North Dakota Reports Record Oil and Gas Production

The June 2019 Director’s Cut was released last week, on August 15, 2019, by Director Lynn Helms, NDIC Department of Mineral Resources – a full copy of the June 2019 Director’s Cut can be found here. It contained some noteworthy info…

The June 2019 Director’s Cut reported the following new all-time high production records in North Dakota:

  • June 2019 Oil Production was 1,424,625 barrels/day and originated primarily from the Bakken and Three Forks
  • June 2019 Gas Production was 2,876,689 MCF/day

In addition, the June 2019 Director’s Cut reported that the number of producing wells increased (based off of preliminary numbers at the release date of the June 2019 Director’s Cut) by approximately 38 wells, also reaching a new all-time high number.

While the statewide rig count for North Dakota is significantly lower than the monster rig count numbers reached back in 2012, as of August 15, 2019 the North Dakota rig count was 61 and the estimated number of wells waiting on completion from end of May to end of June was 983 wells, according to the June 2019 Director’s Cut.

Reaching these all-time high production records this summer is certainly noteworthy.

What is the TAKEAWAY here? North Dakota oil and gas production is sitting pretty and is currently bolstering not just the local economy, but it has been improving the economy of the United States as a whole as well.  

According to Natural Gas Intel’s Shale Daily article entitled Lower 48 Oil Boom, Particularly in Texas and North Dakota, Spurring U.S. GDP, North Dakota’s growth in domestic oil production over recent years has been a key part of the drilling expansion that added as much as 1% to the U.S. gross domestic product (GDP) from 2010-2015.

Thanks to the all-time high production records that were set in North Dakota in June, it looks as though this trend will continue.  

Navajo Transitional Energy Company to Purchase Wyoming Coal Mines

Navajo Transitional Energy Company, a wholly-owned limited liability company of the Navajo Nation, is about to close a big deal that will substantially impact Wyoming, and potentially the country as a whole. 

According to the Casper Star Tribune article entitled, Navajo Nation Coal Company Receives Approval to Purchase Cloud Peak Mines, Navajo Transitional Energy Company was the successful bidder and has received court approval to purchase Wyoming’s Antelope and Cordero Rojo mines, located in the Powder River Basin, out of bankruptcy.  The Spring Creek mine located in Montana was also reportedly included in the sale to the Navajo Transitional Energy Company.

Why is this important?

  1. This is a BIG deal. These coal mines are large – Wyoming’s Antelope and Cordero Rojo mines are the third and fifth largest coal mines in the country.  According to the press release dated August 19, 2019 issued by the Navajo Transitional Energy Company entitled, NTEC Expands its Conscientious Energy Development Efforts by Acquiring Three Coal Mines in the Powder River Basin, which can be found here, the properties acquired include surface and mineral rights to approximately 90,000 acres of land.
  • The coal produced from these mines located in the Powder River Basin has a low sulfur content and is therefore considered cleaner.
  • These coal mines currently employ roughly 800 Wyoming miners.
  • Navajo Transitional Energy Company is already in the coal business – according to its website, which can be found here, the company purchased the Navajo Mine in 2013, which is located on the Navajo Nation, south of Farmington, New Mexico. The Navajo Mine is operated on behalf of Navajo Transitional Energy Company by Bisti Fuels Company, LLC, a subsidiary of North American Coal Corporation. 
  • According to Navajo Transitional Energy Company’s press release, the assets were acquired free and clear of the debt burdens since they were purchased through the bankruptcy process.
  • This sale is historic – it not only involves large coal mines but, according to Navajo Transitional Energy Company’s press release, “Indian tribes have long had a deep connection to the earth, and for the first time, a tribal company will now lead thoughtful and diligent energy development on a national level.”
  • Further,  according to Navajo Transitional Energy Company’s press release, “[w]ith this purchase, NTEC [Navajo Transitional Energy Company] becomes the third largest coal producer in the United States.

This historic sale is the high note of the week, as the economic benefits not only to Wyoming, but to the Navajo Nation and the United States as a whole, will be significant. 

Business Friendly: Wyoming Establishes Chancery Court

Wyoming is business friendly and has been taking efforts to streamline conflicts related to companies doing business in the Cowboy State. 

