Shortages of steel-toed boots in Helena? Yes, it's the Bakken, yet again

The article is too long and too jam-packed with information to summarize, so just go read Jan Falstad's article for Lee Newspapers entitled "Booming Bakken: Oil flurry spreads across Eastern Montana"

The usual information about housing shortages spreading ever westward in Montana is of course present, and there is this about traffic on I-94:

Like wagon trains of yesteryear, the traffic tells the tale of the Bakken oil boom.

Semitrailers haul sand, liquid nitrogen, pipe, tanks and modular homes across Montana to the oil fields and change the prairie night sky.

“When you drive down the interstate from Billings to Miles City or Glendive, all you see is traffic at night. It’s almost like the outskirts of Minneapolis,” said Mike Coryell, head of Miles City Economic Development Council.

Sigh. Yes, this is all too true. I log about 1000 miles a month pounding across eastern Montana highways, and I can attest that the days when one could put the cruise control on 82, put on some music, go to sleep, and wake up when you arrived at your destination are sadly gone. (Note to the beloved: I'm joking!)

On a more serious note, Falstad writes that the legislature has some serious work to do in sharing the wealth with the communities that created it. It's funny how Helena is full of politicians and bureaucrats who probably largely agree with President Obama's philosophy about "spreading the wealth around," particularly when the wealth flows from east to west in our fair state. That needs to change.

Under current law, the state keeps 50 percent of mineral tax revenues, schools get 20 percent, counties 19 percent and cities and towns, which shoulder most of the impacts, receive one-tenth of 1 percent.

She also notes that the real impact on Miles City may come if the Otter Creek coal fields start getting developed. I won't hold my breath.

But the most enjoyable part of the article was this:

One Helena mom couldn’t find steel-toed work boots for her son last summer because Bakken workers living in Montana’s capital and commuting to work had bought them all.

What will be next? Missoula becoming a bedroom community for the Bakken? That could prove interesting...

New Great Falls projects may pull workers from the Bakken

According to a recent AP article, new projects are coming into the Great Falls area, intending to provide service to the oil sands of southern Canada.

The Great Falls area has the benefit of being close to the Canadian border -- as we were reminded a few years ago when a Calgary couple had to come to a Montana town of fewer than 60,000 inhabitants in order to have their quadruplets delivered -- another triumph of the Canadian health service over the inferior American one. Additionally, Great Falls is large enough to provide a labor force, unlike other towns on Montana's northern tier.

That's potential good news to Montana residents who have relocated to the Bakken oil extraction projects in North Dakota.

They're now inquiring about possibilities to work closer to home, said Sarah Converse, director of Sweetgrass Development, an economic organization for north-central Montana...

Commuting to the Bakken for work from places like Great Falls and Billings is no cup of tea for workers. The development of service industries closer to home will be a boon -- but of course such service jobs are dependent on continued growth in the oil fields themselves.

Decker coal mine in Montana laying off workers -- meanwhile, Bakken jobs are projected to boom

While this may not be directly related to the war on coal that the Obama administration has waged, it certainly couldn't have helped: the Decker coal mine in southeastern Montana is laying off 75 workers.

The increased regulation laid on coal-burning electricity plants by the EPA have already cost a good number of workers in Billings their jobs at PPL's plant, now scheduled to be mothballed. And now, another set of workers in a major southeastern Montana coal mine. Many of them live in the Sheridan area, but as everyone knows, folks in Sheridan come to Billings all the time for shopping, medical care, and other services that are found here in the nearest "big city" to Sheridan and surrounds.

Meanwhile (hat tip to Bruce Oksol at Million Dollar Way), the Bakken is going to be producing 50,000 new jobs by 2015.

Bismarck State College is teaming up with Williston State, Fort Berthold, Sitting Bull and Turtle Mountain Colleges to provide necessary training.

"This is probably one of the biggest and most important partnerships that we`ve had with the state institutions. And it should have happened a long time ago," said Fort Berthold Community College President Russell Mason

The multiplier effect of energy development (like any economic development) thus shows itself in a positive effect on tribal and other area colleges.

