Monke: Obama's silly oil tax just another ego trip

When you ask three members of Congress the same question about a proposed policy and every one of them laughs about it, you know it can’t be good.

That was the case when I interviewed members of the North Dakota Congressional delegation about President Barack Obama’s proposed $10.25 per barrel oil production tax in his 2016 spending budget.

Republican Rep. Kevin Cramer called the tax “dead on arrival.” Sen. John Hoeven, also a Republican, believes it would go so far as to threaten national security. Sen. Heidi Heitkamp, a Democrat, said trying to impose this kind of tax on the oil industry right now was like kicking someone when they’re down.

All three of them agree it would mean thousands of lost jobs across the country.

And for what? More “environmental progress” as the president himself put it last week?

Look, I’m all for green energy and agree that we need an all-of-the-above energy strategy in this country. We know wind farms can work and earlier this year, I visited Yuma, Ariz., a city where solar panels are a common sight to see on rooftops.

Green energy is good energy. But there’s only so much we can do with it right now as a country.

Cars don’t run on hopes and dreams, and plastic isn’t created by fairy dust. Oil does that. Not wind. Not sunshine. Oil.

Obama said during a Feb. 5 press conference that Americans need to wean ourselves off “dirty fuels.” And that by doing this, and implementing this tax, it’s going to make for a stronger economy. “A wise decision for us to make,” he said.

I’m not sure our president understands — or for that matter, cares — about how much the oil industry matters to the American economy. Heck, I didn’t understand it until the industry planted itself in western North Dakota.

At that Feb. 5 press conference, Obama touted more fake job numbers handed to him by some lackey at a government agency being paid to create them for him out of thin air. But, you never heard one peep about the job boom created earlier in his presidency by shale oil production in North Dakota and Texas. Because he wanted nothing to do with it.

Now, with the oil industry on the downslide, Obama is doing what all good environmentalists do — he’s going for a killing blow and he’s trying to do it through government policy. Even though he’s highly likely to swing and miss on this one.

This pipe dream of a tax isn’t aimed at building roads and creating self-driving cars, as the president claims. It’s an ego trip wrapped around his radical agenda that the majority of Americans don’t even agree with.

Let’s hope Congress has some sense and tells Obama to kick this can down the road and straight into his recycling bin.

The boom’s gone, and some people in southwest North Dakota are OK with that

To get a sense of what’s happening in a community, it’s often best to consult the local barber.

Paul Ellerkamp owns Big Sky Barbers, a two-chair shop he runs with his younger brother in a north Dickinson strip mall.

Their business is a small, but accurate representation of the highs of the oil boom, the slows of the bust and the ongoing market stabilization the area is going through today.

The surprising similarity between the oil boom and now, Ellerkamp said, is his bottom line.

“We’re not turning away 50 people a day,” he said with a small sigh of relief. “… But somehow the bottom line is about the same. We do not see as many oilfield guys as we used to. I won’t even begin to give you a percentage of how much that has dropped off — but quite a few.”

As Dickinson and its surrounding small towns settle back into something similar to the pre-boom world, Ellerkamp said there’s plenty of positives to take from it.

“Overall, if you’d look at it from a person that has been here 10 years, or has lived here all their life, they kind of liked not so much of the hustle and bustle,” he said. “It’s definitely more of the hometown feeling.”

And so it goes for life in Dickinson and southwest North Dakota, where an oil boom brought thousands of people to the area, only to leave many high and dry when prices collapsed in early 2014 and kept falling through early January.

Now, instead of eyeing expansion and trying to track uncharted growth, most businesses and cities are planning for modesty and hoping they can plan for the possibility of both a calm and busy future, should oil prices and activity suddenly rebound.

Major projects and commercial development in Dickinson have all but come to a halt as the hub city begins paying off deficits created by infrastructure and building projects that helped alleviate the booming, oil-driven economy.

What remains of Dickinson’s once hurried building sector is on the public side, where the Dickinson Middle School building is taking shape and water treatment facilities are under construction. New commercial developments — such as stores and restaurants — while still opening, aren’t coming at as fast of a clip as they were the past two years.
However, Dickinson’s economy isn’t faltering — even in the face of low oil prices and uncertain farm commodities and livestock prices.

“We know we’re rebalancing the Dickinson economy now,” Stark Development Executive Vice President Gaylon Baker said in his State of the City speech on Jan. 19. “We’re going to get back to a more normal situation.”

Even the small towns in southwest North Dakota aren’t sweating the slowdown much.

“Some projects have kind of slowed down. Traffic has,” said Chuck Muscha, Killdeer’s mayor. “But I think probably the main people who had the biggest effect is the business owners. When this transpired, things were booming. Now they’re closer to normal.”

