapor go? “There are a lot of folks looking into how to use lasers. Lasers have probably got a better a shot than some of others,” Eustes said. The best part of all is the continued improvement through research and application. “I think there are potentials for breaking the rules when people say we can’t drill that fast, and then someone comes up with an idea,” Eustes said. “That’s what I enjoy about the American spirit. Limits are meant to be broken.” JANUARY 2016 ENERGY PIPELINE 31
VEHICLE ACCIDENTS, MACHINERY REMAIN LEADING CAUSES OF WORKER FATALITIES
BY DAN LARSON • FOR ENERGY PIPELINE
The American worker builds skyscrapers and highways, grows the food, logs the wood and produces the energy the global economy would quickly stall without. Workers also are killed on the job with unfortunate and persistent frequency.
§ despite the continuing tragedy of workplace
fatalities, safety professionals and government statisticians recognize there have been tremendous strides in safer workplaces. Through safer designs, training, safety cultures and ongoing vigilance, efforts are bearing fruit. While worker deaths were slightly up in Colorado in 2014, only a fraction came out of the oil and gas industry, data shows. Still, safety pros emphatically state that no matter the improvement, one worker killed is too many.
Death Scroll
§ One of many ways the federal government spends tax money is to keep track of people killed or injured on the job. It also writes and enforces workplace safety regulations under the Occupational Safety and Health Act of 1970 through OSHA, a federal agency known by its acronym like the FBI or EPA. The OSHA website includes a scrolling text box of workers killed on the job in the prior three months. The grisly list of men killed on the job - and they are almost all men - share a common theme of the life-threatening hazards seemingly inherent in working around machinery and energy sources. Samples from the OSHA workplace fatality ticker: A man in Illinois was killed in early September when the scissor-lift he was operating tipped over; two weeks
later, a man in Pennsylvania was killed by arc flash while working near an electrical cabinet; one day later, a man in Kentucky was struck and killed by a falling tree his first day on the job; near the end of the month, a man in Pennsylvania was killed in a trench collapse. In early October, three men in Louisiana were killed when a gas pipeline ruptured; a man in Florida was fatally crushed between a truck and telephone pole; later in the month, a man in Ohio was struck and killed by steel coil being moved by an overhead crane. The sudden end to a life captured in 15 words carries a visceral impact. Every name is of someone who showed up for work expecting to return home that evening. Every name is of a life unlived. That the work these men were doing was dangerous does not lessen the impact of their deaths. In the federal fiscal year that ended Sept. 30, 2015, there were 4,679 workers killed on the job across the U.S., an increase of 2 percent from the year before, the agency reported. Of those, 83 Colorado workers were killed on the job in 2014, compared to 65 the year before. Roughly half were killed in traffic accidents. The circumstance of each worker’s death, all 4,679, is listed in a dry, six-column government spreadsheet that runs for 81 pages. “Making a living shouldn’t have to cost you your life,” said David Michaels, assistant secretary of labor for Occupational Safety and Health Administration. “Workplace fatalities, injuries and illnesses are preventable. Safe jobs happen because employers make the choice to fulfill their responsibilities and protect their workers.”
