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FEBRUARY 2017 ENERGY PIPELINE 3
Features
15
12
TRUCK TRAFFIC
FRONT YARD RIG
COGCC study suggests ways to reduce oilfield truck traffic, but local truck company owner hopes to keep trucking jobs viable for region.
Synergy Resources deploys workover rig to cap 54-year-old well. By Sharon Dunn
By Matthew Van Deventer
ON THE COVER Design by Joshua Aho
METHANE 8 COLORADO REGULATIONS
Companies moving on methane leaks but dinged on tank emissions. By Dan Larson
11
OIL & GAS OUTLOOK
Chief of American Petroleum Institute hopes Trump administration will favor oil and gas. By Katarina Velazquez
In Every Issue 17
News Briefs
19
Making Hole
21
Virtual reality training for oilfield workers.
The origins of oil town “aero views” By Bruce Wells
By Gary Beers
4 ENERGY PIPELINE FEBRUARY 2017
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FEBRUARY 2017 ENERGY PIPELINE 7
COLORADO METHANE REGULATIONS Companies moving on methane leaks but dinged on tank emissions BY DAN LARSON • FOR ENERGY PIPELINE Jennifer Shea, manager of Health Safety and Environment for Anadarko Petroleum, looks for methane emissions at a production site. A year into Colorado’s new rules to regulate methane emissions have some companies struggling to comply with rules that regulators and company men interpret differently. Photos for Energy Pipeline/Anadarko Petroleum.
During the first year in effect, Colorado rules aimed at managing emissions at oil and natural gas facilities saw nearly a half million inspections at more than 18,700 production and processing facilities across the state. Referred to as Reg 7, the rules were approved following a rigorous, five-day rulemaking session in February 2014. The extensive revisions to the state’s methane emissions control rules for oil & gas facilities were approved in an 8-1 vote by state’s Air Quality Control Commission. The rules are intended to reduce hydrocarbon gas emissions that impact formation of ground-level ozone and to control methane emissions that contribute to climate change, according to official statements issued at the time. State regulators and the industry agree rules aimed at finding and repairing leaks are effective in reducing emissions of methane and other gaseous hydrocarbons referred to as volatile organic compounds at well sites and processing facilities. Controversy is brewing however, over state enforcement of rules covering gas emissions from oil storage tanks. 8 ENERGY PIPELINE FEBRUARY 2017
LEAK VS. VENT Over the past year, the Air Pollution Control Division (APCD) began enforcement actions against 10 companies operating in the DJ Basin. Although the state refers to them as Compliance Advisories, such actions can cost the operators tens of thousands of dollars or more to settle and are based on an interpretation of air regulations by the state that operators contend are impossible to comply with. “The problem lies with how you define what is a leak and what is a vent,” said an industry employee whose company is facing a compliance advisory following site visits by state inspectors. “The state is saying that any emission you can see or hear is a defacto violation while we believe the rule says emissions are to be managed to the maximum extent practicable,” said the industry employee who asked not to be identified. Most violations cited in the advisories are for gas emissions from tank thief hatches and pressure relief valves. The latter are considered safety devices
that necessarily release gas to reduce a dangerous pressure build-up within storage tanks and other vessels at a well site. Companies that receive compliance advisories are required to enter discussions with the state in which they can dispute alleged violations. But such discussions are actually “highly sensitive negotiations” that could cost the company hundreds of thousands of dollars, the employee said. The APCD can enforce violations with permit revocations and fines up to $15,000 per day, according a review of the compliance advisories issued over a sixmonth period in 2015. The violations stem from state inspector site visits beginning in late 2013 through mid-2015.
REASONABLY REQUIRED Under the revised regulations, companies must develop formal plans for the control and ongoing monitoring of emissions from storage tanks. A company’s plan for Storage Tank Emission Management (STEM) must
include engineering designs, air pollution control equipment, and operational and monitoring practices for “control of VOC emissions and operate without venting emissions from the thief hatch or pressure relief device during normal operation unless venting is reasonably required for maintenance, gauging, or safety of personnel and equipment.” Companies are not required to file their STEM plans with the state but must have them available for review at the division’s request. “These control devices are actually safety devices designed to prevent catastrophic failure,” said the company environmental specialist who requested anonymity due to the sensitive nature of ongoing discussions with the division. “Under certain conditions, (pressure relief valves) do emit because that’s what they are designed to do. It is very difficult to prevent them from venting at all. The difference between what is a leak and what is a vent was a major point of contention during the rulemaking; now it has become a major problem with the way the rule is interpreted,” the specialist said. Despite the innocuous name, the APCD’s compliance advisories are in fact, enforcement actions, the specialist noted. These actions are based on “standards that are not quantitative and very difficult for us to comply with.” Discussions to settle the compliance advisories with APCD continue, said Mark McMillan, stationary sources program manager with the Air Pollution Control Division. “We can’t share too much because they are active enforcement cases, but we are making good progress.” McMillian also denied the state’s actions were a retroactive application of the rules. “Site inspections have been ongoing since well before the 2014 rulemaking,” McMillan said. “These emission regulations have been in place for a decade.” Any new regulatory regime of the scope of Reg 7 can be expected to have a period of uncertainty, said Andrew Casper, director of legal and regulatory affairs at Colorado Oil & Gas Association. “This was a big, comprehensive rulemaking,” Casper observed. “Overall, we have a good working relationship with the division. And, we continue to work collaboratively with them so we can avoid surprises and achieve a level of regulatory
certainty.” Casper cites joint efforts by APCD and industry to develop guidance documents and host seminars aimed at helping companies bring their operations into compliance.