Mark Benz, who owns the Grab n’ Go convenience store at the corner of state Highways 22 and 200 as well as petroleum distributor Benz Oil in Killdeer, said the slowdown in activity is noticeable on both the visual and business side.

But, he said he’s maintaining a philosophy of “no rash decisions.”

While the convenience store opened in 2012 at the height of the boom, Benz Oil has been around since 1970. So Benz said he’s seen plenty of highs and lows in the oil business.

“One thing I know from being in this industry this long is it can change awful fast,” he said.

Even in Bowman County, where oil has been a part of life for decades, they’re subtly feeling the effects of the slowdown and playing the waiting game.

Like Dickinson, Bowman County doesn’t have big plans for 2016, County Commissioner Rick Braaten said.

“As far as our road and bridge budget, that’s our biggest one, all we’re doing there for this coming year is maintenance,” he said. “We’re not doing any projects or construction in 2016. We had a feeling funds were going to be quite a bit lower. We decided not to do any improvements on our roads this year.”

Teran Doerr, the executive director of the Bowman County Development Corp., said she has seen people lose jobs, businesses report slower sales and more housing come on the market.

“It almost feels like it happened overnight,” she said.

A carbon dioxide pipeline planned by Denbury Resources to use for injection on older wells in the county is still coming but the project is moving much slower, according to Denbury representatives.

New England, like Bowman, had been planning for 2015 to be the year it began seeing increased activity from the oil business.

Two oil rigs were drilling into the Tyler formation west of the city in Slope County in 2014. If they hit, the town of about 700 people was bound to boom. But the wells didn’t produce and when the prices dropped, Marathon Oil cut its losses and moved on.

Surprisingly, we are still doing well,” New England City Auditor Jason Jung said.

The city wrapped up the first of a likely four-year street and water project in 2015, Jung said.

The best decision the city made during the boom was not to overdo things, he said, adding that while new housing has sprung up and most new people who came to the area stayed, some are losing their oil jobs.

“The oil, we had some positive effects from it and we haven’t seen the negative effects,” Jung said. “We might be one of the few towns that might be that way instead of the opposite way.”

To the north in South Heart — Dickinson’s unofficial suburb — it was merely three years ago that South Heart Mayor Floyd Hurt stood with a shovel in hand and political dignitaries at his side to break ground on the new Dakota Prairie Refinery between his 300-person town and Dickinson.

Now, the refinery is operating but recently reported a $20 million loss traced back to low oil prices and lack of diesel fuel use in area, a crew camp in South Heart has closed and a planned massive facility for oilfield service giant Schlumberger is smaller than it was planned to be and very quiet.

Hurt said South Heart is still fairly happy with where it’s at, however.

The best thing to do is just sit tight and wait and see,” Hurt said. “If it starts going up and things start generating again, then make plans to move with the times.”

During his State of the City speech, Baker called it “highly unlikely” that the area’s energy industry would ever again “relive the speed, volume and chaos” of the past oil boom.

And, if folks around the area are to be believed, they’re just fine with that.

Insight: Interview with Lynn Helms

Following the State of the City address on Tuesday, Press Managing Editor Dustin Monke had an 11-minute chat with state Department of Mineral Resources Director Lynn Helms about the state of the southwest North Dakota energy industry.

They chatted about falling oil prices and rig numbers, the oilfield job outlook in western North Dakota and what kind of chances there are for oil production to ramp up in the Bakken.

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Check out this week’s full episode of Insight on the jump.

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Target Logistics to temporarily close Dunn County crew camp

MANNING — Target Logistics is temporarily closing its massive crew camp in southern Dunn County, the company said Wednesday.

Citing dwindling capacity and low oil prices, the company says plans to close the nearly 600-bed crew camp 8 miles north of Dickinson and reopen in late spring or early summer.

“The capacity is down, somewhat due to the oil situation and somewhat due to the weather,” said Randy Pruett with Pierpont Communications, which provides media relations for Target Logistics. “This is not uncommon throughout the crew camp industry.”

Pruett said he didn’t know exactly when the camp was closing, but said those staying there were being relocated to other Target Logistics properties in North Dakota.

The news was announced earlier in the day at the Dunn County Commission meeting.

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Editorial: Oil export ban repeal part of long game

In what has become dark days for the U.S. oil industry and the thousands of workers it supports, Congress provided some light this week by agreeing to repeal the American crude oil export ban as part of the 2016 spending bill. President Barack Obama signed the bill late Friday.

It’s a huge and historic moment for the sagging oil industry, which has seen prices bottom out to seven-year lows and drilling rigs stacked across the U.S. — in North Dakota and Texas, in particular — while thousands of oil workers lost jobs in the process.