JANUARY 2016 ENERGY PIPELINE 33
Trucks like this are found throughout the oil patch, with the words safety plastered seemingly at every visual plane. Oil field companies make safety a priority in the field. This truck was found at an Anadarko operations site in Weld County in October. Photo by Sharon Dunn/sdunn@energypipeline.com
By the Numbers
§ OSHA was created by President Richard Nixon in April 1971 and is part of the U.S. Department of Labor, as is the Bureau of Labor Statistics where the number-crunching is done. OSHA states that before it was created, an estimated 14,000 workers were killed on the job every year. Today, workplaces are safer and healthier with the on-the-job fatality rate going from 38 deaths a day to 12 a day now, OSHA reports. Recently, the rate of workplace fatalities held steady in 2013 and in 2014 at 3.3 deaths per 100,000 full-time equivalent workers, maintaining the declining fatality trend since the rate was 4.2 worker deaths per 100,000 full time equivalent in 2006. Regarding the cause of worker deaths, OSHA reported an increase in fatalities in 2014 from slips, trips and falls, from exposure to harmful substances and in traffic accidents than the year before, while fewer died from fires and explosions, being struck by objects or equipment, or from violence by people or animals. And while fewer people were killed on the job in oil and gas and mining than in other industries, the industry saw a fatality rate second only to the segment that includes the agriculture, forestry, fishing and hunting industries, according to BLS. For reference, nearly five times as many people, a total of 874, were killed in the construction industry as in the oil and 34 ENERGY PIPELINE JANUARY 2016
gas and mining segment, where 181 workers died on the job in 2014. However, because the construction industry employs so many more workers, the fatality rate for that industry was 9.4 per 100,000 full time equivalent workers compared to a rate of 14.1 fatalities per 100,000 in oil a gas and mining. Closer to home, BLS data show six Colorado workers in the oil and gas and mining industries died at work in 2014 while four workers in the agriculture and forestry industry died, and 13 fatalities were reported in the construction industry. As work and career opportunities for women expand, the incidence of workplace fatalities involving women has likewise increased. OSHA reports the number of women killed on the job increased 13 percent in 2014 over the year before. “Even with this increase, women accounted for only 8 percent of all fatal occupational injuries in 2014,” the agency reports. Earlier this year, a report issued by a different part of the federal government indicated more oil and gas workers killed at work than reported by BLS. Industry opponents quickly attributed this to the inherent hazards of oil and gas development and production. Called Fatalities in Oil & Gas Extraction, the report said eight workers died in Colorado last year, compared to the six deaths reported by BLS. Produced by the National Institute for Occupational Safety and Health, a department within the federal Centers for Disease Control, the FOG report is described as a “more indepth report” because it includes “all identified fatal events ... to oil and gas extraction workers.” The most recent FOG report, covering January through
June 2014, states that it includes “all cardiac events that begin at work” because, it says, “acute exposure to some chemicals or toxic substances can mimic or induce (a) cardiac event” while it undercounts the number of traffic fatalities, which is why final BLS counts will be higher than FOG totals. For the first half of 2014, 43 oil and gas worker fatalities were reported, three of which were in Colorado. Worker activities at the time of death ranged from rigging up and down to welding to winching and water hauling. However, it is the report’s linkage of exposure to toxic substances to the incidence of apparent cardiac events that raised controversy in the industry. The FOG report states that while “it may not always be possible to determine if exposure occurred, cardiac events are included in FOG in order to support the identification and characterization of exposure risks in this industry.”
Tank Gauging
§ In March 2015, Todd Jordan, director of the OSHA Health Response Team, presented the results of an OSHA study of hazards workers face during tank gauging and other routine wellsite tasks to a meeting of the oil and gas sector of the National Occupational Research Agenda. NORA is a public-private partnership created to “stimulate innovative research and improved workplace practices.” Formed in 1996, NORA and its industry sectors have become a research framework for NIOSH and the nation, the agency reports. According to Jordan, tank gauging, fluid sampling and product transfer tasks can expose a worker to a variety of hydrocarbons, some of which can have an anesthetic effect at even low concentrations. Other hazards include oxygen deficiency, hydrogen sulfide exposure and combustible vapors. Between 2010 and 2014, nine incidents were reported nationally in which workers were found collapsed or later complained of illness and died, OSHA statistics show. Regular exposure to hydrocarbons while performing routine wellsite tasks is common and workers are often alone without adequate personal protective equipment, Jordan said. The agency’s investigation found that the workers interviewed for the study reported feeling light-headed, “weak at the knees” and needed to sit down until the symptoms passed. Many such incidents occurred when tank hatches were “fluttering” due to high gas pressure inside the tank. Uncontrolled tank venting and manual tank gauging can quickly expose workers to hydrocarbons or oxygen deficiency at levels considered immediately dangerous to life and health, Jordan reported.
