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Features
15
10
TRIPLE CREEK
EXTRACTION IPO
State approves Triple Creek oil, gas project in west Greeley; neighbors sue in Denver courts.
Extraction IPO success seen as indicator of better markets.
By Sharon Dunn
By Dan Larson
8 MONOBORE DRILLING
ON THE COVER
Drilling companies continue to shave costs with efficient well designs.
Design by Joshua Aho
By Dan Larson
12
EARNINGS REPORTS
Anardarko, Noble see rosier picture for U.S. onshore oil business. By Sharon Dunn
13
SEVERANCE TAXES
State severance taxes drop 69 percent this year due to oil and gas downturn. By Sharon Dunn
4 ENERGY PIPELINE DECEMBER 2016
In Every Issue 19
Making Hole
21
Tech Talk
Roaring Ranger wins WWI. By Bruce Wells
If an oil formation is fracked, how will it drain? Ask a smart rock. By Gary Beers
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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. Send editorial-related comments and story ideas to: editor@energypipeline.com For advertising inquiries, contact: bjacobson@energypipeline.com December 2016, Volume 3, Issue 16. Published by Greeley Publishing Co., publisher of The Greeley Tribune, Windsor Now, the Fence Post, and Tri-State Livestock News.
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DECEMBER 2016 ENERGY PIPELINE 7
ROCKY MOUNTAIN ENERGY SUMMIT
MONOBORE DRILLING Drilling companies continue to shave costs with efficient well designs
BY DAN LARSON • FOR ENERGY PIPELINE
For every new oil or natural gas well to be drilled, engineers are faced with a host of decisions that ultimately determine if the well will return the money invested
in it and become a valuable asset on the company’s books. And while few professionals in any business easily own up to bad decisions,
Source: PDC Energy 8 ENERGY PIPELINE DECEMBER 2016
drilling and completions engineers, and the geologists, financial experts and logistics staff that support them, know that any number of their decisions can result in a well that is a winner versus one that produces poorly and fails to return the investment. One of the early decisions to be considered is whether the well will be conventionally drilled and completed, or in some situations, if a monobore well is the better option. The design of a typical well involves drilling a series of progressive smaller diameter holes as the well goes deeper. At each stage, casing of progressively smaller diameter is pushed into the hole to a specified depth and cemented in place. At shallow depths, casing protects groundwater; the deeper it is used to isolate the well from formations with different pressure gradients, that are unstable or could otherwise contaminate the well. Drilling and completing such a conventional well involves use of complex wellheads, drill bits, drilling mud formulas and downhole equipment among other things.
An alternative that has proven successful in oil fields around the world reduces the number of concentric, progressively smaller tubes by eliminating the intermediate casing liner in favor of a single diameter pipe extending from the tip of the production zone back to above the production zone. Referred to as a monobore well, this design reduces the need for some equipment and materials, and as a result, the supply and logistics needed for a conventional well. With a larger diameter production string, the well can produce greater volumes of fluid or gas. In proven fields, a larger production pipe can reduce the number of wells needed to efficiently produce, according to a report on OilPro, an online forum serving the oil and gas industry. Likewise, because monobore wells are less complex than conventional wells, they can be drilled and completed faster and can be less expensive to operate long term. According to a paper published by the Society of Petroleum Engineers earlier this year, companies drilling into the DJ Basin’s Niobrara formation have found monobore wells reduced expenses by reducing drilling time compared to conventional wells. The paper, “Drilling in the Niobrara Unconventional Shale Play with a Single Drilling Assembly,” describes the techniques, drilling assemblies and drilling fluid formulas that allow for faster drill-to-depth and lower costs. According to an article on SPE’s PetroWiki online resource, a monobore well also makes periodic maintenance of the well easier and less expensive since the uniform diameter allows access to the production liner without disturbing the completion or pulling the production tubing. DJ Basin operator PDC Energy in a report to investors says that it has “almost fully transitioned to monobore well design.” The change has resulted in savings of between $50,000-$100,000 daily drilling costs for a standard 4,200-foot lateral well. Overall, the cost of that well is brought down to $2.5 million as a result, PDC reports. Longer lateral wells save even more and PDC expects that all of its standard-reach and mid-reach laterals, about two-thirds of the company’s 2016 well projects, will be monobore. The company says it is also considering monobore technology for some extra-long laterals of 9,000-plus feet or more. Oil and gas drilling expert John Turley defined a monobore well and where and when it is used. “Monobore completion utilizes a single,
large size of completion casing or tubing for production. The larger bore precludes the need for production packers and tubing making it a lower-risk, less-expensive choice when designing a well.” A monobore well “caters to higher production rates so fewer wells are needed to develop a field,” he said. “No doubt, it is a proven technology and is very applicable to contemporary horizontal wells in shale plays such as the Niobrara,” Turley concluded. A recognized expert in petroleum drilling, Turley earned distinction with publication of a book on the cause of the 2010 Deepwater Horizon disaster in the Gulf of Mexico that one reviewer called a “must read” for anyone who wants to understand the blow-out and the resulting oil spill. Published in 2012, Turley’s book, “The Simple Truth: BP’s Macondo Blowout,” is a narrative nonfiction book that he says provides insight into what led up to the massive explosion and fire that destroyed the Deepwater Horizon and resulted in an oil spill called the worst in history. A Colorado resident, Turley’s 26-year career at Marathon Oil was primarily in offshore operations, including drilling design management, technology and production. A Colorado School of Mines grad, Turley is a SPE distinguished lecturer, having presented for the past two years across the US and internationally.