FINDING AND FIXING
In contrast to the controversial
“Under certain conditions, (pressure relief valves) do emit because that’s what they are designed to do. It is very difficult to prevent them from venting at all.” COMPANY ENVIRONMENTAL SPECIALIST
enforcement of storage tank emissions, rules aimed at finding and fixing well site methane leaks are considered to
be reasonable and a success, even if compliance can be costly. In November, APCD released its report on the extent of company inspections and repairs of the thousands of oil & gas sites across Colorado. The report concluded the revisions to its Reg 7 Leak Detection and Repair (LDAR) rules “resulted in an increase in the identification and repair of leaks at production facilities and natural gas compressor stations.” Those on the front lines of compliance agree that finding and fixing means lower emissions from oil and gas production and processing sites across the state. “We are on right track,” said APCD’s McMillan. “The goal of the Reg 7 rulemaking was to reduce emissions of methane and VOCs and their role in ozone formation. While we don’t have specific numbers yet in terms of tons per year reductions, we do know that good things happen when facilities are buttoned up,” he said. The report shows the oil & gas industry has been active in addressing the huge number of components they operate. “That’s real action and positive sign,” McMillan noted. (See chart) During the five-day hearings that ushered in Colorado’s first-in-the-nation rules aimed at methane emissions at oil & gas sites, the industry expressed concerns that monthly inspections of high-production sites was excessive and unneeded. Once found and fixed, most leaks do not return, they said. A proposal to allow operators to reduce the number of
LEAK DETECTION & REPAIR REPORT 2015 “Companies reporting” “Facilities inspected” 135 18,759 “Component type” “Number of leaks” “Leaks repaired” Valves 10,720 Connectors 17,523 Flanges 1,545 Pump seals 1,511 “Pressure relief devices” 4,741 Total 36,044 35,494
“Total inspections” 493,814 “Delayed epair”
501*
*Some leaks identified were not repaired before the end of the year. Source: CDPHE “LDAR Annual Report 2015” FEBRUARY 2017 ENERGY PIPELINE 9
inspections over time was rejected by the commission during the 2014 rulemaking. Overall, the LDAR program is working, COGA’s Casper said. “By now, companies are seeing fewer leaks at their facilities.”
For its part, the EPA took the next step in regulating methane emissions from all onshore oil & gas production and processing facilities. In August 2015, the agency issued rules requiring operators to reduce methane and VOC emissions from new and recompleted wells. Its latest effort aims at clamping down on methane emissions from existing production facilities. Colorado’s LDAR program is In November, EPA sent formal considered the model for rule changes requests for information to all oil & gas from the federal government that cover oil companies operating in the US “to assist in the development of comprehensive regulations to reduce methane emissions,” said Gina McCarthy, Administrator of the EPA. “New data show that methane emissions are substantially higher than we previously understood. So, it’s time to take a closer look at regulating existing sources of methane emissions,” McCarthy said. On November 10, the agency began sending Information Collection Requests to nearly 20,000 companies operating hundreds of thousands of onshore Anadarko Petroleum employees use a FLIR camera to monitor for methane emissions at a production site. Some companies oil & gas production, operating in the Denver Julesburg Basin are struggling with differing interpretations of the rules. gathering, transmission, pipeline and storage facilities across the country. and gas production and processing. The Of those sources, one type of pneumatic The two-part survey obligates operators federal rule changes, issued in September controller has by now been nearly phased to provide information on the number and 2015, were made to the EPA’s Emission out. types of equipment at all onshore oil and Standards for New and Modified Oil and Pneumatic controllers are widely used gas production facilities as well as “detailed Gas Sources, referred to as OOOOa, and to automatically monitor production information on emissions sources and its Control Techniques Guidelines (CTG) levels or to actuate valves. Changes made emissions control devices or practices,” for existing sources. in a 2009 rulemaking prohibit a type of according to an EPA fact sheet. Although the federal rules include controller referred to as “high bleed” The agency’s survey will inform federal LDAR requirements, they have not been pneumatic from use at production sites in regulators of the emission controls used in finalized and include enough differences the ozone non-attainment region along the field, how those controls are configured, with Colorado’s LDAR rules to prevent the Front Range. Switching to intermittent whether electricity or generating capacity is them from being included in a state ozone controllers resulted in a 99.6 percent available, and how often sites are visited. reduction plan that was proposed last reduction of VOC emissions attributed Survey information is intended to summer. to pneumatics, according to a July 2016 help EPA “develop and apply standards to For example, Colorado requires report from the Air Quality Control effectively reduce emissions from existing monthly inspections of larger sites using Commission. sources.” an optical gas imaging camera or less EPA estimates the industry will spend $42 stringent “audio, visual and olfactory” million responding to the survey. inspections monthly for smaller sites.
MODEL RULE
EPA rules issued in the summer require semiannual inspections for all but the smallest producing wells. The state’s Supplemental Implementation Plan does take credit for the estimated 60 percent reduction of sources of gas emissions the EPA estimates that its LDAR program will achieve. Colorado regulations clamping down on other sources of natural gas emissions at production sites have also helped reduce methane emissions over the past five years.