U.S. Workers Killed in Apparent Oil and Gas Related Activities in 2015 9/24/2015 NORAM DRILLING COMPANY, GREENFIELD, OK. Worker struck and killed by pin on oil and gas well drilling rig. 9/6/2015 C & J OILFIELD SERVICES INC., FOX, OK. Worker driving tanker truck killed in vehicle collision. 8/11/2015 VIVA ENERGY SERVICES LLC, PYOTE, TX. Three workers servicing well hospitalized for burns resulting from flash fire. 7/25/2015 NATIONAL EWP INC., SODA SPRINGS, ID. Worker fatally crushed between drill rig and pickup truck. 7/23/2015 BASIC ENERGY SERVICE LP, DACOMA, OK. Worker fatally crushed by service rig. 7/17/2015 OIL WELL SERVICE COMPANY BAKERSFIELD, CA. Worker killed in fall from oil derrick platform. 7/6/2015 C & J WELL SERVICES, HUNTSVILLE, TX. Worker struck and killed by pipe being unloaded from truck. 5/17/2015 STEINBERGER DRILLING COMPANY LTD, QUANAH, TX. Worker struck and killed by drill casing. 5/1/2015 TESEI PETROLEUM, INC., MADERA, CA. Three workers hospitalized when propane tank ignited. 4/26/2015 ENERGY TRANSFER PARTNERS, JAL, NM. Worker suffered fatal burns in pump room.
4/24/2015 E.E. HALL, INC., KETTLEMAN CITY, CA. Worker killed in oil tank explosion. 4/23/2015 NALCO CHAMPION, CHICKASHA, OK. Worker struck and killed by pipe under pressure. 4/18/2015 LOUISIANA CRANE AND CONSTRUCTION LLC, KERMIT, TX. Worker struck and killed by plug ejected from pressurized pipeline. 4/16/2015 ENCORE PIPE & CONSTRUCTION, LLC, STANTON, TX. Worker struck and killed by falling pipes. 4/14/2015 NEBRASKA RAILCAR CLEANING SERVICES LLC, OMAHA, NB. Two workers killed in explosion of tanker containing petroleum waste. 4/2/2015 SCI WELDING OILFIELD SERVICES, INC., ALTAMONT, UT. Worker struck and killed by part of oil drill assembly. 3/24/2015 RELIANCE WELL SERVICE INC., FAIRFIELD, TX. Worker struck and killed by machine parts when drill line broke. 3/11/2015 NRG ENERGY INC., JEWETT, TX. Worker struck and killed by motor vehicle. 3/10/2015 MASON WELL SERVICE, MIDKIFF, TX. Three workers killed in oil well explosion. 3/5/2015 ACCURATE TANK AND VESSELS, MIDLAND, TX. Worker died after being overcome by paint fumes.
2/23/2015 RIG POWER INC., EL PASO, TX. Worker killed when disabled truck rolled over. 2/20/2015 OVERFLOW ENERGY LLC, CHEYENNE, OK. Worker killed in tank explosion. 2/11/2015 MUSTANG MACHINERY/ CATERPILLAR, BEAUMONT, TX. Worker pinned and fatally crushed between boom and frame of outrigger. 2/9/2015 MERCER WELL SERVICE, LOVING, NM. Worker struck and killed by falling pipe. 1/27/2015 JWT WELL SERVICES, NORA, VA. Worker killed when vehicle ran down embankment. 1/15/2015 C & D OILFIELD SERVICES INC., DICKINSON, N.D. Worker died from atmospheric exposure to tank battery. 1/8/2015 BASIC ENERGY SERVICES LP, BUFFALO, WY. Worker killed in fall from well service rig derrick. Source: Occupational Safety and Hazard Administration. This list is categorized by the company name, type and location of incident, and may not be a complete list of all oilfield related deaths. This list is part of OSHA’s ongoing count , as of November 2015, of American worker death, which comprises hundreds of pages of names.
JANUARY 2016 ENERGY PIPELINE 35
By the Numbers The United States recorded 4,679 workrelated deaths in 2014, which increased 2% from the 4,585 fatal work injuries in 2013.