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EXTRACTION IPO Extraction IPO success seen as indicator of better markets BY DAN LARSON • FOR ENERGY PIPELINE
Success in the oil and natural gas business cannot happen without money and lots of it. Usually, that money comes from selling part ownership in the company to private investors or selling to the public on the stock market. For Extraction Oil & Gas, a company founded in 2014 and grown through private equity investments, offering the public an ownership stake in the company gives it access to the additional dollars needed to drive growth and solidify its future. After three weeks on the market, public investors liked what they saw by the end of October in the Denver-based company. In an industry hammered for a year and a half by historic low prices, an oil and gas company IPO is regarded as risky. Indeed, the overall IPO market has seen a lackluster year with several high-profile tech and health care IPOs earning the investor equivalent of a Bronx cheer. So the apparent success of Extraction’s IPO quickly attracted attention in the media and the favor of investors. Noted as the first oil and gas IPO in more than two years, Extraction’s public offering of 33.3 million shares at $19 each commenced Oct. 12 on the NASDAQ. The IPO saw immediate positive movement and by Election Day, shares were trading at $21.05. According to market analysts, timing plays 10 ENERGY PIPELINE DECEMBER 2016
a critical role in the success or failure of an IPO. “This IPO could be seen as a bit premature or not, depending on what its private equity backers are looking for,” said
“There is also a general sentiment that the equity market is overheated so Extraction’s private equity backers may see this as a good time to IPO.” BERNADETTE JOHNSON Ponderosa Energy managing partner
Bernadette Johnson, a managing partner at Ponderosa Energy in Denver. “The oil market will remain volatile in the short term and the share price will reflect
that. But prices will eventually rise, making an investment in the right producer a good bet,” Johnson said. “There is also a general sentiment that the equity market is overheated so Extraction’s private equity backers may see this as a good time to IPO,” she added. Johnson noted that another important factor influencing the timing of Extraction’s IPO was related to Colorado’s election ballot and what was not on it this year. A week before Labor Day, Colorado Secretary of State Wayne Williams announced that a pair of initiatives that would have restricted new oil and gas development did not qualify for this year’s ballot. Supporters of Initiatives 75 and 78 did not include enough valid signatures to qualify for a spot on the ballot, Williams said. With that uncertainty lifted, Extraction could compete for investors with producers from states like Texas where the location and permitting of a new well is less subject to political and community resistance. The third factor that Extraction offers investors is its favorable production balance of liquids to natural gas. Johnson noted her research shows Extraction’s current production is 43 percent oil, 15 percent natural gas liquids and 42 percent gas. With a portfolio that includes significant gas assets, Extraction is positioned to take advantage of a gas market predicted
to rise over the near term. Where crude prices are not expected to rise much further over the next year, prices for natural gas are forecast to average $4 per thousand cubic foot (mcf) in 2017, Johnson said. That is an increase of $1.14 mcf above the expected average this year. “Most of those drilling rigs that are being added are headed for oil production in the Permian,” she observed. “A company with strong gas reserves should benefit as prices rise.”