FEDERAL SURVEY
10 ENERGY PIPELINE FEBRUARY 2017
OIL & GAS OUTLOOK Chief of American Petroleum Institute hopes Trump administration will favor oil and gas BY KATARINA VELAZQUEZ • FOR ENERGY PIPELINE
WASHINGTON — The chief of the American Petroleum Institute plans to tackle about 145 executive regulations governing oil and gas development under the new presidential administration. Jack Gerard, president and CEO of the American Petroleum Institute, outlined the lobby’s biggest energy concerns for 2017 in his recent annual State of American Energy report in Washington, D.C. Gerard said he was hopeful that President-elect Donald Trump’s administration and the new Republicancontrolled Congress will support the oil and gas industry over the next four years. “We must re-examine the regulatory onslaught of the last few years that has proposed or imposed some 145 regulations and other executive actions on our industry, and instead work to implement smart energy regulations that are focused on the consumer, help to grow our economy, protect workers and continue to improve the environment,” he told a group of policymakers and other industry leaders at the annual luncheon. “It is our view that regulations that do not align with those basic and commonsense goals should be reexamined, revised or removed to make way for smarter and forward-looking energy policies.” According to TIME Magazine, Trump has said he will support the energy industry, making the U.S. more “energy independent” and to allow onshore and offshore energy reserves on federal lands. “Allowing more offshore oil and natural gas production could create more than
800,000 new jobs, grow our economy by up to $70 billion per year and raise more than $200 billion in cumulative revenue for the government treasury,” Gerard said. “Restricted offshore areas could hold 50 billion barrels, or more, of oil and more than 195 trillion cubic feet of natural gas.” Gerard said there is a greater opportunity in the oil and natural gas industry this year to create middle-class jobs, tackle income inequality, ensure affordable energy for consumers and enhance national security. He said “affordable and abundant” natural gas is key in offering access to a reliable and cleaner burning fuel, thus improving the standard of living for people across the world. This year’s campaign for the 2017 American Petroleum Institute report emphasizes that “Energy is Everything,” and Gerard was sure to reinforce that statement every chance he got. “Energy is fundamental to our society,” Gerard said. “From the electricity that lights our homes and powers our appliances, to the fuel that keeps our vehicles running, to the chemicals that make modern medicine possible. The report demonstrates the countless ways energy is essential to modern society, with oil and natural gas as the foundation.” According to the report, an average American household saved about $1,337 in 2015 because of low home energy costs, and AAA reported American drivers saved about $550 in transportation fuel costs. Gerard also noted that U.S. industrial electricity costs are 30 percent
to 50 percent lower than the nation’s foreign competitors, and that American manufacturing costs could be 2 percent to 3 percent lower than in China by 2018. Gerard addressed climate change, and spoke about how the oil and gas industry is affecting the environment. “We have helped to disprove, conclusively, the long-held assumption that leading the world in the production and refining of oil and natural gas is incompatible with an improving environment,” he said. “America no longer has to choose between more energy and a cleaner environment. The United States has dramatically increased energy production and use even as emissions continue to decline.” According to the U.S. Energy Information Administration, in the first six months of 2016, carbon emissions from electricity generation were at their lowest point in 25 years, even as electricity demand continued to rise due to greater use of natural gas. Gerard also noted U.S. air pollutants have fallen by 70 percent since 1970, even as vehicle miles traveled have increased by more than 170 percent, and that ozone concentrations in the air have dropped by 17 percent since 2000. “Our success was achieved through private sector innovation and investment,” Gerard said. “The oil and natural gas industry’s innovation in the decades-old technique of hydraulic fracturing, paired with horizontal drilling, is the driving force for the American energy revolution.”
FEBRUARY 2017 ENERGY PIPELINE 11
A row of houses sit next to a workover rig along 54th Avenue in Greeley. Synergy Resources worked in January to cap an abandoned oil and gas well beneath a home in the Highland Park West subdivision so future drilling operations in the area do not compromise the well’s integrity. Photo by Joshua Polson/jpolson@greeleytribune.com
FRONT YARD RIG Synergy Resources works to cap 54-year-old abandoned well in west Greeley resident’s front yard BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
Bobbie Burke looked out her front window in west Greeley one Wednesday
Josephine Jones Park
26th St 54th Ave
27th St
55th Ave
12 ENERGY PIPELINE FEBRUARY 2017
Site of front yard drilling rig
56th Ave
morning in January and saw an almost unbelievable sight. Poking through the trees, there was a drilling rig in her neighborhood. Upon closer inspection, the rig towered 60 to 70 feet in the air in a resident’s front yard in the Highland Park West subdivision near 54th Avenue and 26th Street. “It’s a little strange looking at this out your
Greeley City Forestry
front window,” said Burke, who lives on 56th Avenue. Aren’t there supposed to be rules against drilling in a neighborhood, she wondered? And in someone’s front yard? She and others quickly grew angry. But this rig is doing anything but drilling for oil. It’s there for one of the most unique circumstances oilman Craig Rasmuson has ever encountered. Rasmuson, executive vice president of
business development at Synergy Resources, is leading his crews to cap a well drilled in 1963 that never produced. “This is an extremely unique situation to find a well that, lo and behold, was built over,” Rasmuson said. “It was just an open field back in 1963, and it had a house built on it in 1988, and it has had numerous owners. There’s no record of it in the title. I don’t know how that was missed.” Synergy has plans to drill 20 wells in this area in the next year, a good $100 million investment. Its plans are to drill the wells as what the industry calls “long laterals,” meaning the company will stage drilling equipment up to 2.5 miles away from the site to meet required setbacks of at least 500 feet in a residential neighborhood. This abandoned well would put a wrinkle in that plan if they didn’t do something. “There is no risk to it sitting there as it was,” Rasmuson explained. “The concern is when we do future development in proximity of that old well, that could compromise it.” The well was drilled vertically 54 years ago. Prior to any new horizontal drilling energy companies must check the integrity of all vertical wells within the vicinity. In this case, Synergy found one, drilled in the J-Sand, which is about 7,600 feet below the surface. Synergy needs to cap it above the formations in which it plans to drill, the three benches of the Niobrara and the Codell, which are about 800 feet above its actual cap. “The concern is the cement and pipe integrity of a well over 50 years old,” Rasmuson said. “So when you add the pressure of a hydrofrac it could communicate to that well. Because the plug is below the formation we’re in, it could compromise that existing hole. It could come back to the surface.” Synergy contractors had to use high powered metal detectors to find the well. “We originally thought it was homeowner to the north. In 1963, there was no GPS mapping. We had an engineering company with high powered metal detectors and they wanded both of the yards,” Rasmuson said. “It’s commonplace to have to re-enter an old well, but the majority of the time it is in ag areas. This is one that just happened to have a subdivision built over it.” Synergy workers went in and found the old oil well casing 4-5 feet below the surface. Then they had some explaining to do, sending out notices to 44 surrounding
residents about their need to cap the well. They needed to go in and drill, which would displace not only the homeowner — who does
Synergy put the family up in a local hotel. “It’s a very small chance this would ever happen, and the family has been great,”
A workover rig sits in front of a home off 54th Avenue in west Greeley. The rig is worked in January to recap a well drilled in 1963 that never produced. While capping and recapping wells is not uncommon, those operations generally happen in agricultural areas rather than residential ones. This unique situation forced Synergy Resources to move its operation to the Highland Park West subdivision.