WORK-RELATED DEATHS IN COLORADO GREW ALMOST 28% FROM 2013-14. YEAR TOTAL
YEAR TOTAL
2014 83
2013 65
OTHER OIL HEAVY STATES STATE
2014 (2013) PERCENT CHANGE
Nebraska
54
(39)
up 38.5%
North Dakota 38
(56)
down 32%
Pennsylvania 175 (183)
down 4.4%
Oklahoma
91
down 1%
Louisiana
120 (114)
up 5.3%
Texas
524 (508)
up 3.15%
Wyoming
37
up 42.3%
(92)
(26)
OF THOSE IN 2014, BY TYPE OF EVENT IN COLORADO: EVENT
TOTAL
Violence by others or animals 12 41
Fires and Explosions
0
Falls, slips and trips
9
Exposure to harmful substance or environments
6
Contact with objects and equipment
14
WORK RELATED DEATHS IN 2014 LOCATION
TOTAL
Weld County
13
Boulder
4
Colorado Springs
6
Denver-Aurora-Lakewood 20 Fort Collins-Loveland
2
Grand Junction
2
Source: U.S. Bureau of Labor Statistics
36 ENERGY PIPELINE JANUARY 2016
• Provide hazard communication training of workers. • Conduct hazard assessments to determine appropriate personal protective equipment, particularly respiratory protection. • Assess wellsites for possible engineering controls on equipment to prevent exposure hazards. • Establish standard operating procedures and workplace controls for approaching and opening tank hatches to reduce exposures and potential for flash fires. The agency also recommends companies further assess hazard exposure in standard practices for solo operators such as truck drivers, for gauging multiple tanks by pumpers and for the effects of wind, temperature and humidity during routine wellsite activity. Finally, the agency advised that further study is needed into a possible connection between the anesthetic effect of hydrocarbon exposure and traffic accidents.
Toward Zero
§
Transportation incidents
To protect workers’ health, the report advises companies to:
“Whenever there’s an accident or workers are injured, oil and gas is held up as a dangerous place to work,” said Carrie Jordan, project manager at MJS Safety, a workplace safety training and compliance company based in Berthoud. She is also secretary of the DJ Basin Safety Council. “OSHA statistics clearly show the oil and gas industry is not the most dangerous place to work,” Jordan said. “Many other industries have higher worker fatality and injury rates. It’s just that the oil and gas industry is always in the spotlight and is always willing to take the steps necessary to protect its workers.” Jordan observes that for an industry made up of so many diverse businesses with workers from all walks of life, the oil and gas industry is remarkably unified in its efforts to protect the health and safety of its people.
At Encana, the Pressure & Pipe Principles, or P3, consist of policy and practices improvements to identify and manage risks of operating gas and liquids lines under pressure.
§ “There is not an operator out there who would knowingly allow a worker or contractor to work for it without some type of recognized, accredited orientation and training in place,” she said. Anadarko Petroleum Corp., the leading oil producer in the DJ Basin, makes “a safety-first culture a way of life,” say company representatives in Colorado. Industry-standard employee training and certification requirements are “just the beginning of a company-wide safety culture,” according to Korby Bracken, regional Environment, Health and Safety director at Anadarko. “We recognize oil and gas is a risky business,” Bracken says. “When you are dealing with high pressure, volatile and potentially explosive gases, you always have to be on your game. Although we’ve seen a recent trend in a decrease of severity of injuries to employees, I consider anything greater than zero a failure on our part.” Even for the most common workplace injuries - slips, trips and falls - workers must be aware of what causes them and how they can be prevented. Bracken said Anadarko uses a safety awareness tool called SafeStart for employees and contractors. The SafeStart tool seeks to improve awareness of the four behavioral states that can lead to accidents: frustration, fatigue, rushing and complacency. Bracken notes that making a connection between the four states and the circumstances of an accident or near-miss helps workers develop safe work habits. And like any oil and gas company, significant portions of Anadarko’s work is done by contractors and service providers. Contractor qualifications and safety policies are available through information clearinghouses such as ISNetworld. The company also has its own teams of auditors as part of its Contractor Assessment Program that visit contractor offices and worksites to verify documentation and performance. Noble describes its approach as a “culture of individual responsibility for the safety of oneself, coworkers and the community.” This “No Harm” culture, the company reports, “emphasizes a common set of principles to align safe behaviors with company values.” As an example, Noble sees truck traffic, which it calls “inherent in a shale development” as both a temporary inconvenience for neighbors as well as a potential traffic