ON THE MEND By one account, the devastation visited on the oil industry by the price collapse has by now ended, even if quarterly filings continue to show red ink. A recent report in the San Antonio Express-News declared in late October that despite generally dismal third quarter numbers, “there are signs of life in the oil field and expectation that things are on the mend.” After hitting bottom at 404 rigs in May,
the number of drilling rigs operating across the U.S., and especially in Texas, has ticked up slowly in the weeks since. The weekly rig count issued by Baker Hughes on Nov. 4 showed 569 rigs operating in the U.S. The near-term outlook has turned optimistic, as well. Even with prices that could “fall back into the $45 range,” according to an industry analyst, companies are expected to increase capital spending next year, some by as much as 20 percent. In a presentation at this year’s EnerCom Oil & Gas conference in August in Denver, an analyst for Wunderlich Securities forecast increased spending and activity in the oil patch next year. As companies open their checkbooks for things like drilling rigs, completion projects and all the services that support them, hiring will pick up and economic activity increase. Ponderosa, which says it provides investors with “detailed market intelligence in crude oil, natural gas and NGL markets,” predicts prices will rise to an average $52 per barrel in 2017. Johnson said the firm predicted crude prices to average $46 per barrel for 2016, and barring the unexpected, will be very close to
the mark. “The market is still oversupplied,” Johnson said. “We see continued volatility short-term. Even if OPEC pulls 750,000 barrels a day off the market, the U.S. can easily fill that gap.” “That’s the problem with optimism,” she observed. “As producers see an improving market, they start hedging and increase production. As a result, the market volatility will continue.” Johnson noted Ponderosa predicts oil will not rise to $60 until 2018. For a company formed two years ago, Extraction is on a remarkable growth curve. Its recent success in winning state approval for its permit to develop the Triple Creek site west of Greeley appears to justify the company’s plan to add a third drilling rig next year. Where other companies dipped a toe in the IPO waters only to pull back, Extraction weighed the risks against the benefits and jumped in feet first. So far, it appears to be the right move.
DECEMBER 2016 ENERGY PIPELINE 11
EARNINGS REPORTS Anadarko, Noble see rosier picture for U.S. onshore oil business
BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
Weld County’s two largest oil and gas producers continue to hemorrhage
money, but both companies are indicating a turnaround is near. Anadarko Petroleum and Noble Energy released their third-quarter earnings in November, noting substantial losses for the quarter and the first nine months of the year. Both global companies are selling billions in assets, while painting a rosier picture of a forthcoming robust 2017. Both posted growth in sales volumes, but they also walked away from the quarter with net losses. Anadarko, which posted an $830 million loss in the quarter, reached record sales volumes of roughly 248,000 barrels of oil equivalent per day out of its Denver-Julesburg Basin operations in Weld — an almost 13 percent increase from the same time last year. Noble reported a net loss of $144 million for the quarter, but reported 113,000 barrels of oil equivalent per day in its DJ operations. Combined volumes in two hot areas in Weld made up 59,000 barrels of oil equivalent per day, an 11 percent increase, according to a Noble news release. The companies, however, are reporting smaller losses than they were last year at 12 ENERGY PIPELINE DECEMBER 2016
the same time. During a call with analysts Tuesday, Anadarko officials concentrated on how the company will move forward through next year, focusing on three primary plays. “We’ve also positioned the portfolio for the future with our assets in the Delaware, DJ and the Deepwater Gulf of Mexico, serving as the primary sources for our growth,” said Anadarko President and CEO Al Walker in the call. The company has spent the past several months selling $3 billion in assets, with another $1 billion asset sale to go — and one lucrative acquisition in the Gulf of Mexico, which will allow the company to double down on its three D’s. Weld County sits smack dab in the middle of the Denver-Julesburg Basin. Walker said the company, which has been operating one drilling rig in Weld all year, added two rigs this month and plans to add two more before the end of the year. That’s essentially saying they plan to put a total of 400 people to work. Noble officials, on the other hand, have announced a third round of layoffs before the end of the year. In its third quarter earnings release, Noble President and CEO David Stover touted the company’s “continued outstanding production performance and
cost control.” The company notes it sold $1.5 billion in assets this year, which has helped pay down debt. That allowed the company to add rigs in its Texas assets. “Tremendous performance has ensured a bright future for Noble Energy,” Stover said in the release. The company will have its earnings call today, where officials will talk more about their earnings results. While Anadarko plans to end the year with five or even six rigs in Weld, Noble has two rigs. In Weld, wells have a mix of oil, natural gas and natural gas liquids, some heavier on the oil side, others heavier on the gas side. Anadarko officials reported they will concentrate more on their oil-heavy assets in the future, as oil prices rebound somewhat from decade-long lows. Natural gas prices, however, continue to stay low, hovering around $3 per million British thermal units. “It’s not really in our best interest to pursue natural gas,” Walker told analysts. “I don’t mind being wrong, but I think our view is that it would take natural gas to approach $6 before it would probably displace our interest in investing in oil, and I don’t see that happening.”