On March 15, 2019, Governor Gordon signed into law an act of the 2019 Wyoming legislature, Senate File 104, which created a Chancery Court – check out the press release issued by the Wyoming Judicial Branch here.  

What is the purpose of the Chancery Court?

The Chancery Court is a specialty court of limited jurisdiction which is intended to be a business court, where business-related conflicts are expedited through the judicial process. According to the Wyoming Judicial Branch’s press release, its “purpose is to provide a forum for streamlined resolution of commercial, business, and trust cases.”

What types of cases would go before the Chancery Court?

According to the Wyoming Judicial Branch’s press release, the court would have “jurisdiction to decide actions seeking declaratory or injunctive relief and actions seeking money recovery over $50,000 that arise from claims including breach of contract, breach of fiduciary duty, fraud, derivative actions, the Uniform Commercial Code, and the Uniform Trust Code.”

When will the Chancery Court be established?

Short answer – the ball is starting to roll pretty quickly. The Wyoming Supreme Court has reportedly been charged with establishing the Chancery Court rules and regulations by January 1, 2020 and beginning March 1, 2022, the Chancery Court judge position is to be filled through Wyoming’s constitutional judicial selection process.

What does this mean for your Wyoming business?

TAKEWAY: Among the other favorable aspects of doing business in the Cowboy State, Wyoming has established a specialty business court for commercial/business disputes in excess of $50,000 that will have the expertise to streamline disputes that occur in Wyoming involving business entities. 

For more information, check out the following articles:

Revision to Wyoming’s APD Rules: Proposal for Wyoming’s First to File Rule to Expire in 2 Years

At yesterday’s hearings, the Wyoming Oil and Gas Conservation Commission (“WOGCC”) released a proposed rule aimed at addressing the increased volume of drilling permits filed in the Cowboy State. The formal bulletin entitled, “WOGCC Proposes Rule to Address Volume of Drilling Permits,” can be found here.

If approved, the proposed rule, released in accordance with Wyoming’s rulemaking guidelines, will change several aspects concerning the filing of Applications for Permits to Drill (“APDs”), according to the bulletin:

  • Going forward, Wyoming will remain a “first to file state” for a two-year period
  • After the expiration of the initial two-year period, other working interest owners within a drilling and spacing unit (“DSU”) will be able to file APDs with a time limit placed on the operator to drill the well
  • A new checklist will be provided for information to be included in and submitted with an APD from (i) the operator who is not the current operator of the DSU and (ii) the operator of the DSU who holds the oldest pending APD or producing well

To review the proposed rule, click here.  Prior to the comment period, a public meeting will be held to explain the rule and answer any questions. Written public comments will be collected and reviewed during the 45-day comment period.

Stay tuned as we will be monitoring how this proposed rule develops! This is a big proposed change that could have many potential consequences for operators. 

Wyoming’s Increases in the Energy Sector are Visually Apparent

As I drove from Denver to Sheridan, Wyoming this weekend, two things caught my eye from the highway:

1. Coal: I passed not one, but two trains pulling railcars filled to the brim with coal. It has been awhile since I have seen a full coal train on the move, let alone two within hours of each other!

2. Oil: More derricks are springing up.

Actually, I should say three things caught my eye – the third is that Wyoming is greener than I have seen in many years. The grasses are lush and vibrant, transforming the prairies and hills.

COAL

Many may not be aware that Wyoming has been the nation’s leading coal producer since 1986. For more excellent information about Wyoming’s coal production, check out the Wyoming Mining Association’s website, which can be found here.

The coal in the Powder is truly a one of a kind commodity. Wyoming’s Powder River Basin, located in the northeast corner of the state, is known not only for the large size of its mines, but the unique features of its primary commodity. Because thick coal seams lay relatively close to the surface, the Powder lends to cost effective coal recovery operations, keeping costs lower. Further, the coal from the geologic formation there is lower in sulfur, making it cleaner when burned.

Of the roughly 5,500 employees reportedly working in the coal industry across Wyoming, more than 4,500 of them work in the Powder. Coal has always been a big part of Wyoming’ economy, and the commodity’s future is very volatile at this point.