hazard. To manage this dual-edged sword, the company “implements specific road-use strategies. These include blackout hours, keeping large trucks off the road during school bus-route hours, and pipelines to reduce truck traffic.” According to its annual HSE report, Noble reported no fatalities from 2012-14. At Encana, the Pressure & Pipe Principles, or P3, consist of policy and practices improvements to identify and manage risks of operating gas and liquids lines under pressure. It also consolidated its driving safety programs into a single effort that includes training and in-vehicle monitors. Halliburton has its Life Rules that all employees are expected to memorize. The Life Rules are the 10 workplace tasks that can lead to injuries and form a foundation of the company’s “Journey to Zero” safety program. For Baker Hughes, the company has shifted away from seeing worker safety as part of a health, safety and the environment regulatory obligation to “the right thing to do” as a moral and ethical responsibility and because it is good for business. The company partnered with the Society of Petroleum Engineers on a safety initiative called “Getting to Zero” which aims for a safety incident-free workplace. Baker Hughes says that its interdependent safety culture encourages workers to “closely examine their work activities, and adopt safer attitudes and behaviors. Employees are becoming more passionate about protecting their own safety and looking out for their fellow workers,” according to the company’s safety doctrine. As part of its effort to foster a common vocabulary around health, safety and environment, Baker Hughes defined its goal as a “Perfect HSE Day.” Now, a day with no recordable injuries, no serious traffic accidents and no serious environmental spills is a Perfect HSE Day. Results indicate the program appears to be working, Baker Hughes says. In 2012, 22 Perfect HSE Days were recorded. In 2013, the number increased to 42 days and increased again in 2014 to 92. Through three quarters in 2015, more than 100 incident-free days were logged. Ultimately, safety is personal. “When people bring these safety thoughts into their lives, both at work and at home, safety performance goes up,” Anadarko’s Bracken concludes. JANUARY 2016 ENERGY PIPELINE 37
News Briefs MedShare honors Anadarko Petroleum for humanitarian aid MedShare International’s Northeast Regional Council on Nov. 9 honored Anadarko Petroleum Corporation for its outstanding humanitarian partnership with MedShare in Sierra Leone. MedShare is a humanitarian aid organization that sources and distributes essential surplus medical supplies and equipment to underserved communities in 96 countries around the world. The Northeast Regional Council was organized by Sandy Tytel to bring Medshare’s mission to New York City’s dynamic, international community, according to a news release. Anadarko was instrumental in providing financial and logistics support to send seven shipments of medical supplies and equipment to key hospitals in areas where the company operated, the release stated. It also provided financial support specifically for MedShare’s work in stemming the spread of the Ebola virus. “Anadarko has been an extremely supportive partner of Medshare and, in doing so, has again demonstrated its concern for all the people in the countries around the world in which it conducts business,” said Sandy Tytel, Medshare Board of Trustee member and Northeast Regional Council Chair. “We are grateful to work with a company that practices good citizenship worldwide and displays its commitment to social good time and time again.” “It was a privilege to partner with MedShare in making a meaningful difference during a critical time of need for people in Sierra Leone,” said Anadarko Country Manager Bernie Sanger. “All of us can appreciate having someone there when we need help, and it’s reassuring to know we can work with a non-profit organization like MedShare to make a powerful difference in the lives of so many people.” Anadarko is one of the world’s largest publicly traded oil and natural gas exploration and production companies. The company’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. Learn more at www.anadarko.com - Staff Reports