SEVERANCE TAXES State severance taxes drop 69 percent this year due to oil and gas downturn BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
Weld County and several of its smaller municipalities will see taxes derived from oil and gas production this year slashed more than half, but federal lease royalties on energy production may offset it some. The taxes and royalties are important in that they help communities that are impacted by oil and gas development rebuild infrastructure. The state this year distributed $37.9 million in annual state severance tax and federal mineral lease direct distribution payments to 510 Colorado counties, municipalities, school districts, and federal mineral lease districts. Weld County government, which gets the biggest individual severance tax payment in the state, saw a 65 percent drop in taxes to $1.66 million. All 25 other municipalities in Weld that receive taxes also saw huge hits. But many Weld and local officials have been preparing, knowing a downturn in the industry would create a gap in funding. “We already planned for it,” said Gary Carsten, town administrator for Eaton, where severance taxes dropped 63 percent in the past year to $61,312. “We knew it was going to come, so I was pretty conservative. I’m not a surprised at all. It doesn’t help, but it’s not a surprise.” Smaller towns like Eaton use such money for streets and other necessary infrastructure. Carsten has been working with the state Department of Transportation to get a new street light on the north end of town; these funds would have helped foot the bill, which will come to about $750,000. “We’ll still do it, but it means we’ll have to find other sources of money, but we knew that going in,” Carsten said. A small silver lining is the federal mineral lease royalty for Eaton came in slightly higher this year at $51,338, up 7.6 percent from last year. In fact, while all Weld towns saw a massive drop in severance taxes, most saw increases in their federal royalties. Greeley is an example of a wash. City officials had been expecting $2 million this year between the two funds — $1.5 million from severance and $500,000 from royalties. Severance taxes actually fell to $1.1 million (down from $3.3 million last year), but federal royalties jumped a skosh to $954,044. “We’re breathing a sigh of relief right now,” said Victoria Runkle, Greeley’s assistant city manager and finance director. Weld County Finance Director Don Warden budgets every year for a five-year average, knowing oil and gas revenues go up and down. When the county gets more than the budgeted average, he
stuffs it in a contingency fund. When it goes down, he dips in for a little help. This year, he’ll be dipping into that fund, as severance taxes fell about $334,000 short of expectations. “We’ve had that fund balance, which built up over last few years,” Warden said. “We won’t have to make any cutbacks.” Like Greeley, Weld’s lease royalties grew slightly to $1.39
SEVERANCE TAXES Municipality Ault Dacono Eaton Erie Evans Firestone Fort Lupton Frederick Garden City Gilcrest Greeley Grover Hudson Johnstown Keenesburg Kersey LaSalle Lochbuie Mead Milliken Nunn Pierce Platteville Raymer Severance Weld County Windsor
2016 $17,118 $42,813 $61,312 $85,326 $279,666 $96,814 $109,272 $96,236 $2,925 $18,190 $1.14m $2,484 $20,586 $149,742 $15,117 $29,894 $41,519 $55,091 $41,648 $74,207 $7,415 $12,408 $39,561 $1,206 $39,417 $1.66m $157,601
2015 $56,456 $119,521 $166,203 $243,452 $856,763 $275,862 $324,519 $269,906 $5,849 $56,727 $3.3m $6,086 $62.112 $382,502 $42,571 $77,157 $109,763 $152,054 $110,044 $201,376 $19,344 $29,357 $129,121 $3,518 $99,808 $4.8m $426,063
Source: Colorado Department of Local Affairs DECEMBER 2016 ENERGY PIPELINE 13
FEDERAL MINERAL LEASE REVENUES Municipality Ault Dacono Eaton Erie Evans Firestone Fort Lupton Frederick Garden City
2016 $14,334 $35,854 $51,338 $71,732 $234,159 $81,272 $91,493 $80,599 $2,449
2015 $16,001 $33,877 $47,675 $69,708 $242,838 $78,190 $91,980 $76,502 $1,658
Gilcrest Greeley Grover Hudson Johnstown Keenesburg Kersey LaSalle Lochbuie Mead
$15,230 $954,044 $2,080 $17,239 $125,589 $12,659 $25,028 $34,760 $46,511 $34,880
million, or 2 percent. Next year, however, may be another down year, Warden said. The state Supreme Court ruled in May the state was overcharging oil and gas companies for severance taxes. Original figures on that payback were at $87 million, but Warden said, that amount will come down as officials have since determined that estimate was too high. “The net effect, besides the oil and gas price drop… is that fund will probably be depleted a bit by making refunds to oil and gas companies. I would imagine it will have more of an impact next year.”