not want to be identified for this story — but his neighbor across the street, former Greeley
THEY NEEDED TO GO IN AND DRILL, WHICH WOULD DISPLACE NOT ONLY THE HOMEOWNER, BUT HIS NEIGHBOR ACROSS THE STREET, FORMER GREELEY CITY COUNCILMAN HARRY FELDERMAN, FOR ABOUT 10 DAYS. City Councilman Harry Felderman, for about 10 days.
Rasmuson said. “They giggled it off and said, ‘We should have played the Powerball.’” Synergy is footing the bill for a host of entertainment for the family in Denver, as well. Rasmuson said the couple’s children are having a ball “living” in the hotel’s pool. Synergy also is paying much of the expenses for the Feldermans, who opted to go out of town to visit friends during the operation. Neighbors, however, are living with the monstrous operation, which has blocked traffic in the middle of 54th Avenue. Detour signs direct them around the next block to get to their homes to the north of the site. “I’m OK with it,” said Ivan Pagel, who lives about two doors to the south of the site. “They came in and were upfront about it and talked to everyone. We were all surprised. They said they were going to be really noisy, but we haven’t heard much. We didn’t feel the ground shake. “They’re just plugging a hole that no one knew was there.” It helped a bit that a Synergy employee FEBRUARY 2017 ENERGY PIPELINE 13
A workover rig rises up from the fenced in area on 54th Avenue in west Greeley.
lived in the neighborhood, a familiar face neighbors could trust. Two houses to the north of the site, Terri Faulkner curled her nose a bit a the diesel fumes emanating from the site. She came back to town the day after the work-over rig — that’s the technical term — went up. “It’s a little overwhelming,” Faulkner said. “It’s pretty intense. My
14 ENERGY PIPELINE FEBRUARY 2017
neighbors thought people were shooting guns” when the drilling started. Most neighbors are in agreement: If the well could become a problem, they’d rather have it fixed. “I guess there’s not a better season for this, and it’s not been that much of an inconvenience” to have to drive around the block to get home, Faulkner said. There is, she said, a constant hum. Down the block, Jamie Dennis said she thought the site — now a mini industrial complex — was street work at first. She’s been amused by the amount of interest and picture taking that has been going on. “My 3-year-old thinks it’s cool,” she added. Synergy originally estimated the entire operation would take until Jan. 20, but Rasmuson said the company is running into some complications that could stretch it into the following week. “The date is a moving target,” Rasmuson said Friday. “Back in the ‘60s they just threw everything in. We’re running into some obstacles as we’re trying to get it cleaned out. It will be a little longer than we had hoped.” One silver lining, Rasmuson said, is that minerals from this area couldn’t be produced before the advent of hydraulic fracturing and horizontal drilling. Being able to drill from 2.5 miles away is a way around that. Residents in that area could see from 12.5 percent to 20 percent royalties on production.
Technician Jeremy Taylor installs a new air conditioner drive in the engine of a truck at Colorado Crude Carriers, 20739 Colo. 392, in Greeley.
KEEP ON TRUCKING Local truck company owner works to secure trucking jobs amid statewide call to curtail traffic fueled by increased drilling in DJ Basin BY MATTHEW VAN DEVENTER • FOR ENERGY PIPELINE
T
wo years ago, Rod Steely’s trucking
operation in Greeley was running at full speed. Steely, owner of Colorado Crude Carriers, was running about 42 trucks and about 44 trailers. Last February, he had to lay off 13 drivers and sell several trucks. Now, he can only run 21 trucks — and 10 are parked. “I’m an optimist,” Steeley said. “I keep telling everyone I’m feeling good that things are going to come back this year.” While the oil and gas downturn is chiefly responsible for that blow to his bottom line — and the market is starting to pick back up
— a continued movement to get more trucks off the road by piping crude oil out of Weld County could harm the trucking business even further. A new report released by the Colorado Oil and Gas Conservation Commission in November, could keep more of Steely’s trucks idled. The report, commissioned by the Governor’s Task Force on Oil and Gas in 2015, identifies some of the impacts truck traffic has on Colorado communities and outlines a host of recommendations to reduce the volumes. “I think one of the biggest benefits of this report is it’s a compilation of a lot of different ideas and examples that different govern-
ments and different operators have tried, and I think it will help local governments who are trying to figure out how to respond to citizen concerns about truck traffic,” says Kathleen Staks, spokesperson for the Department of Natural Resources who was a facilitator for the report’s three-day working group. The report is not a regulatory action by any means, but more a list of recommendations, reminds Staks. Between fall 2014 and February 2015, the task force held statewide meetings to hear concerns from people who were for and against oil and gas development as well as those in the FEBRUARY 2017 ENERGY PIPELINE 15
Rod Steely was a part of a working group through the Colorado Oil and Gas Conservation Commission to study how to reduce truck traffic due to oilfield activity. Steely got involved to make sure the voice of employers was heard.