38 ENERGY PIPELINE JANUARY 2016
The 2015 Southwest & Midcontinent Oil & Gas Awards Congratulations to the winners of the 2015 Southwest and Midcontinenet Oil and Gas Awards. The awards were announced at the Awards Gala Dinner Oct. 15 at the Westin Dallas Park Central. • Award for Drilling Excellence: Ensign Energy Services Inc. • Manufacturer of the Year: Sand X. • Oilfield Services Company of the Year: Frank’s International N.V. • New Technology Development of the Year - Products: Drillform Technical Services Ltd. • Consultancy of the Year: KJE, Inc. • Themark Corporation E&P Company of the Year: Occidental Petroleum Corporation. • General Industry Service Award: Well Master Corporation. • Award for Excellence in Corporate Social Responsibility: Apache Corporation. • Midstream Company of the Year: EnLink Midstream. • Trucking Company of the Year - Presented by Kenworth: Ryder System Inc. • VZ Environmental Award for Excellence in Environmental Stewardship: Houston Advanced Research Center. • The Oil & Gas Financial Journal Transaction of the Year: Encana. • Water Management Company of the Year: MIOX Corporation. • Engineering Company of the Year: Landpoint. • Bendix Commercial Vehicle Systems Award for Excellence in Health & Safety - Operational: Aveda Transportation and Energy Services. • Bendix Commercial Vehicle Systems Award for Excellence in Health & Safety - Products: TekSolv, Inc. • New Technology Development of the Year - Software Application: Trimble, Geospatial Division. • Industry Supplier of the Year: Chemplex Solvay Group. • Breitling Energy Future Industry Leader: Stephen Cravens - YPE. Industry Leader: Howard G. Westerman J-W Energy Company.. - Staff Reports
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Under the agreement, ANGA’s mission to promote natural gas as a clean, affordable solution to America’s energy and environmental needs will be handled by a new Market Development Group at API, a team led by current ANGA President Marty Durbin. ANGA members who are not already members of API will become full members. “Marty will be essential to our continued, and now combined, efforts to advance natural gas market development and I am pleased to welcome him back to API in this new role,” said Gerard. “And we welcome ANGA members to full participation in API’s industry-wide activities.” API and ANGA have long collaborated to highlight environmental, job creation, energy security and consumer benefits from abundant and affordable supplies of natural gas.
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USD Partners acquires crude oil terminal in Wyoming HOUSTON - USD Partners LP has agreed to acquire 100 percent of the equity interests in Casper Crude to Rail, LLC from Stonepeak Infrastructure Partners, Cogent Energy Solutions and The Granite Peak Group $225 million, subject to closing adjustments. The price includes $208.3 million of cash and $16.7 million of limited partner units issued to the sellers, according to a news release. The Casper terminal’s principal assets include: a unit traincapable crude oil loading rail terminal with 100,000 barrels per day of capacity and dual loop tracks; six customer-dedicated storage tanks with 900,000 barrels of total capacity; and a sixmile, 24-inch diameter pipeline with a direct connection from Spectra Energy Partners LP’s Express crude oil pipeline, which runs from Hardisty, Alberta, to Casper, Wyo., and provides access to multiple grades of Canadian crude oil. The terminal’s location supports access to multiple refining centers across the U.S., onsite storage and blending capabilities, which enables customers to ship preferred grades of crude oil from Casper. The terminal’s footprint and modular design also allows for the addition of a second loading station and an additional 1.1 million barrels of storage capacity with minimal disruption to existing operations and relatively low incremental capital costs, the release stated. “We are pleased to announce our first acquisition since the Partnership’s initial public offering last October. The Casper terminal represents an attractive opportunity to deliver a highly accretive, complementary acquisition to our unitholders and supports the Partnership’s ability to achieve its targeted distribution growth over the next several years,” said