Straw Blankets
$16,078 $936,011 $1,725 $17,605 $108,736 $12,067 $21,869 $31,111 $43,098 $31,190
Milliken Nunn Pierce Platteville Raymer Severance Weld County Windsor
$62,326 $6,209 $10,389 $33,124 $1,010 $33,008 $1.395m $133,749
$57,077 $5,483 $8,321 $36,598 $997 $28,289 $1.366m $123,461
Source: Colorado Department of Local Affairs
In fact, Warden expects, the county severance tax distribution next year will be only about $1 million. The state Department of Local Affairs distributes the funds, and noted that statewide, federal lease royalties fell 38 percent. That drop, according to a news release, was partially offset by the General Assembly’s transfer of nearly $4.5 million from the Local Government Permanent reserve. The growth in Weld federal mineral leases is because it has the lion’s share of permits, wells, development and oil and gas employee population.
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The open field just west of 71st Avenue will soon become home to the Triple Creek drilling project that neighbors have been fighting for the last year. Site work began in early November.
TRIPLE CREEK
State approves Triple Creek oil, gas project in west Greeley; neighbors sue state to keep fighting BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
S
everal west
Greeley residents
whose newest neighbor will soon be an industrial plot of 22 oil and gas wells continue to fight against it and proved it in late November when they sued the state Oil and Gas Conservation Commission over the project. Site work began in early November and
continues at the west Greeley project just off of 71st Avenue and 18th Street. Staff at the COGCC in October approved a permit by Extraction Oil and Gas to site 22 oil and gas wells on a 14-acre pocket of a 69acre plot of land surrounded by west Greeley neighborhoods, giving the controversial project the go-ahead after a several-month
delay. For operator Extraction Oil and Gas, it’s been a long two years, and officials are eager to show residents the project will be tolerable and hazard-free. “Our Triple Creek location will be a flagship energy development facility that utilizes some of the best technologies available to our industry. Throughout this two-year permitDECEMBER 2016 ENERGY PIPELINE 15
The open field just west of 71st Avenue will soon become home to the Triple Creek drilling project that neighbors have been fighting for the last year. site work began in early November. Neighbors have fought hard to protect this area they’ve come to love off their back decks.
ting process, we engaged in the regulatory consultation process, working extensively with state and local governments, as well as our neighbors, to implement measures that will help reduce inconveniences that could result from the development process. We are pleased that the Triple Creek site permits have been approved and we look forward to responsibly developing the energy resources we all use each day.” The best of intentions aside, neighbors want a judge in Denver District Court to rule that the state failed to follow its own rules in regard to Triple Creek — rules that were established late last year to find a balance with drilling in urban neighborhoods. Triple Creek was expected to proceed last March when the Greeley City Council approved the project, overturning its planning commission’s earlier denial. But Triple Creek was the first project in the state to meet definitions under the new state rules implemented in January, which trigger more conversations and discussions with local governments about the impacts of large oil and gas facilities on surrounding neighbor16 ENERGY PIPELINE DECEMBER 2016
hoods. The sheer timing of the city approval effectively negated its earlier state approval. Extraction had to resubmit its application to the state and it was again approved. While Triple Creek was the first large-scale project approved under the new state rules, neighbors say it is now clear they’re not working. “As far as I’m concerned there is not a safe city or town in Colorado where they can have an effect on development in urban areas,” said Lowell Lewis, who is a neighbor living near the Triple Creek project. The plan is to put the facility on the field, which also is surrounded on all sides by about nine existing well sites — and residences, all a good 1,000 feet away, meeting new state requirements. In a statement, the COGCC explained its decision to approve the site was one of balancing of property rights and one that received ample public input. “All oil and gas facilities on the Triple Creek site, including wells, separators, tanks and other production facilities, will be greater
than 1,000 feet from the nearest residences and the location permit includes numerous enforceable site-specific conditions designed to eliminate or minimize impacts of development,” the statement read. Neighbors have also fought the site due to concerns of heavy truck traffic and pollution in their backyards. They brought the matter back up to the state in July when they learned of what they called inconsistencies in that the site met the definition of the larger projects governed by the new state rules. Residents say the state in this case is not following its own rules, which in part require companies with intense projects closer to neighborhoods to examine two alternatives sites before settling on the site closest to residents. The COGCC statement stated that because Extraction’s site had already been approved by the city, the requirement to examine two alternatives sites was moot. Though, the COGCC reports it did ask Extraction officials to review two alternative sites the neighbors suggested. Extraction rejected those sites for a variety of reasons, which included being too close to
buildings on one, and not having the mineral rights to drill on another. Both sites would place drilling in either ecologically sensitive areas, or conflict with the city’s residential plans, the company stated in documents filed with the COGCC. Extraction officials said Triple Creek site was the compromise location when neighbors fought a planned drilling pad called the Gilbert pad a few miles to the east, which was much closer to multifamily residences. Another site, called Sheep Draw just northeast of Triple Creek, also was examined, but it too was considered unacceptable for its proximity to sensitive areas. “Originally, Mineral Resources looked to develop the minerals off at Sheep Draw. And Synergy was looking to operate the Gilbert pad,” said Blane Thingelstad, project manager for the site. “We said we can make the pads, which had 350 setbacks, we have location we think we can develop with much getter setbacks and bring in best management practices as well. That’s how the evolution of Triple Creek started. We worked with Synergy and said we had a better idea.” But in initial meetings with residents, com-
An existing oil and gas well is one of nine on the 69-acre site of the Triple Creek project. Extraction Oil and Gas plan to use the best practices in drilling technology, such as electric drilling rigs, LACT units to trap methane emissions, and eventaully pipe out the oil.
