Sunlight Shining Through Cloud

Less Is More (and other conundra)

Posted on: December 30, 2012

The year-ender … where media outlets fill time and space cheaply by looking back over the past twelve months of news that’s already been reported. But, alas, I have not seen a year-ender about The Oil Patch. So, with stats from various departments of the state of North Dakota, stories published by the AP, Reuters, The Bismarck Tribune, and the Sunlight (this) Blog, I present Less Is More (and other conundra). At the end, you may think, “that seemed like ‘More Is More.'” I’ll let you decide. As for the conundra, you’ll have a headache and won’t want to figure them out.

The Bakken

The Bakken

Eggplant-crop

The Eggplant

The Oil Patch – also called The Bakken (rhymes with rockin’) – is a big eggplant-shaped chunk of western North Dakota, eastern Montana and southern Saskatchewan under which lies eight layers of earth containing lots of decaying dinosaurs [Conundrum #1: You mean dinosaurs had nothing to do with the creation of oil?] [Nope.]

Big oil companies and their sub-contractors have been poking holes in the Bakken since the 1950’s. What they got was lots of promises and even a few barrels of oil. Then, a couple of geological geniuses – Dr. Horizontal and Dr. Frac – developed new hole-poking technologies. The first was eponymously named “Horizontal Drilling”. Here, they drill down two miles deep toward China. Then they hang a Louis and drill another two miles toward France.

Not wanting to be left in the cuttings pit of history, Dr. Frac developed the important-sounding “Hydraulic Fracturing” method wherein a roughneck lights sticks of dynamite, throws them down Dr. Horizontal’s holes, cover his ears, and blows the whole thing up. The scientifically calculated results? Sinkholes big enough to swallow the thriving metropolis of Williston ND; hence the new terrestrial feature called “The Williston Basin”. No, what they got was holes through which the dinosaurs could escape and repopulate the earth. Seriously this time, they got substrata now pressurized and ready to squeeze oil up to the surface so we could fill our tanks.

The good doctors immediately recognized the potential for lots of media interviews so, in 2008, they formed a company called “Oil Boom”. Their methods are patented, so don’t try this at home.

Now that you have the history, we can take a clear-eyed look at 2012 (right after I wash the fracking chemicals from my glasses).

This year, North Dakota became the second-ranking oil-producing state in the union, right behind Texas. This caused great fear in The Lone Star State. You see, Texas has had size issues ever since Alaska became the 49th state; Alaska being much larger than Texas. All the girls would look at Texas and laugh until Texas ran, crying, to its mothe … but I digress.

ND passed both Alaska and California on its way toward Texas’ ego. California responded by sending ND a lovely fruit basket. How did we get this big? By sucking almost 700,000 barrels of oil from our 4,000 wells every day! The suits – who enjoy their year-end bonuses – are planning to drill at least 2,000 new wells per year for the next 15 to 20 years. After that, they’re reasonably sure they can afford to buy the solar system.

In ’05, the U.S. imported 60% of its oil needs, the majority of it from a distant country called Canada. As a reward, Canada let us win the Stanley Cup once or twice. Today, we import only 42%. As a reward, Canada has shut down the entire NHL season and is threatening to pollute Nebraska’s water table with tar sands.

How are we growing our national energy independence? By producing more oil, silly. (Do I need to clean your glasses, too?) But you did your part by buying more fuel-efficient cars imported from foreign countries like Japan and Tennessee.

The renowned accounting firm of Zager and Evans projects that by 2020, the U.S. will surpass Saudi Arabia in oil production. In the year 2525, and I quote, “Everything you think, do and say is in the pill you took today.”

41,000 workers were hired in the past three years statewide, most of them for new oilfield or related-industry jobs. 22,000 jobs remain unfilled. The pace of drilling has increased, but the fracking division of ‘Oil Boom Inc.’ can’t keep up. Most applicants claim to be afraid of dynamite. Sissies.