Of course, none of this is thanks to the federal government (in spite of the President standing in line to take credit for increased domestic oil production.) Also thanks to Bruce over at Million Dollar Way: of 187 rigs currently drilling in North Dakota, only 3 or 4 are on federal land. (Unless you count reservation land as federal land -- which you shouldn't, since its use should be determined solely by the tribes involved.) I would point out that there is not a lack of federal land in North Dakota -- the Forest Service has pretty vast tracts of National Grasslands in the western half of the state, and there is some BLM land, too.

As Bruce points out there is perhaps some Intelligent Design involved favoring North Dakota, allowing for "sweet spots" of Bakken drilling to be located outside federal land.

The full article is in the Minot Daily News.

The GOP's new dominance of the Montana Public Service Commission: implications for coal, oil, and the Montana Bakken

I'm most gratified to see our friend (and fellow former Yellowstone County GOP chair) Kirk Bushman with a small but comfortable lead in the PSC district that encompasses Billings and its surrounds. Granted, there is a lot of vote to be tallied, due to problems with machines, but let's hope that the vote continues to break Bushman's way. Couldn't happen to be a better guy, and given Bushman's broad political interests, it will be good to have him on the Republican bench for possible future statewide races.

While all three races are tight as of the current vote tallies, and things could change, it is looking like the GOP could sweep all three PSC races, going from a 3-2 majority to a "clean sweep" 5-0 majority. As Brad Molnar (who was the sole Republican for a time on the Commission) can attest, a big majority makes a big difference, since a Republican commissioner can defect on any given vote without ultimate negative consequences. Bob Lake, from what we remember of him, is a very solid sort, and he is to be commended for being able to unseat an incumbent Democrat in a tough district for a Republican to win. As to Roger Koopman, granted, Montana Headlines is not exactly a fan club site. But congratulations to him all the same for being able to unseat an incumbent Democrat. May he prosper on the Commission and discover a talent for moderation, restraint, and rhetorical discretion... Everyone has it inside them -- you just need to dig deep and find it. And think about it -- if you stand in just the right place and squint your eyes just right while looking at the Montana PSC, it is like seeing (to steal a phrase from WFB) a dream walking: a solid majority of reasonable conservatives to make up the governing majority, and an extreme right-winger to play the obligatory role of the neutered opposition...

For the last couple of years the Montana PSC has had a 3-2 Republican majority, but much of the proceedings seem to have been overshadowed by fighting between Republicans Brad Molnar of Laurel and Travis Kavulla of Great Falls. I don't know Kavulla, but he seems like a very sharp and ambitious young man. He was formerly on staff at National Review, which speaks well of his general political disposition and intellectual capacity.

Brad Molnar I do know personally, and he was always very good to me and most helpful during my time of political involvement. And things are never boring when Molnar is around! (My interview with Molnar back in 2008 still holds the record for being the most-read post in the history of this site.)

At one point, Molnar (a Ron Paul supporter) and I (a McCain supporter because of his being the presumptive nominee and because he had overwhelmingly won the Montana primary election over Paul) tried to team up to broker a compromise between Ron Paul supporters and the McCain people in order to avoid a floor fight at the 2008 Montana GOP convention. We were ruthlessly shot down by the McCain honchos, for whom nothing but total victory for their side was an acceptable outcome, but it was fun trying.

I haven't spoken to Molnar since these problems erupted on the PSC, but the bottom line is that with the GOP in control of all 5 seats, we can expect that reasonable decisions favorable to traditional energy development will be produced, regardless of inevitable intra-party disagreements. We also have every reason to hope that the interests of Montana consumers will trump theoretical green energy benefits.

What exactly can the PSC do to promote traditional energy development in Montana? Not a lot directly. One thing it can do is to restore full accountability and honest accounting when it comes to telling Montanans about the true cost of green energy requirements for Montana utility companies. There are those who believe that there has been smoke and mirrors used to cover up the true cost of wind energy in our state, and the Commission will be able to address that -- laying out the numbers in front of the public and asking Montanans if they think the cost is worth the benefit.

A "pyramid scheme" in the Bakken? And an oil refinery for New Town, ND?

When I first wrote this a few days ago, I was planning to put it up on Monday as one of my energy-related pieces, but the heart of it really has more to do with cultural issues than with energy.

Besides, I think I will give some pre-election thoughts and predictions on Monday, since it will be the day before Election Day. On Wednesday, there will be a lot of political things to talk about regarding what happened on Tuesday, so that will put me back on track. I have an idea about what I want to write about next Friday for my cultural offering, but I will want to do it some justice.