North Dakota Democratic Sen. Heidi Heitkamp played a key role in making sure this happened, working the folks on her side of the aisle alongside Alaska Republican Sen. Lisa Murkowski to assure bipartisan support. North Dakota Republicans Sen. John Hoeven and Rep. Kevin Cramer also kept pushing their bipartisan colleagues. Hoeven called it a “win across the board.”

 While the bill is not without some major flaws — which we won’t go into here — the Republicans are happy because the oil export ban has been lifted and the Democrats are pleased because the bill included big tax breaks for wind and solar energy.

 Many energy analysts have theorized that lifting the oil export ban will serve to help prop up oil prices just enough to make drilling in North Dakota more profitable, thereby creating jobs and keeping our energy industry humming while ensuring gasoline prices stay manageable for the everyday American.

But, as The New York Times noted earlier this week, the impact of lifting the ban is “extremely complicated.” The main point is that repealing the ban allows oil companies to dictate who gets to buy their crude, whether it’s a refinery in the U.S., China or elsewhere.

Earlier this fall, MBI Energy Services CEO Jim Arthaud told The Press he often analogizes the oil export ban into farming terms. He said, in the simplest of terms, telling the U.S. it can’t export oil but we can export gasoline and other refined fuels is like telling farmers they can’t sell their wheat for export, but they can export bread.

“They know now if they produce this oil and if they market this oil, the entire world is available for them in this market,” Heitkamp said in a phone call with North Dakota media earlier this week
She added that killing the ban won’t have immediate impacts on the North Dakota energy industry and called it a “long-term fix.” She added that the recent oil price freefall “obviously amped up the intensity” to get it tacked on to the spending bill.

The senator is right when she says this is all part of a long game. We shouldn’t expect the ban’s repeal to be some sort of magic switch that cranks things in the Bakken back up to summer 2014 levels immediately. It’s going to help, even if it takes a while.

 Will it bring the energy success story back to western North Dakota? Only time will tell.

Tyler formation proved tough to tap into

Graphic courtesy of Timothy Nesheim, North Dakota Geological Survey
Graphic courtesy of Timothy Nesheim, North Dakota Geological Survey

AMIDON — Hydraulic fracturing of the Tyler shale formation was expected to liven the sleepy plains of Slope County with oil activity.

But more than two years after the first well was spudded, three horizontal wells drilled by Marathon Oil Co. between September and December of 2013 have proven economically unfeasible and are now abandoned. A permit for a fourth well has been canceled.

The challenging geology of the play combined with the steep drop in oil prices kept Marathon from setting off another shale play in western North Dakota, said Timothy Nesheim, a subsurface geologist with the state Geological Survey.

Nesheim said the first two Tyler test wells “produced oil at rates too low to be economical at nearly any oil price.”

It’s a sharp change from September 2013, when Marathon estimated it could produce about 1.6 million barrels of oil equivalent from four test wells it had received permits to drill.

The wells produced 4,471 barrels of oil and 5.2 million cubic feet of natural gas, all of it coming from the Rundle Trust 29-21H and Powell 31-27TH wells, according to state Department of Mineral Resources Oil and Gas Division data.

Nesheim said the Rundle well — one of two drilled on a pad — had an initial 24-hour production rate of 88 barrels of oil per day and stabilized at just 7 bpd “for several months before it was plugged and abandoned.” By comparison, Bakken wells are producing an average of 117 barrels a day so far in 2015, according to Oil and Gas Division data.

Even at oil prices of $80 to $100 a barrel, the well’s production rate was about 5 to 10 percent of what it needed to be economical, he said.

“We had our hopes up. It looked good,” said Ken Urlacher, who farms and ranches on the Rundle land and takes care of the landowner’s cattle operation. “Obviously, if it didn’t look good, they wouldn’t have spent all the money in it and put the tanks on it.”

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Dakota Prairie Refinery posts losses, MDU Resources puts second refinery on hold

 

MDU Resources’ plans for a second refinery in North Dakota are being put on hold after a volatile mix of market conditions — largely paced by low oil prices — led the Dakota Prairie Refinery west of Dickinson to post larger-than-expected losses in 2015.

The company said in late 2014 that it had planned to build a second greenfield refinery in Minot. In its latest capital investment report filed Nov. 17 with the Securities and Exchange Commission, MDU Resources stated capital expenses for a second refinery had been removed from its forecast as it “focuses on optimizing its current refinery investment.”

“Once we reach the point where we can sit back and say this (the Dakota Prairie Refinery) is an optimized facility and it’s producing like we want it to be, then we’ll look at expansion,” MDU Resources public relations manager Tim Rasmussen said Thursday.

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