OIL

Oil production is on the rise in the Cowboy state. In fact, according to a recent article published by Wyoming Public Media, which can be found here, oil production in Wyoming has risen to its highest level in 25 years.

In short, increases in the energy sector are visually apparent in Wyoming – only time can tell what the future is for Powder River coal and what lies ahead for the oil produced in the Cowboy State. Stay tuned!

Potential Oversupply and Slower Demand: Will OPEC Extend Production Cuts?

There is one thing on the mind of many folks involved in the oil and gas industry – the upcoming OPEC meeting in Vienna.  On June 25, 2019, the 176th OPEC meeting will be held.

In fact, there are already reports out there attempting to predict the potential impacts of the upcoming OPEC meeting and other global factors on the price of oil – check out this recent article from Bloomberg entitled, Bulls Beware: The 2020 Oil Market is Quickly Turning Ugly.

While oil prices have increased slightly today, they are still lower than many would like to see.  As of this post, WTI Crude is at $52.25 per barrel and Brent Crude is at $61.36 per barrel, according to Bloomberg Energy.  Of significant impact on oil prices is the fundamental nature of supply and demand – stockpiles are reportedly high (ish) and demand is currently low (ish), and may be going lower. 

Oil & Gas 360 released an article entitled, Goldman Sees Hard Path to OPEC+ Extension that discusses these supply and demand issues in the context of the upcoming OPEC meeting in detail.  The bottom line is that we may be going into the OPEC meeting with many uncertainties as to whether production cuts will be extended.  According to the Oil & Gas 360 article, stockpiles are currently at their highest level since mid-2017 and this oversupply is present “amid slower demand growth.”

According to the U.S. Energy Information Administration (“EIA”) Short-Term Energy Outlook which was released June 11, 2019:

Annual U.S. crude oil production reached a record 11.0 million b/d in 2018. EIA forecasts that U.S. production will increase by 1.4 million b/d in 2019 and by 0.9 million b/d in 2020, with 2020 production averaging 13.3 million b/d. Despite EIA’s expectation for slowing growth, the 2019 forecast would be the second-largest annual growth on record (following 1.6 million b/d in 2018), and the 2020 forecast would be the fifth-largest growth on record.

The takeaway from this is easily summed up by a recent CNBC article entitled, Oil Steadies as OPEC Supply Cuts Counter Growth Concerns as follows:  “While the talk of prolonged supply restraint is supporting prices, concern about slowing demand and economic growth has had a bigger impact on sentiment.”

Are we oversupplied?  Is there too much oil in inventories? How much will global oil demand drop?

We must wait and see…stay tuned!

Another Oil Glut Feared?

The headlines are all talking about supply and demand; specifically, oil supply and its impact on the price of oil.  As of the posting of this, WTI Crude is sitting at $58.07 per barrel and Brent crude is at $67.85 per barrel, according to Bloomberg Energy, and it has folks wondering where oil prices will go from here in light of oil inventories rising.  In fact, Oil & Gas 360 just released an article yesterday entitled, Rough Day for Oil: Crude Plunge Approaches 6% discussing the plunge in oil prices in detail.

The recent headlines include:

By way of a reminder, at the end of last year, a “glut” is reported to have helped contribute to the fact that oil prices took a significant tumble to that $45 per barrel mark, that we all would like to forget happened. 

So is another “glut” on the horizon? 

Let’s focus on North Dakota for now:

The North Dakota Industrial Commission (“NDIC”) released its most recent Director’s Cut on May 15, 2019, which can be found here.  North Dakota oil production reportedly bounced up approximately 54,500 barrels of oil per day from February 2019 to March 2019.  In addition, the number of producing wells reportedly increased by nearly 200 wells from February 2019 to March 2019, edging close to the all-time high number of producing wells which was 15,409 in January 2019.

However, the North Dakota rig count is reportedly down 70% from the high; the rig count as of May 15, 2019 was 65 and the all-time rig count was 218 from 5/29/2012.  The Director’s Cut also reports that drilling permit activity has returned to normal, operators continue to maintain a permit inventory that will accommodate varying oil prices for the next 12 months.