Dan Borgen, the Partnership’s Chief Executive Officer. “The terminal’s highquality customer base and strategic location ensure competitive, sustainable market access, as well as provide an additional platform for heavy crude oil solutions.” The Casper terminal commenced operations in September 2014 and is supported by take-or-pay contracts with primarily investment grade refiners and a weighted-average remaining contract life of approximately three years. For the full year 2016, the Casper terminal is expected to contribute minimum contracted Adjusted EBITDA of approximately $26 million, the release stated. The partnership intends to fund the cash portion of the purchase price with approximately $35 million of cash on hand and approximately $173 million of senior secured credit facility borrowings. The Partnership will issue approximately 1.7 million common units as equity consideration based on a unit price of $9.62, the volume-weighted average daily closing price for the Partnership’s common units for the 30 trading day period prior to October 12, 2015. - Staff Reports
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MAKING HOLE A look back at the origins of oil and gas BY BRUCE WELLS • AMERICAN OIL & GAS HISTORICAL SOCIETY
Project Gasbuggy tests nuclear fracking project gasbuggy was the first in a series of Atomic
Energy Commission downhole nuclear detonations to release natural gas trapped in shale. This was “fracking” late 1960s style. In December 1967, government scientists, exploring the peacetime uses of controlled atomic explosions, detonated a 29-kiloton nuclear device they had lowered into a gas well in rural New Mexico. The Hiroshima bomb was about 15 kilotons. Called Project Gasbuggy, the experiment was one of several that included experts from the Atomic Energy Commission, the U.S. Bureau of Mines and petroleum companies like the El Paso Natural Gas. Near three low-production natural gas wells outside Farmington, the team drilled to 4,227 feet and lowered a 13-foot-long by 18-inch-wide nuclear device into the borehole. The explosion in New Mexico was part of a wider set of experiments known as Plowshare, a program established by the Commission in 1957 to test constructive use of nuclear devices. From 1961-73, scientists carried out Project Gasbuggy and the other projects by setting off 27 nuclear detonations. The tests, mostly conducted in Nevada, also took place in the natural gas fields of Colorado and New Mexico. Many Plowshare experiments focused on creating craters and canals. Among other goals, it was hoped the Panama Canal could be inexpensively widened. “In the end, although less dramatic than nuclear excavation, the most promising use for nuclear explosions proved to be for stimulation of natural gas production,” notes a 2011 report for the U.S. Department of Energy. Project Gasbuggy was the first of three nuclear fracturing experiments exclusively focused on stimulating natural gas production. Its 29-kiloton
blast created a molten glass-lined cavern 160 feet in diameter and 333 feet tall, The cavern collapsed within seconds. Although measurements indicated fractures extended 200 feet in all directions, Tritium radiation contaminated the increased natural gas production. “There was no mushroom cloud, but on December 10, 1967, a nuclear bomb exploded less than 60 miles from Farmington,” explains historian Wade Nelson. Scientists had predicted that nuclear explosives would create more and bigger fractures “and hollow out a huge cavity that will serve as a reservoir for the natural gas” released from the fractures, Nelson reports. “It was believed a nuclear device would simply provide a bigger bang for the buck than nitroglycerine, up to 3,500 quarts of which would be used in a single shot,” he adds. Two more nuclear
BRUCE WELLS, is the founder of American Oil and Gas Historical Society, a 501c3 nonprofit organization dedicated to preserving the history of oil and gas. He is a former energy reporter and editor who lives in Washington, D.C.
Scientists lower a nuclear device into a New Mexico natural gas well in December 1967. The experimental 29-kiloton device will be detonated at a depth of 4,227 feet. Two Colorado gas wells will be similarly “fracked.” Los Alamos Lab photo. JANUARY 2016 ENERGY PIPELINE 43
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Researchers once believed a nuclear device would provide “a bigger bang for the buck than nitroglycerin” for fracturing dense shales and releasing natural gas. Los Alamos Lab photo.