middle. The task force came up with a slew of items to discuss and then voted for nine to be investigated further, such as truck traffic. Major impacts identified by the working group include speeding trucks, trucks near schools or bus routes, noise pollution, environmental issues such as emissions and dust, not using haul routes, truck traffic during peak times and density of traffic, truck safety and wildlife restrictions. For each impact, the report provides actions government and operators can take to mitigate impacts. Installing temporary and permanent pipelines as well as centralized facilities seem to be an end-all solution for most drilling and midstream operations. For example, permanent and temporary pipelines can be installed to feed a site with sand and water to be used for completion operations. Getting the crude to market can also be done with pipelines. Weld’s two largest operators, Anadarko Petroleum and Noble Energy, both have expansive underground operations. However, some truck traffic will always be necessary, such as when pipelines are not feasible. Adam Bedard, CEO of ARB Midstream, which has built a rail hub south of Evans, points out that the initial drilling and extraction operations happen over a month or even a few weeks and then they are gone. However, a site can provide resources for years, which means truck traffic for years. A house sitting on a truck route could see 40 trucks a day hauling crude. 16 ENERGY PIPELINE FEBRUARY 2017
Bedard recognizes the need for truck hauling as “critical to energy infrastructure development,” especially at the beginning of a site when it may not warrant a pipeline. ARB Midstream’s focus is on getting crude to market via pipelines where it’s most economical, and on rail for other items involved in the oil and gas drilling. “That was part of the premise behind the site, is when crude oil is moving by rail, let’s reduce the distance the trucks need to haul it,” he said. Bedard likens the pipeline to a tree, where small pipes from various wells feed into bigger pipelines and eventually a main vein, rail or centralized facility. Bedard says his pipeline is big enough to take 800 trucks off the road every day. It spans 42 miles to get to the Grand Mesa pipeline in Windsor. Economics, cost, reliability, safety and social impact are all factors that play into switching to a pipeline. Bedard’s pipeline can run 170,000 barrels a day at around $1.35 a barrel. Truck hauling could cost double or triple that, he said. Also, they are not nearly effective in adverse weather conditions, can run into safety issues, and cause wear and tear on the roads as well as increased emissions. “I think almost any producer wants their oil on a pipeline rather than on a truck. A lot plays into it — economics, one of those, certainly safety and social awareness are big things. There’s value for them to get trucks off the road,” says Bedard.
On the other hand, long-time truck haulers such as Steely of Colorado Crude Carriers, 20739 Colo. 392, Greeley, wants things to slow down because people’s jobs are at stake. “I understand to a degree why they had to cut down, because it did get rather hectic at times with some of the programs they had going,” says Steely, who was involved in the truck traffic working group. He’s felt the ebb and flow of trucking over the past few years as he saw out-of-state carriers move to his territory in north east Greeley and set up shop. Many have left, Steely said, and even he has had to cut down on his workforce as more crude is being piped instead of trucked. “I understood where they were coming from and what they were hoping to accomplish and do, but I also reminded them that we don’t want to get too far out there because there’s a lot of jobs at stake,” said Steely. He says a sluggish market and the elections have kept things quiet, so when he hears talk about reducing the impacts of truck traffic, Steely is a little concerned. Today, he’s running at 45 percent of what he was two years ago. He’s keeping positive though, and maintaining relationships with producers while focusing on producers who can’t rely on rail or pipelines to get their crude to market. Overall, however, it looks as if the market may be heading toward using fewer trucks. “Over the past several years we have seen the following operational changes be adopted by the industry, which have resulted in traffic reduction: Fresh water for completions is now almost universally being transported via temporary surface or semi-permanent pipelines from the source to the point of use,” says Troy Swain, an oil and gas liaison for Weld County, in an email. Swain has also seen crude sent to production facilities more and more by pipelines. Staks said she is confident the latest report will be a solid tool in continuing the trend of minimizing the impacts of truck traffic on Colorado communities: “I think it will help operators as they think about ways to reduce the impacts from truck traffic and hopefully incentivize stronger relationships between local governments and operators to work together and explore different issues.” Steely plans to keep running, and hopes to finally tell some of those laid off employees to come on back.
News Briefs EIA FORECASTS SLIGHTLY HIGHER CRUDE, NATURAL GAS PRICES The U.S. Energy Information Administration released its Short-Term Energy Outlook in January, forecasting to 2018. Here are the highlights from a news release: • Benchmark North Sea Brent crude oil spot prices averaged $53/barrel in December, a $9 per-barrel increase from Novemberand the first month since July 2015 in which Brent spot prices averaged more than $50/barrel. • Brent crude oil prices are forecast to average $53/barrel this year and $56/b in 2018. West Texas Intermediate crude oil prices are forecast to average $1/b less than Brent in both 2017 and 2018. • U.S. regular gasoline retail prices are expected to increase from an average of $2.31/gal in the first quarter of 2017 from $2.25/gallon in December. U.S. regular gasoline retail prices are forecast to average $2.38/gallon this year and $2.41/gallon in 2018. • U.S. crude oil production averaged an estimated 8.9 million barrels per day in 2016 and is forecast to average 9 million barrels per day this year and 9.3 million b/d in 2018. The forecast increases in production largely reflect increases in federal offshore Gulf of Mexico production, according to the release. Rising tight oil production, which results from increases in drilling activity, rig efficiency and well-level productivity also are seen as contributors to that expected production growth. • Dry natural gas production is estimated to have averaged 72.4 billion cubic feet per day (Bcf/d) in 2016, a decline of 1.8 Bcf/d (2.4 percent) from 2015, which would be the first time annual average natural gas production has fallen since 2005. Forecast dry natural gas production increases by an average of 1.4 Bcf/d in 2017 and by 2.8
Bcf/d in 2018. • The Henry Hub natural gas spot price averaged $2.51 per million British thermal units (MMBtu) in 2016 and is expected to increase to an average of $3.55 this year and $3.73 in 2018. Higher average prices in 2017 reflect price increases in the second half of 2016 because of a hot summer and declining production, which reduced the inventory excess compared with the previous five-year average. • EIA estimates the annual average share of U.S. total utility-scale electricity generation from natural gas was 34 percent in 2016 and the share from coal was 30 percent, marking the first time that a fuel other than coal provided the largest share of electricity generation on an annual basis, the rlesae stated. The generation shares of coal and natural gas are expected to be roughly equal this year at about 32 percent of electricity. In 2018, natural gas and coal generate 33 percent and 32 percent of electricity, respectively. • The forecast shares of electricity generation fuels from other energy sources are expected to change modestly, the release stated. Nuclear power is estimated to have generated 20 percent of electricity in 2016 and is projected to fall slightly to 19 percent of generation in 2018. Nonhydropower renewables are estimated to have generated 8 percent of electricity in 2016 and to grow to 9 percent of generation in 2018. Hydropower’s share of electricity generation from 2016 through 2018 is expected to remain between 6 percent and 7 percent.