The venerable Sunlight Blog has often ruminated about the number of trucks truckin’ around here. Here’s why they’re there: it takes 1,000 tanker truckloads of water to frac one drilled well. If you do the math, that’s 1,000 tankers times 300 rigs times 28Loves sign-crop wells per year per rig and you get … let’s see … carry the 17, add the hypotenuse of pi r², divide by zero error, remember to feed the fish … oh, darn … my pencil broke. Let’s just agree that that’s a lot of trucks.

This blog has dutifully reported that truck drivers have a problem doing their business (if you know what I mean) as they travel the 118 highway miles through the Oil Patch. To solve this problem, Love’s and Pilot have opened brand new truck stops with gleaming new facilities (if you know what I mean). Another truck stop has broken ground, and yet another has hung a sign on the corner. More later.

What most people don’t know – and I’m going to teach you – is that the black gold underground does not live alone. It co-habitates with natural gas. If you can get past the morality of this for just a moment, I want to teach you that the stuff that comes to the surface is more like a primordial stew than the refined liquid you get from the gas pump. The oil and gas and other ingredients are then tearfully separated topside.

Which brings us to flaring. Flaring is the burning of pent-up natural gas which, if left to enter the atmosphere by itself, would kill us all within a mere 40,000 years. Instead, we light it up … which produces an impressive flame shooting out of the ground for the kids to enjoy while giving the rest of us big headaches. (This is why you won’t be figuring out the conundra anytime soon.) In the rest of the country, 5-10% of the wells are flared. Here, it’s 30%. Every sentient being is concerned about the health effects of flaring. Even (allegedly) sentient beings at the state capitol are proposing legislation to lessen it. In the meantime, the suits are chanting: “Burn, baby, burn.”

What the suits know is that the only real solution is to capture the natural gas by sending it through pipelines to processors and ultimately to market. To their credit, many millions of dollars have been invested in the construction of many thousands of miles of pipelines this very year. But we need a lot more. Maybe the guys who’re afraid of dynamite can help us build more pipelines. (The costs, price and value of Natural Gas in today’s market will be the subject of a future SunlightBlog post.)

It’s all about transporting our products out of the Bakken and into the banks so we can get paid. We use lots of tanker trucks for that, adding to the conundra on the highways. We also use rail tanker cars. It’s hard to describe the scope of what BNSF Railroad has done to satisfy the need. They’ve built depots with twin tracks side-by-side in a two-mile-long circle leading to a low-slung building in which the tankers are filled with oil as they’re dragged through. Ten of these monstrously huge depots have been built around The Oil Patch this year resulting in 25% of production being hauled away to banks at all corners of the country. The checks should be arriving any day now.

Minerals extraction, as we insiders call it, does not occur in isolation. The massive oil industry lives and works alongside the small towns and people of northwestern North Dakota. Ever-considerate of our neighbors, the industry realized that the good people of Williston couldn’t get to church because of our perpetual truck-populated traffic jams. So, truck bypasses were built on the west and east sides of the city. Unfortunately, no traffic improvement was derived because other meaningful summer/fall road construction projects were undertaken in all four directions effectively causing trucks, pickups and cars to fight for the single-lane spaces through the miles-long construction zones into and out of town. The churches have given up. Too much swearing.

The official 2010 census said there were 14,716 souls in Williston. Nearly-official estimates say there are 33,000 here now. A recent university study guessed there will be 44,000 here by 2017. The same story can be told of all the towns around here. Arnegard will multiply its population (115) by a factor of 12 with the completion of a mancamp there. All of these people need to get here, so Amtrak has doubled the number of rail passenger cars on its Empire Builder line. Jefferson Lines is driving its big buses through the Bakken seven days a week between Minneapolis and Billings. These modes of transportation will get you to or from a major metropolis in a scant 12 hours.

If your time is scanter than that, you’ll want to fly. Delta and United both started operations at the Williston airport last month. 4,916 November boardings equals a 63% increase over the previous record in May. Two small points must be made about this: 1) a round-trip to/from MSP or Denver costs about $700; and 2) Sloulin Field International Airport has no tower!!! Here again, the same can be said for other airports. Minot experienced a 52% increase in boardings. Killdeer (where?) is getting 16 to 20 takeoffs and landings each day at Weydahl Field where they used to get 90 per year. Small problem: this airport has been closed for several years due to disrepair. The FAA advises pilots to land at their own risk. Yikes!