fracking tests later took place in Colorado. They were much bigger. In 1969, Project Rulison detonated a 43-kiloton nuclear device almost 8,500 feet underground at a site near Rulison, Colorado. The well also produced radioactive natural gas. Northwest of Rifle, a 1973 test called Project Rio Blanco was designed to increase natural gas production from lowpermeability sandstone. It detonated three 33-kiloton nuclear devices in a single well. The nearly simultaneous explosions occurred at depths of 5,838, 6,230, and 6,689 feet below ground level. Project Rio Blanco and its contaminated and useless natural gas proved to be the last experiment of the Plowshare program. A proposed 50-kiloton detonation to fracture deep oil shale deposits never took place. Growing knowledge (and concern) about radioactivity ended these tests for the peaceful use of nuclear explosions. Plowshare was canceled in 1975. The 2011 U.S. Department of Energy report concluded: “By 1974, approximately $82 million had been invested in the nuclear gas stimulation technology program (i.e., nuclear tests Gasbuggy, Rulison, and Rio Blanco). It was estimated that even after 25 years of gas production of all the natural gas deemed recoverable, that only 15 (percent ) to 40 percent of the investment could be recovered. At the same time, alternative, non-nuclear technologies were being developed, such as hydrofracturing. Consequently, under the pressure of economic and environmental concerns, the Plowshare Program was discontinued at the end of FY 1975.” In 1969, Oklahoma-based Parker Drilling Company signed a contract with the Atomic Energy Commission to drill a series of holes (up to 120 inches in diameter and 6,500 feet deep) in Alaska and Nevada for nuclear bomb tests. Parker Drilling’s Rig No. 114 was one of three special rigs built to drill the wells. Today, the giant rig is a Route 66 tourist attraction in Elk City. Also see “Shooters - A ‘Fracking’ History” at the American Oil & Gas Historical Society website, www.aoghs.org.
“Making Hole” is a term for drilling coined long before oil or natural gas were anything more than flammable curiosities. Read more petroleum history at the American Oil & Gas Historical Society’s website, www.aoghs.org.
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DATA CENTER
The oil and gas industry is a large part of Colorado’s economy. Below, find statistics on energy pricing, drilling production, well permits, spills and rigs.
2015 DRILLING PERMITS COUNTY
RIG COUNT BY STATE
NO. (% OF STATE TOTAL)
Weld..........................................................................................1,688 (61.5%) Garfield......................................................................495 (18%) Rio Blanco..........................................104 (3.8%)
State Dec. 18 Nov. Avg. Colorado 25 33 Louisiana 58 70 Oklahoma 86 83 North Dakota 58 63 Texas 320 340 California 9 12 Alaska 12 13 Ohio 15 20 Pennsylvania 26 28 Wyoming 20 24 Source: Baker Hughes Rig Count.
Oct. Avg. 30 69 90 63 349 14 12 20 29 25
Sept. Avg. 33 72 106 69 367 14 13 18 34 24
2015 GAS PRODUCTION
COUNTY *YTD PRODUCTION (% OF STATE) Weld...........................................369,046,169 (32%) Garfield...................................374,502,877 (32.4%) La Plata ..................................235,150,084 (22.3%) Las Animas ................................ 53,508,746 (4.6%) Rio Blanco .................................. 39,952,072 (3.4%) Mesa ........................................... 22,751,513 (1.9%) State...................................................1,155,135,563
State....................................................2,745 Source: Colorado Oil and Gas Conservation Commission as of Dec. 1.
2015 OIL
PRODUCTION COUNTY *YTD
US RIG COUNT
The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999. Area Dec. 18 Nov. Avg. Oct. Avg. Sept. Avg. U.S. 709 760 809 848 Canada 162 178 184 183 Source: Baker Hughes Rig Count, Dec. 18.
PRODUCTION (% OF STATE)
Weld 74,140,717 (89%) Rio Blanco 2,961,770 (3.6%) Arapahoe 1,167,239 (1.4%) Lincoln 937,751 (1.1%) Garfield 1,193,654 (1.43%) Cheyenne 829,356 (0.9%) State 83,260,407
Source: Colorado Oil and Gas Conservation Commission as of Dec. 2.
Source: Colorado Oil and Gas Conservation Commission as of Dec. 2.
COLORADO ACTIVE WELL COUNT 46 ENERGY PIPELINE JANUARY 2016
Weld ..........................................................................22,695 Garfield .....................................................................11,031 Yuma ...........................................................................3,881 LaPlata........................................................................3,319
Las Animas .................................................................2,970 Rio Blanco ...................................................................2,906 36 others .....................................................................6,926 State .........................................................................53,728
Source: Colorado Oil and Gas Conservation Commission as of Dec. 1.
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