ARB MIDSTREAM ACQUIRES PIPELINE GATHERING COMPANY ARB Midstream, an energy midstream, logistics and marketing company based in Denver, last fall acquired a controlling interest in the Platte River Gathering System from Rimrock Midstream Holdings.
The PRG system provides gathering for crude oil production in the heart of the prolific Denver-Julesburg Basin, which is home to the Niobrara and Wattenberg plays in Weld County. The system is backed by multiple long-term producer commitments, and started transporting crude oil in April 2016, according to a news release. PRG is capable of moving up to 157,000 b/d and includes over 40 miles of crude oil gathering lines, truck unloading at the Lucerne Hub, and planned storage capacity of up to 600,000 barrels. PRG delivers to the Grand Mesa Pipeline, which delivers barrels to Cushing, Okla. Adam Bedard, CEO of ARB Midstream, said the gathering system is “is a strategic fit with our existing footprint of midstream infrastructure and marketing capabilities in the one of the fastest-growing crude oil plays in North America. As the DJ Basin has grown, infrastructure has struggled to keep up. The PRG System allows Weld County producers to move barrels to market efficiently and economically, while replacing the need for trucks in the regional communities.” At the same time, ARB announced the appointment of Pat McMurry as the senior vice president of gathering and transportation. McMurry joined the ARB management team after overseeing the development of PRG for Rimrock. He has over 40 years of experience in midstream construction and business development, including multiple pipeline and terminal projects at Enterprise, TEPPCO and ExxonMobil, the release stated. In combination with ARB’s existing crude marketing and logistics business in the Denver-Julesburg and the greater Rocky Mountain market, the PRG transaction will support ARB’s goal of offering a fully-integrated midstream and marketing solution to producers in the Denver-Julesburg basin. ARB Midstream, LLC is a privately held FEBRUARY 2017 ENERGY PIPELINE 17
News Briefs PDC ENERGY BUYS DELAWARE BASIN ACREAGE IN TEXAS
company based in Denver that provides midstream and marketing solutions for crude oil, LPGs and refined products. ARB markets crude oil and operates assets in Colorado, Texas, Wyoming, North Dakota, and Calgary, AB.
SYNERGY RESOURCES SELLS 10,000 ACRES IN DJ BASIN Synergy Resources Corporation, an oil and gas exploration and production company focused in the Denver-Julesburg Basin, has sold 10,000 acres of undevelopment assets and approximately 700 barrels of oil equivalent per day for $71 million. The transaction is expected to close in the first quarter of 2017. Lynn A. Peterson, Chairman and CEO of Synergy stated, “The opportunity to strengthen Synergy’s liquidity through monetization of non-contiguous acreage outside our area of planned development, 18 ENERGY PIPELINE FEBRUARY 2017
further fortifies the company’s balance sheet and helps consolidate our footprint. We will continue to pursue accretive opportunities that complement our high quality acreage position as well as divest of properties that are not in our drilling plans over the next several years.” “Our team continues to execute the operations’ plan as we laid out in 2016. ... The Company exited 2016 with approximately 50 percent of 2017 guided production volumes hedged for both oil and gas and we will continue to be opportunistic in managing risk. Our industry has started the year with a much better commodity price outlook than in 2016 which, when combined with Synergy’s balance sheet, top tier assets and production growth profile, significantly sets us apart from many of our peers.” Synergy continues to operate two drilling rigs and expects to utilize the rigs throughout 2017.
Denver-based PDC Energy, Inc. announced has purchased 4,500 net acres in Reeves and Culberson counties, Texas, from Fortuna Resources Holdings, LLC, for approximately $118 million in cash, according to a news release. PDC’s working interest in the acquired leasehold is 100 percent and PDC expects to operate 100 percent of the properties, the release stated. The acquired properties are concentrated in the company’s central acreage block contiguous with the company’s acreage from the recently closed acquisition of approximately 57,000 net acres in Reeves and Culberson counties, the release stated. Current net production associated with the acquisition is approximately 300 barrels of oil equivalent per day. Also included is a drilled, but uncompleted (“DUC”) horizontal well, and a salt water disposal well, the release stated. The company estimates the acreage contains 75 gross 1-mile horizontal drilling locations. PDC plans to integrate the newly acquired acreage into its development drilling plans for its central acreage block, the release stated. President and Chief Executive Officer Bart Brookman commented in the release, “This bolt-on acquisition is a great example of our strategy to both expand and block up our Core Delaware Basin position. Our net acreage, drilling inventory and estimated reserve potential in the basin are expected to increase by approximately ten percent with this transaction. Additionally, by creating a large, contiguous acreage block, we have the opportunity to focus on longer lateral development while optimizing our operational efficiencies.” Fortuna Resources Holdings, LLC, is a Permian Basin focused independent oil and natural gas producer sponsored by certain affiliates of Och-Ziff Capital Management Group LLC.