* * * * *

I know I am often tendentiously critical of Billings Gazette editorial practices, but there are reporters working for that newspaper, and for Lee newspapers in Montana in general, whose work I admire.

Long-time readers know my deep respect for the "just the facts" approach of lead political reporter Charles Johnson, for general interest reporter and one-time "City Lights" columnist Ed Kemmick, and for local political reporter Tom Lutey (yes, I know some Republicans think he is biased, but he always shot perfectly straight with me every time I dealt with him when I was heading up Yellowstone County's Republican Party.)

Not mentioned nearly often enough (given the primarily political emphasis this site had for its first years of existence) is the ever-reliable Jan Falstad, whom I mentioned for the first time earlier this year.

Now, she has a whopper of a summary about goings on in the Bakken. And how can you beat leading off with the story of developers planning to built a giant pyramid in Williston, ND -- the epicenter of the Bakken oil boom? It's just one of those stories where truth is stranger than fiction.

The North Dakota state capitol is the tallest building in the state, and while it reminds me entirely too much of Soviet architecture (given the centrality of the Nonpartisan League in the state's political history, that shouldn't perhaps be surprising) -- but still, the idea that something as tasteless as a Vegas-style pyramid would eclipse it seems somehow wrong. A traditional skyscraper to headquarter a major company and provide office space, condos, and the like? Fine. But a pyramid? Egad! Do some capitalists feel a burning need to live out the philistine caricature that leftist artistes assign them? It's almost enough to make this traditional energy booster start having sweet daydreams about Solyndra... But not quite.

Back to Falstad's piece, though. Tucked into the piece is this stunner:

The Mandan, Hidatsa and Arikara tribes on the Fort Berthold Reservation in New Town, N.D., just received a key federal permit to build the first major U.S. oil refinery in 30 years.

That is simply jawdropping -- it has been taken nearly as an article of faith that environmentalists would never allow the building of another oil refinery in this country -- ever again. One suspects there is some back-story to this. Did the tribes have some flexibility because of their legal status as an Indian nation? Or did minority concerns help grease the wheels? No matter. I couldn't be happier for that particular group of tribes. They were grotesquely mistreated by the Army Corps of Engineers when Garrison Dam was being built. "New Town" received its name because their other towns (which had been nestled down in the Missouri River valley (think the shelter that Billings enjoys) were all flooded by the vast Lake Sakakawea, and they were built a "new town" up on the windswept plains as a consolation prize.

I first encountered the entire sordid, brutal story in the Marc Reisner's fine book on water in the American West called Cadillac Desert (that the story takes place in the 1950s and not the 1850s only makes the story more repugnant.) The residents of the Ft. Berthold Reservation had perhaps made the smoothest transition to the modern world of any Indians here in America -- largely because they were not nomadic, but rather were farming tribes to begin with. They became fine stockmen, ranching along the well-sheltered and well-watered banks of the Missouri River and being models of the kind of acculturation and assimilation that the federal government supposedly wanted from Indians. They also lived an old-fashioned subsistence lifestyle that would have been familiar to most Americans of any race just a generation or two prior: raising large gardens in the rich bottomland; using timber they cut on the flats along the river for houses, fences, and firewood; making use of the many springs and creeks for their own use and to water their livestock.

What they experienced was the complete loss of a way of life for which they could never be compensated, even had the government tried to do so (and in fact, Lt. Gen. Lewis Pick of the Army Corps of Engineers made it one of his missions in life to punish the Ft. Berthold tribes for what was quite mild resistance -- punish them by making sure the terms they received for “compensation” were as unfavorable and even vindictive as possible.) Little wonder that George Gillette, in the famous photo at right, could do no other than to break out into tears at the ceremony at which the various Indian tribes along the Missouri gave up their land to be flooded (the dams were generally positioned such that white towns would be spared.)

They had already adjusted once to the arrival of the white man -- and then their readjusted lives were demolished just to control flooding in downstream cities like St. Louis. And it wasn't just that it was done, it also was the way it was done -- with cruelty and vindictiveness. The name Lewis Pick deserves to be remembered with the great villains of history. Read that chapter in Reisner's book if you ever get the chance (he refers the reader to another, more detailed, source which I also read -- but I don’t remember its name, and my copy of Cadillac Desert isn’t ready to hand.) If your eyes don't tear up when reading it, something's wrong with you.