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pany officials said they’d be piping out oil from the project rather than store it on site, which prompts fears from residents who worry about the possibility of rogue emissions and potential explosions. Extraction officials would not fully commit to the piping option, and the city and state approved the site without such a requirement — which the neighbors deemed contrary to new state rules that require a company in such projects to employ the best available practices to reduce impacts on surrounding neighborhoods. The neighbors saw that as an absolute requirement, while the COGCC looked at the matter differently. The COGCC statement noted it would not hold Extraction to the requirement of using the “best available technologies” such as piping out oil, because the area didn’t have existing infrastructure to do so. “That, however, doesn’t preclude adding pipeline options if capacity in the area were to increase at some point in the future,” the statement read. “The site will deploy state-of-the-art technology that reduces issues commonly associated with loading product into trucks, issues such as tank vapors, extended diesel truck idling and safety hazards.” The pipeline issue is the basis for the neighbors’ lawsuit. They’re getting free representation from the Environmental Law Clinic at the University of Denver. Thingelstad said piping has never been taken off the table. There remain concerns about the multitude of easements the company would have to get to hook up to the White Cliffs pipeline in Platteville, roughly 30 miles away. But like their promised electric drilling rigs — which reduce noise while drilling — they need to make sure they can deliver on their commitments. “On the electric drilling, we told the city we were working on it, we’re going to try, which is the same thing we said on the pipeline, but we couldn’t commit until we heard from Xcel being able to provide that electricity at Triple Creek,” Thingelstad said. “Once we got that, we committed. Until we have that level of commitment on the pipeline, I can’t commit. “It’s going to happen. It’s just a matter of when. We’re working with several midstream providers right now.”
Lewis said he would like to believe they’re genuine in that claim, but he said he feels he’s in a rock and a hard place. Now, all he can do is hold their feet to the fire. “We all have good vantage points, and different vantage points,” Lewis said. “If they act in violation of the conditions of approval and best management practice, if they’re in violation, we’ll make some calls and turn them in.” Extraction has planned several “best practices,” including electric drilling rigs, vapor recovery units that control 99.9 percent of emissions, and the use of special devices to lock in emissions during transfers of oil from tank to truck, building 12.5-foot-tall tanks instead of 20-foot tanks, and storing no waste on site. One innovation is called a “quiet fleet,” which Liberty Oil Field Services created for drilling in urban areas, which they say will reduce the roar of diesel engines in the hydraulic fracturing phase of the projects to a whisper. “We partnered with Liberty to bring that to the basin,” Thingelstad said. The company cannot drill five months out of the year at the Triple Creek site — from February to July — during the red-tail hawk’s nesting season. Thingelstad said crews will drill the first few wells between now and February, and go back in to finish the job next summer. He said wells won’t be producing for a good year. Lewis said the neighbors are upset because this site will set the precedent throughout the state. There soon could be Triple Creeks everywhere, he said. “They could in fact come here and do what they told us” they would, Lewis said. “There’s that potential, and that really relies on Extraction saying they’ll be good neighbors. I don’t hold a lot of hope for it.” Meanwhile, work will continue at the site. The neighbors have not sought an injunction, as the legal risks associated with being liable for any damages are too great, Lewis said.