MAKING HOLE The origins of oil town “aero views” BY BRUCE WELLS • FOR ENERGY PIPELINE
Traveling from Pennsylvania to Texas at the turn of the century, Thaddeus Mortimer Fowler created
Fowler, born in Lowell, Mass., on Dec. 21, 1842, served in the 21st New York Volunteers during the Civil War. He was wounded at the Second Battle of Bull Run in 1862 and discharged at Boston the next year. Fowler migrated to Wisconsin, where he established his own panoramic map company in 1870. A panoramic view of Stewart, Ohio, is the earliest Fowler map in the Library of Congress collection. In 1885, Fowler moved with his family to Morrisville, Pa., where he maintained his headquarters for the next 25 years as he traveled the country. He began to draw hundreds of views
An 1896 Fowler panorama of Titusville, Pennsylvania, where Edwin L. Drake launched the U.S. petroleum Industry in 1859. Image courtesy Library of Congress.
panoramic maps of many of America’s earliest oil towns. Lithographs of Fowler’s hand-drawn cartography — done without a balloon — have fascinated Americans since the Victorian Age. The Library of Congress today preserves hundreds of his panoramic maps. Panoramic maps were a popular way to depict towns during the late 19th and early 20th centuries.
The Library of Congress Geography and Map Division has identified more than 400 Fowler maps, including this 1918 view of Tulsa.
A surprising number of the lithographs, also called “bird’s-eye views,” captured the small communities near oil and natural gas fields.
Fowler published a lithograph of Wichita Falls, Texas, in 1890. For a fee, he would include homes and businesses as map insets. Image courtesy Amon Carter Museum.
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.
of Pennsylvania, Ohio and West Virginia towns – including many that were prospering, thanks to oil. Fowler’s work included an 1896 map of Sistersville, W.V., where an oil discovery four years earlier had found a giant oilfield. The well at Polecat Run revealed the Sistersville Anticline and transformed the small community on the Ohio River. Historians have identified more than 410 Fowler panoramas. “Thaddeus Mortimer Fowler was perhaps the most prolific of the dozens of bird’s-eye view artists who crisscrossed the country during the latter three decades of the 19th century,” explains the Amon Carter Museum of American Art. FEBRUARY 2017 ENERGY PIPELINE 19
“He produced at least 17 views of different Texas cities in 1890 and 1891, but that output is dwarfed by his production of almost 250
known as the “Oil Capital of the World.” How did Fowler create his maps? Preparation of panoramic maps “involved a vast amount of painstakingly detailed labor,” explains the Library of Congress. “For each project a frame or projection was developed, showing in perspective the pattern of streets. The artist then walked in the street, sketching buildings, trees, and other features to present a complete and accurate landscape as though seen from an elevation of 2,000 to 3,000 feet,” the LOC notes. This collection of data was entered on the frame in his workroom, and “a careful perspective, which required a surface of 300 square feet, was then erected from a correct survey of the city.” Fowler died in March 1922 at age 80, following a fall on icy streets while working in Middletown, N.Y. His maps of communities – including oil boom towns – preserve a pictorial record of urban life at the time. For some small towns, these “aero views” are the only early A detail (with derricks) from Fowler’s 1896 map of Sistersville, West Virginia, where an oil maps that have survived. discovery four years earlier had brought prosperity.
views of Pennsylvania between 1872 and 1922,” added the Fort Worth, Texas, museum. Fowler traveled to Oklahoma in 1890 to map “Oklahoma City, Indian Territory” less than a year after the first land rush. He returned to produce a 1918 drawing of Tulsa, which already was becoming
“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.
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Virtual reality training for oil field workers BY GARY BEERS • FOR ENERGY PIPELINE
Hands-on, first-person training is a long-standing basis for effectively learning a work assignment. With the recent advances in computer technology, this becomes more certain if the hands are on an electronic device that is the key into work assignments in a variety of simulated situations. During the past decade, there has been an explosive, diverse boom in providing interactive, electronic environments for learning which can be cast along a continuum (Table 1). One of the obvious advances is the placement of the worker, as an avatar, in a virtual work environment. However, the mixed reality developments for learning environments are laden with promise
for highly-productive training. The reason is that the worker’s specific real environment is the foundation for layers of virtual enhancements and, thus, the ability to create custom work situations – both expected and unexpected. Additional information on mixed and virtual reality learning environments is provided below with examples.
AUGMENTED REALITY As the worker conducts an assignment in a real environment, overlays of information on key objects and conditions in this environment are seen through computer-aided glasses and the worker
can use this information to adjust his actions in completing the assignment. While not related to oil fields, an excellent example of how AR works in assisting the pilot of a small plane is available online (https://glass.aero/).
AUGMENTED VIRTUALITY Basically, a computerized image is placed in a real environment which can be seen from any angle by users equipped with special glasses. The image is dynamic and can be modified by the users. While an example from the oil and gas industry was not located, a popular example from the field of human anatomy can be accessed online (https:// www.youtube.com/watch?v=SKpKlh1-en0 ). Also, there is a fun and fantastic example involving a whale hologram leaping out of the floor of a basketball court which is accessible online (https:// www.youtube.com/watch?v=HXYmc-X4Cy4 ). You may think “Pokémon Go” is an example of augmented reality since these computerized creatures are placed in real environments and can be seen from any angle when located on an iPhone. However, professionals in the field concluded that this application does not meet the technical definition (Pokémon Go isn’t real AR but could inspire augmented reality development. W. Mansell, January 4 2017, Technology, International Business Times).
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.
VIRTUAL REALITY VR training immerses the user, as an interactive avatar, in an animated 3-D replica of actual oil/ gas facility with a work assignment (Figure 1) Depending on the assignment, the design, specifications, and status of relevant equipment are shown to aid user decisions to complete the assignment. Incorrect decision result in unfortunate consequences to the avatar. An example of auditing energy isolation via FEBRUARY 2017 ENERGY PIPELINE 21
“Lockout-Tagout” training at petroleum facility, using VR, is accessible online (http://optech4d.com/oil-gas). Unfortunately, this user needs further training due to loss of his avatar as a result of an incorrect decision. The value of VR-based training is evident in a study carried out by the National Training Laboratory involving helicopter pilot landing on offshore oil platforms. The study concluded that retention rates
for lecture style learning were at 5 %, reading learning rates were at 10 %, while VR simulation learning retention was at 75 %. After deployment of this training, a major oil company projected a $2 million savings in logistics savings (http://optech4d.com/case-study/ helicopter-landing-officer-hlo-training-simulator-vr ).