Now let’s look at big picture data:

According to the U.S. Energy Information Administration (“EIA”), crude oil inventories have risen – according to EIA data highlights, which can be found here, crude oil inventories as of May 17, 2019 are at 476.8 million barrels, an increase of 4.7 million barrels from a week earlier, and an increase of 38.6 million barrels from one year earlier. This increase was reportedly larger than expected, according to the article entitled, WTI Extends Slide to Weekly Lows Near $61 After EIA Report.

It is no secret that supply has increased, so the question remains as to whether supply has increased to the extent that it will cause a glut.  The upcoming OPEC meeting in June and many other factors may help us in determining where we sit on the supply front. Stay tuned!  

Wyoming: A Place for Energy and Persistence

“Energy and persistence conquer all things.” – Benjamin Franklin

Discussing topics in the energy sector gives one a certain, well, energy. A charge or *spark* – a bolt of anticipatory excitement and the promise of potential comes from being “in the know.”  I just received such a spark

The U.S. Energy Information Administration (“EIA”) released a new portal this week that will change the way that we analyze state-level energy data in the United States.  To be honest, I am very excited about it, in the only way that a true nerd in the energy sector who writes an energy-focused blog can be. 

It is called the State Energy Portal and can be found here

I was instantly pulled to focus on the Rockies, and one clear conclusion was apparent – states in the Rockies, namely, North Dakota, Wyoming and Colorado, produce more energy than they consume.  The Rockies are producers.  Check out the EIA states overview map here.  

Yes, there are obviously other states in the same boat that are producing more energy than they consume (check out Texas, Pennsylvania, New Mexico, Oklahoma and Alaska, for example).  However, there is not an entire producing region like the Rockies anywhere else in the United States.  States in the Rockies are synonymous with energy production – the Rockies are giants in energy production.

Benjamin Franklin said, “Energy and persistence conquer all things.”  That could not be more true for the Rockies, an area of the country built by persistence, grit and tenacity – and also by the energy sector.   

The Cowboy State via the State Energy Portal

The state-by-state analysis in the State Energy Portal is amazingly instructive.  As a native of the Cowboy State, I was first drawn to the analysis on Wyoming, which can be found here

The first sentence of the State Energy Portal analysis on Wyoming says it all:

“Wyoming produces 15 times more energy than it consumes, which makes it the biggest net energy supplier among the states.” 

Folks from Wyoming are taught from a very young age the importance of producing. Work hard, imagine big, create, labor and focus your effort – produce something valuable with your time.  It makes sense that Wyoming is THE giant in energy production. 

What is also important, though, is that the State has a variety of sources to tap for energy production.  According to the State Energy Portal Wyoming analysis, and the internal sources cited within the same:

  • Coal: 7 of the 10 largest U.S. coal mines are located in Wyoming’s Powder River Basin.
  • Petroleum:  Wyoming is the 6th largest crude oil producer in the U.S.
  • Oil Production: Wyoming’s monthly oil production is on the rise and in August 2018 reached its highest level in more than 25 years. Most of the state’s oil production increase has come from two primary regions in eastern Wyoming: the Niobrara Shale (due north of the Colorado border) and the Powder River Basin (due south of the Montana border).
  • Natural Gas: Wyoming ranks among the top 5 states with the most natural gas reserves.
  • Natural Gas Production: Most of Wyoming’s natural gas has come from fields in the Green River Basin located in the southwest corner of the Cowboy State.  Notably, more than half of the state’s natural gas is produced on leased federal land – recently in 2018, the federal government approved a large natural gas project in the basin, which calls for the drilling of 3,500 wells over 10 years.
  • Uranium:  Wyoming has significant uranium reserves and is home to the largest uranium mining operations in the U.S.
  • Wind:  Wyoming has some of the largest wind reserves in the nation and big wind-generating electricity projects are in the works in the State.
  • Hydroelectric Power:  Many people may not know that Wyoming is home to 21 hydropower dams and hydroelectric power is the 3rd largest source of Wyoming’s power generation.

TAKEAWAY:  Wyoming is an energy production giant.  It provides a variety of sources for energy production, which clearly causes energy-related industries to dominate the Cowboy State.  While Wyoming is my personal place to refuel and recharge, it also is a major energy producer for the nation. 