AB0UT THE TRIPLE CREEK PROJECT The project includes 22 oil and gas wells on a 14-acre portion of a 69-acre plot of land in west Greeley that is surrounded on all sides by housing and nine existing oil and gas wells. The project was initially approved by the COGCC, but rule changes earlier this year, forced Extraction Oil and Gas to resubmit its application to address surrounding concerns, given that it would now be considered a large urban mitigation area. The COGCC approved the second permit in October. Meanwhile, the city of Greeley planning commission in January denied the project, with members stating the project was too big for the areas. Extraction appealed to the Greeley Council, which approved the project in March. Here’s how Extraction will have to develop: • With the use of an electric drilling rig that is nearly silent; • Vapor recovery units that minimize and eliminate 99.9 percent of emissions relating to production; • Sound walls to reduce temporary noise; 18 ENERGY PIPELINE DECEMBER 2016
• Technology called LACT, which eliminates the need to open hatches on oil tanks and thus eliminates emissions associated with the transfer of oil from tanks to trucks; • Landscaping and berms. • Completions crews will arrive on this site arrive in buses rather than in individual vehicles to reduce traffic. • In accordance with the city’s wishes, Extraction also will build 14foot berms in several locations surrounding this site. • The company will only be able to drill and operate at the facility seven months out of the year; the remaining five will be in the nesting season for the red-tailed hawk. Extraction officials estimated that delay could still allow them to drill their wells within two years. • Storage tanks will be 12.5-foot-tall instead of 20 feet; they can store no waste on site, have frequent trips to monitor the site and have multiple legal access points.
MAKING HOLE Roaring Ranger wins WWI BY BRUCE WELLS • AMERICAN OIL & GAS HISTORICAL SOCIETY
Ninety-nine years ago, a Texas oilfield was discovered halfway between Abilene and Dallas, Texas. The Oct. 17, 1917, wildcat well in Eastland County made headlines worldwide. “Roaring Ranger” erupted in a geyser of oil — and revealed an oilfield that would help win World War I. Ranger’s town leaders had been eager to find oil, especially after newspaper accounts of a 1911 oilfield discovery at Electra to the north. A decade earlier, the famous “Lucas Gusher” in southeastern Texas had launched the modern U.S. petroleum industry. As the county’s farmers struggled with severe drought, Ranger officials hoped to strike “black gold” with the help of William K. Gordon, vice president of the Texas and Pacific Coal Company in nearby Thurber. After one failed attempt with a shallow well, Gordon agreed to drill a second well up to 3,500 feet deep. Using a cable-tool rig, Gordon and contractor Warren Wagner spudded their well on July 2, 1917, on the McCleskey farm about 2 miles south of Ranger. After more than three months of drilling, the J.H. McCleskey No. 1 well roared in from a depth of 3,432 feet. When completed, “Roaring Ranger” initially produced 1,600 barrels of oil a day of high gravity oil. Later gushers yielded up to 10,000 barrels of oil daily. Within 20 months, Texas and Pacific Coal Company stock jumped from $30 a share to $1,250 a share. The company reorganized as the Texas Pacific Coal and Oil Company. Eastland County oil discoveries brought economic booms to Ranger, Cisco, Desdemona (now a ghost town) and Eastland. The Abilene Reporter-News reported Ranger’s population swelled from less than 1,000 to more than 30,000 — mostly men. The drilling boom “started the rush to Ranger that brought about the development of one of the greatest oilfields in the country,” proclaims historian Damon Sasser. “By 1919, the Texas Pacific Coal and Oil Company had 22 oil wells being drilled and there were also eight refineries open or under construction,” Sasser adds. More freight was unloaded in Ranger by the railroad than at any other place upon its line, including stations in Fort Worth, Dallas and New Orleans.
The flood of people also brought Texas Rangers to enforce laws. When jails in Ranger overflowed, the lawmen handcuffed prisoners to telephone poles. “The Texas Rangers were no strangers to the town – years earlier, the city actually sprang up around an old Texas Ranger camp, hence the name Ranger,” Sasser notes. Independent operators opened other nearby oilfields, including the Parsons, Sinclair-Earnest and Lake Sand fields. Production from the Breckenridge
The J.H. McCleskey No. 1 discovery well in 1917 created an oil boom at Ranger and across Eastland County, Texas.
oilfield in neighboring Stephens County was 10 million barrels of oil by 1919. It peaked at more than 31 million barrels of oil in 1921. “Roaring Ranger” and the region’s production proved essential to the Allied victory in World War I. When the armistice was signed in 1918, a member of the British War Cabinet declared, “The Allied cause floated to victory upon a wave of oil.” Among the veterans visiting booming Eastland County after the war was a young Conrad Hilton, who visited Cisco intending to buy a bank. When he witnessed the long line of roughnecks waiting for a room at the Mobley Hotel, he decided to buy the hotel - his first. Although Ranger’s boom ended in the early 1920s when excess oil production caused wells to fail, the discoveries confirmed existence of a large petroleumproducing region, the Mid-Continent, which included hundreds of oilfields reaching from Kansas, Oklahoma and Texas.
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.