Now that you’re here, you’ll need a place to stay. Hotel beds have doubled in number throughout the region in 2012. If you do find a room, it’ll set you back a cool $200+ per night. It’s pointless to try, though; the oil companies have pre-leased the rooms for themselves.

A fairly large number of incoming workers brought 5th-wheels, trailers and RV’s, and found homeowners willing to rent their driveways and back yards in which to park them. Williston city fathers felt that these wheeled crash pads were responsible for lowering the quality of life (insert raucous laughter here), so in August, they banished these living spaces to other places not in Williston.

Housing was and is a big problem. We need 22,000 more workers but we don’t have anyplace to put ’em. So mancamps, trailer parks, RV parks, apartment complexes, and housing subdivisions are going up everywhere. I personally know a professional plumber who hasn’t slept all year. When he does get to bed, he lays awake all night worrying that the phone will ring with another toilet for him to install.

Verizon Wireless techies have been busy in the Bakken, and thank goodness — you can get to feelin’ like you’re isolated out here. You want to keep that data flowin’ and the phone a-ringin’. VZW’s workers kicked Williston’s service up to 4G-LTE back in June. I was first to convert in my company, so they nicknamed me 4G-Fred (4G, for short). In Sidney Montana where I live, we went 4G last week. This represents a considerable acceleration of VZW’s own upgrade schedule. Good job, Verizon!

Whew! All that work makes me hungry. Let’s go to Buffalo Wild Wings. You may recall reading in the Sunlight Blog during the summer that BWW advertised for part-time workers and couldn’t find any. So they scotched the idea and went home. Well, they’re back – and soon we’ll be enjoyin’ them Jammin’ Jalapeño wings with a frosty mug of beer. Still don’t know where the waitstaff is comin’ from. While we’re eating, let’s spend a few moments listening to the local radio station. Hey, they’re doing the Williston Basin Jobs Board.

Announcer: The Pizza Place in Minot is looking for a delivery person with a clean driving record. We pay $15-20/hr to start and a $250 signing bonus. Call 555-5555 and ask for Yoda.

Happy male voice: Hi. I’m Xxx Xxx, manager of the KFC in Sidney. We do chicken right. Here’s Fred, one of our loyal customers: “They do chicken right.” We’re open from 11 to 8 Monday through Friday. Closed on weekends. Got a beef with that? Go to McDonalds.

Dry female voice: Hi. I’m Xxx Xxx, manager of the McDonalds in Sidney. We’re closed. McDs pic-cropOh, you can pull on the doors all you want, but you’re gonna have to settle for the drive-thru which is only open from 11-9. You laughed at our foreign-exchange workers, so this is the best we can do.

                                              –

Walmart sign-cropGlum male voice: Hello. I’m Xxx Xxx, manager of the Walmart in Williston. We do nothing right. Our shelves are always empty. There are pallets of stuff in the middle of the aisles; all the aisles, all the time. We’ll pay you more than I’m making and throw in some benefits, too. Come to work here so your friends won’t have to wait at the checkout for at least 20 minutes. I’m so depressed. Excuse me while I stock the shelves. By myself. Again. Call next week to see if I’m still here.

Well, that was pleasant. I sure hope all those places find workers because we can’t spend all of our money on Amazon.com.

Two more stories about the retail labor shortage. Watford City (pop. 1,744 going on 10,000) has two very small grocery stores. The highly-respected Coborn’s grocery chain in Minnesota wants to expand their reach into North Dakota. They’ll soon build a shopping center in Watford. So they bought Mike’s SuperValu not for its space or inventory, but for its 40 employees.

And here’s the most out-there story of all. Minot’s Menards (home improvement) store has needed 50 more workers since forever. Here’s how they’ll solve the problem: Menards will hire 50 workers at their corporate headquarters in Eau Claire Wisconsin, fly them to Minot, put them up in hotels, pay them perdiem, and fly them back home. Every week! Now do you believe me?