DEVELOPERS, PROVIDERS AND LEARNERS Three trends emerged in 2000 to 2010 that presently form the basis for the quantum shift to virtual learning and the creation of emerging workforce well-trained to learn through hands-on experiences within artificial settings. The releases of two VR action games (“Call to Duty” in 2003 and “Minecraft” in 2009), fired the launch of a generation of “gamers” - who developed self-taught skills to understand how to interact with artificial problems and other players in a virtual environment. The growth of this trend is amazing and currently involves about 155 million gamers in the US. In 2016, a study by the Entertainment Software Association reported the following demographics: • 63 percent of households surveyed include at least one frequent gamer. • 65 percent of homes own a video game-playing device, while 48 percent own a dedicated game console. • 47 percent of gamers are between 18 and 49 years old. • the average guy who plays games is 35 years old; the average woman is 44.
• 59 percent of those who play games on a regular basis are men; 41 % are women. • the average gamer has been playing video games for 13 years In 2005, the national Immersive Education Initiative was established with a mission to define and develop standards, best practices, technology platforms, training and education programs, and communities of support for virtual worlds, virtual reality, augmented and mixed reality, simulations, game-based learning and training systems, and fully immersive environments such as caves and domes. This nonprofit held the 2016 national conference in Denver. Examples of institutions offering immersive education opportunities in the Rocky Mountain Region are: • University of Colorado — Immersive Education (iED) Club with National Park Service. • Shell 3-D Visualization Center at the University of Wyoming. • South Dakota School of Mines and Technology. • Computer Science Department at North Dakota State University. • Biomedical Engineering at the University of Utah. • Montana State University Recently, there are unique facilities focused on immersive technology. For example, Louisiana Immersive Technologies Enterprise is the world’s first and only data visualization facility. Numerous commercial companies have focused on providing experiential training in real-time using VR with data-driven applications. Examples of the providers include: EON Reality, FuelFX, GeoSafety, optech4d, PetroEd, TigerGeneral, Siemens, SchneiderElectric, and Honeywell Process Solutions. An introduction to the companies pioneering diverse applications of reality technology is available online at www.realitytechnologies.com/companies. Examples of VR products for training oil field workers include: • Immersive Training for Oil Rigs (https://hwd3d.com/blog/3d-interactive-tech-talk-immersive-safetytraining-for-oil-rigs-chemical/ ) » Immersive Simulation for Field Operator Training (https://www.youtube.com/watch?v=rJULyO9E2vE ) Oil Companies Need to Optimize Use of Mixed and Virtual Reality Training The emerging work force is trained to learn under AR/AV/VR environments and can quickly develop the complex expertise that will be useful in their technical jobs in the oil field. The oil and gas industry needs recognize this new workforce resource and develop immersive education programs specific to company facilities and operations..
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The oil and gas industry is a large part of Colorado’s economy. Below, find statistics on drilling production, well permits and rig counts.
2016 DRILLING PERMITS
RIG COUNT BY STATE
COUNTY
NO. (% OF STATE TOTAL)
Weld..............................................................................................1,704 (60%) Garfield......................................................724 (25.3%)
State Jan. 6 Dec. Avg. Colorado 29 26 Louisiana 50 48 Oklahoma 86 82 New Mexico 37 32 North Dakota 33 32 Texas 327 310 California 6 6 Alaska 8 7 Ohio 20 18 Pennsylvania 33 31 Wyoming 17 19 Source: Baker Hughes Rig Count. Dec. 9
Nov. Avg. 20 50 77 31 35 271 6 8 16 27 16
Oct. Avg. 19 46 72 32 31 250 6 9 14 25 13
2016 GAS PRODUCTION
COUNTY *YTD PRODUCTION (% OF STATE) Weld........................................527,280,142 (37.3%) Garfield...................................418,026,910 (29.6%) La Plata ..................................256,890,149 (18.1%) Las Animas ................................ 58,483,318 (4.1%) Rio Blanco ................................46,459,436 (3.25%) Mesa ........................................... 32,014,412 (2.1%) State ...................................................1,413,055,727
La Plata..................96 (3.97%) Adams............74 (2.5%) Rio Blanco......71 (2.2%) Jackson.......57 (2.5%) State2,835 Source: Colorado Oil and Gas Conservation Commission as of Jan. 1
US RIG COUNT
The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999. Area Jan 6 Dec. Avg. Nov. Avg. Oct. Avg. U.S. 665 634 580 543 Canada 205 209 172 157 Source: Baker Hughes Rig Count, Jan 6.
2016 OIL
PRODUCTION COUNTY *YTD
PRODUCTION (% OF STATE)
Weld Rio Blanco Garfield Cheyenne Arapahoe Lincoln Adams Larimer State
86,527,877 (89.1%) 3,510,992 (3.6%) 1,342,812 (1.4%) 1,035,113 (1.1%) 742,943 (0.76%) 734,030 (0.76%) 647,089 (0.67%) 649,026 (0.67%) 97,065,744
Source: Colorado Oil and Gas Conservation Commission as of Jan. 9
Source: Colorado Oil and Gas Conservation Commission as of Jan. 9
COLORADO ACTIVE WELL COUNT
Weld ..........................................................................23,028 Garfield .....................................................................11,171 Yuma ...........................................................................3,877 LaPlata........................................................................3,326
Las Animas .................................................................2,938 Rio Blanco ...................................................................2,891 State .........................................................................54,036 FEBRUARY 2017 ENERGY PIPELINE 23
Source: Colorado Oil and Gas Conservation Commission as of Jan. 1
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