DECEMBER 2016 ENERGY PIPELINE 19
Established by the Ranger chamber of commerce in 1982, the “Roaring Ranger” Museum — inside the original Texas and Pacific Railway’s depot — today exhibits historic drilling equipment, oilfield photos and a vintage cable-tool rig. Ranger residents annually celebrate their 1917 gusher with an oil festival and parade down Main Street. When the parade crosses the historic train depot’s tracks, it passes a small, gray granite marker dedicated to the “First Oil Well Drilled in Eastland County.”
The 2016 Roaring Ranger Day Parade took place on the 99th birthday of the oil gusher. Plans are underway for the 2017 centennial celebration. Photo courtesy Metroplex.com.
“Making Hole” is a term for drilling coined long before oil or natural gas were anything more than flammable curiosities. 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.
A circa 1920 postcard shows the Texas and Pacific Railway Depot, today home of the Roaring Ranger Museum.
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TECH TALK
If an oil formation is fracked, how will it drain? Ask a smart rock. BY GARY BEERS • FOR ENERGY PIPELINE
Precise knowledge about predicted oil and gas movement through rock pores will lead to more efficient placement of fewer wells and effective design of fracking. A concurrent benefit would include reductions in environmental and local societal impacts. Advances in recent decades focused on moving traditional core analysis into the digital age with the application of computer-aided design (CAD) to create digital rocks. While this improvement is significant, there persists a remaining layer of scientific guessing between actual pore-scale flow behavior and the engineer’s mathematical modeling. The extent of guessing increases as predictions were expanded to describe flow through adjacent, different reservoir rocks. The ideal solution would be to have real-time readings of changes in temperature, pressure and chemicals as oil and gases move through the small pores of reservoir rocks. While it is impractical to install a network of sensors throughout reservoir formations, it should possible to have aboveground examples of formations with embedded sensors and then introduce flows. One option would be to embed sensors in core samples; the other would be to replicate the core with built-in sensors (i.e., create a smart rock).
3D PRINTED, SENSOR-PACKED SMART ROCKS A Scottish research team (Heriot-Watt University) is 3D printing replicas of reservoir rocks ( 1 inch diameter and true-to-scale) with small pores and embedding micro-sensors (with tiny optic fibers) as the layers are laid down. Currently, the selected sensors measure pressure, temperature, flow, pH, and change in fluid/gas composition and are placed where they will not interfere with porous areas under investigation. Smart rocks are being created to directly communicate real-time conditions at the micro-pore level. Professor Maroto-Valer, team
leader, stated The problem is that rocks cannot talk to us. Answer is simple: make own rocks that can talk. By 3-D printing our own core samples we can decide exactly what sort of rock we wish to study, and implanted micro-sensors will be able to tell us directly, in real –time, what is going on as gases a d liquids pass through them. This fundamental knowledge at such a tiny scale will feed hugely into our understanding of such processes at the large scale and enable use to maximize the success of industries from oil extraction to water safety and the storage of captured CO2. (Heriot-Watt University, News, May 25, 2016, Edinburgh, Scotland) Information from the smart rocks will be input to computer models to more accurately design completions of horizontal shale wells or enhanced recovery oil recovery wells. Their research continues on which materials (i.e., plastic polymers, glass, metals) with other materials (i.e., calcite) embedded will come the closest to replicating real-world formations. Incidently, the prestigious European Research Council recently awarded $3.3 million, five-year grant to support continuation of this promising research.
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.
3-D PRINTING IN THE GEOSCIENCES The above creative development of a smart rock is based on adaptations of 3-D printing to the geosciences (Making things geological: 3-D printing in the geosciences, F. Hasiuk, Geological Society of America Today, 24:8:28-29, August 2014). Physical replicas of a rock’s micro-features can be scaled up to sizes more easily explored and understood – as opposed to understanding 3-D data on a computer screen even in 3-D visualization. For example, the structure of sandstone can be precisely replicated at various up-scalings (Figure 1) to provide a fabricated porous rock. DECEMBER 2016 ENERGY PIPELINE 21
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Making a copy of a natural rock is a simple process (Just like the real thing. T. Smith, GEOExPro 12:5, 2015). The first step is collecting a series of two-dimensional cross-sections of the rock using computed tomography (CT) scans and then assembling these into a 3-D digital rock mode. In the second step, the digital rock is segmented into grains and pores. The last step is to 3-D print the surface representing the boundary between the grains and pores. A smart rock produced by the research team at Heriot-Watt University would look like one of the printed versions (Figure 1) with many optic fibers sticking out from the embedded sensors..
FIGURE 1
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3-D Printed samples from core plug of Idaho grey sandstone. (Source: S. Ishutov and F. Hasiuk, GeoFabLab, Iowa State University)
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