The oil industry has experienced something of a slowdown for the past several months. This is manifest in perceptibly less traffic; the wait at Walmart’s checkouts is down to 15 minutes now; and it takes only an hour to get through the carwash.

Talk with the experts and you won’t find consensus about the reason for the slowdown:

  • The oil companies are waiting to see how President Obama exacts his revenge upon them for having donated so much money to Mitt Romney
  • The EPA will hammer down on the oil industry for damaging the environment, even after the resignation of Administrator Lisa Jackson
  • We don’t believe pigs fly (this will be important when we all fall over “The Fiscal Cliff” and we want to grab onto the nearest flying pig)
  • We’re tapped out from having spent the annual drilling budget already last winter which was snowless and warm
  • We’re trying to catch up with infrastructure, pipelines etc.

Here’s what I think. The price of oil on the world market is low thanks, in part, to our own extractions and to the off-shore drilling being done in Brazil. More product on the market with decreasing U.S. demand – even factoring in the increasing demand in China and India – means lower prices. Simple commodity math. An uptick in pricing could occur if, for example, Iran sneezes without covering its nose; or Yemen refuses to let our tankers play in their sandbox; or the dish runs away with the spoon.

If one of these (or any number of other) scenarios occurs and causes the world price of oil to rise, the suits will consider only one factor: Profit. None of the above-bulleted hypotheses will matter. As long as the bottom line is in the plus column, drill we will.

Which brings us back to workers. The oil companies want so badly to keep them that they’re now giving 15% cost-of-living boosts to their wages and benefits. This makes our Bakken workers the highest paid in the country; even higher than in Alaska where the cost-of-living is higher than San Francisco or Washington D.C. (but without the hot air).

Who are our workers? They are manly men from Louisiana and Arizona and Ohio; indeed, from every state in the union (yes, I’ve even seen a license plate from Hawaii). One day in early October, the thermometer reading fell to 18ºF. You could almost feel the whoosh as manly men headed south. We had our first snowstorm in mid-November. What manly men remained climbed into their chrome-plated, high-steppin’, deisel-fueled, flare-throated, four-wheel-drive pickups and screeched for the warmer climes; some of them screeching sideways on the ice and snow-covered roads. There have been two storms since, and there’s nary a Floridian to be found.

And I don’t mind a bit. Fewer of them means there’s more coffee for me at ‘Daily Addiction’, my favorite shop. I have my eye on a new drive-thru coffee kiosk, however. It’s named ‘C-Cups’. Now, there’s a name I can get behind.

Hope you enjoyed my 2012 Bakken industrial retrospective. Tomorrow, I’ll take a look back at … me!  It’s called, “And In With The New.” In the meantime, here’s a photograph shot from outer space. Note the size of Minneapolis/St.Paul and suburbs, the 14th largest metro in the country. Compare that to the size of the Bakken.

Photo: Int'l Space StationCaptions: midwestenergynews.com

Photo: Int’l Space Station
Captions: midwestenergynews.com

2 Responses to "Less Is More (and other conundra)"

Fred,
I enjoy reading your reports going on in the wild north energy fields. It’s been even more interesting when paired with various articles that pass my way and I realize they are referring to the same stuff you are actually experiencing (spent a wasted hour plus listening to a “buy these stocks” spiel based on building infrastructure for the gas transportation, the cities effected, etc.). I’ve even suggested to a few youngsters that they consider going out that way to look for work since it’s lucrative and for now open for business. If I could figure out the right investments to make I would, but whatever I did buy stock in would totally fail in the next year as our investments seem to predict those areas in the economy that go bust in the following 12 months. Don’t believe that? I’ve got the paperwork to prove it. Fiscal cliff? If I’d had gone today to pull all our stuff out of 401Ks and retirement IRAs there would have been no cliff and Congress would have all been at galas doing the tango. Well, just wanted to say thanks, and I do wish you all in that bright spot on the globe a happy little new year (all though I celebrated the Mayan New Year Dec. 21, at 2359hrs., thank you very much)!

Sorry, Deborah. The thought of my Congressperson doing the tango has ruined my New Year’s evening. Hope you’re happy with yourself. 😉

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