A Line in the Sand: Weld County & Boulder County

As a resident of Weld County, I can tell you that there are sometimes stark contrasts between Weld and Boulder Counties.  Although neighbors, the two counties have very different views – and I do not mean of the mountains. 

One of the ramifications of S.B. 181 is increased local control, allowing Colorado cities and counties more control over drilling operations through local zoning ordinances and land use regulations.  Hence, a line in the sand is beginning to be drawn between Boulder and Weld Counties…

On May 1, 2019, the Weld County Board of Commissioners (“Weld County Commissioners”) issued a press release entitled, “Local Control Focus of Board Action,” which can be found here.  During the hearing that same day, the Weld County Commissioners reportedly started the process to give the Weld County government control over oil and gas permitting by “formally designat[ing] all of unincorporated Weld County as being under the purview of county government as it relates to mineral resources – particularly oil and gas.”

The press release follows the “Open Letter from the County Commissioners” from April 16, 2019, the same day that S.B. 181 was signed by Governor Polis, expressing Weld County’s understanding of the value of Colorado’s oil and gas industry, which can be found here

The proposed designation is set for public hearing on June 10, 2019, during which time the Weld County Commissioners will act on the same.  Per the press release, public comment and participation is encouraged at the hearing.  

It is clear that lines are being drawn…stay tuned as more develops!

Colorado’s SB 181: Wyoming’s New Economic Stimulus Package?

It is no secret that Wyoming’s economy is heavily reliant on the energy and natural resources sector.  In fact, the primary forces behind the economy of the Cowboy State are mineral extraction, in the form of coal, oil, natural gas and trona, and agriculture. 

Wyoming is an attractive place to do business due to state incentives like no income tax and low sales and property taxes; however, Wyoming may become even more of a hot opportunity state in light of the passage of Senate Bill 181 by its neighbor to the south, Colorado. 

Colorado has recently taken serious steps to increase oil and gas regulation and revamp the make-up of the Colorado Oil and Gas Conservation Commission.  As Governor Jared Polis signed SB 181 into law yesterday, April 16, 2019, many are trying to anticipate the impact that the bill will have on the oil and gas industry in Colorado.  The future of oil and gas is uncertain, due in part to the significant reforms mandated by SB 181.  For a full discussion of the sweeping impacts of the bill, check out our prior post here

I have heard several folks referring to Colorado’s SB 181 as “Wyoming’s Economic Stimulus Package.”  The comment has been said in jest, but it got me thinking…

Will the oil and gas industry shift more of its focus to the Cowboy State in the wake of SB 181?

There are several factors that support the theory that Wyoming will greatly benefit from Colorado passing SB 181, including:

  • Rural Nature of Wyoming – Wyoming is one of the least populated states in the country.  In addition, the population of the state is spread out – meaning the population density is very opposite to that of Colorado.  As a result, the friction that Colorado has faced with the oil and gas industry as its towns and communities have rapidly expanded into producing areas will be practically a non-issue for rural Wyoming.  In fact, the New York Times wrote an article last summer commenting on this issue of the increase of production in Weld County coupled with Colorado’s population boom entitled, “In Colorado, A Fracking Boom and a Population Explosion Collide.”  Wyoming is a much more attractive environment for operations than Colorado, given Wyoming’s lower population.
  • Attitude – Wyoming residents are, in general, supportive of responsible oil and gas development in the state.  Talk in Wyoming is positive and hopeful of the boom to come, and folks are making what preparations they can in the hopes of a boom in the oil and gas sector again – welcoming it with open arms. Wyoming residents recognize the value of the revenue that oil and gas operations bring to the state.   
  • Workers with Grit – Wyoming is known for its quality of worker; Wyoming folks work hard and with grit, as working outdoors in all weather conditions requires.  

Wyoming presents a favorable opportunity for the energy and natural resources sector to grow, but will the oil and gas industry shift its focus to the Cowboy State in the wake of SB 181?

It is likely that Wyoming will benefit from the passage of SB 181 in Colorado, but only time will tell if SB 181 will be Wyoming’s new economic stimulus package…stay tuned!