Well, enough on this tangent. I hope they make out like bandits on this oil refinery deal. Getting back to Falstad's piece, here are a couple more interesting tidbits:

A decade ago, Williston’s airport handled about 6,000 passengers coming and going each year. Next year, the airport expects that many fliers each month. This airport and seven others serving the oil boom need more than $300 million in improvements.

North Dakota’s city sales taxes jumped 41 percent in the second quarter, with Williston’s sales tax up nearly 58 percent. That means the town of about 45,000 collected $857 million in sales taxes in three months, mostly due to oil production and its spinoffs.

A lot is happening and a lot is changing in western North Dakota. Not all of it has been pretty or easy, especially for long-time residents who were content with how things were before the boom. That state has seemed, however, to be making Herculean efforts to make the transition happen as smoothly as possible and to prepare for what will happen when the boom is over.

New airport in Dakota oil country

OK, so it's not going to look exactly like the airport in the photo, but the effects of the Bakken boom are inching closer to my homestead.

Dirt has started to move on a new $12 million airport in Bowman, ND. Bowman is south of the Bakken proper, but has long been an oil town, forming a sort of triad with Buffalo, SD and Baker, MT (the Red River formation underlies this area.) The existing airport west of town already had the best facilities of any of the small-town airports on either side of the state line, in no small part because of oil-related private aviation. It is about to get better with the building of the new and expanded airport east of town.

While there are no plans for commercial service to the airport, the report notes that it is expected to act as a "pressure release valve for other Oil Patch airports." Busy BNSF rail service comes through Bowman, but an even greater importance of Bowman is that it is at the crossroads of the east-west highway US 12 and the north-south corridor of US 85, so a lot of road traffic comes through it as well. The airport will expand Bowman's role as an important transportation hub in the region.

Yet another example of the good things that can accompany traditional energy development.

Coal state Democrats -- does Montana follow the pattern?

A lot of coal state Democrats are running from President Obama and his stances, which can only be reasonably described as hostile to the coal industry.

Some (but by no means all) high-profile Montana Democrats have not tended to follow that example. Gubernatorial candidate Steve Bullock has broken with his fellow Democrats on the land board on a number of occasions, voting against coal development. Senator Tester has likewise been pretty quiet about President Obama's EPA, and indeed has doubled down in defending EPA policies that other coal-state Democrats have condemned as unreasonable. As we noted before in our "between a frack and a hard place" piece, one plausible explanation for Montana Democrats being timid about going all out for coal is matter of just who is writing the checks to their campaigns.

As a Charles Johnson article noted today, Steve Bullock's lead in fundraising this cycle is completely a function of his high percentage of out-of-state donors. As always, Johnson's article is good, straight reporting. It is interesting that the Helena Independent Record's headline emphasizes Bullock's money lead, whereas the Billings Gazette headline emphasizes the fact that his lead results from out-of-state money. Given that the Gazette caused near-coronary events in Republican households across their readership area by endorsing Republican Rick Hill in Sunday's paper (is Hill poised for a more comfortable victory than we have been led to believe?), perhaps this headline is meant to give a little justification for that endorsement.

Getting back to money, Bullock's lead in fundraising demonstrates just how a dependence on out-of-state money puts Democrats in red states like Montana in a bind. Public sentiment is strongly in favor of natural resource development here in Montana -- and not just with Republicans.

And yet, when red state Democrats toe the environmentalist line insufficiently, they run the risk of losing all of that out-of-state money from liberal activists around the country who want some return on their investment.

Red state Republicans and blue state Democrats have no such conflict: any out-of-state conservative donor, for instance, will tend to have similar concerns as the average (right-of-center) Montanan on things like energy development.

Bakken activity a boon for petroleum engineering at Montana Tech

Activity in the Bakken has had a lot of positive spillover effects, and as a recent op-ed in the Fairfield Sun Times by Leo Heath, the head of Montana Tech’s petroleum engineering indicates, it has ignited the imaginations of at least some incoming students:

It was about 2002 that Montana Tech began to see a spike in interest in its petroleum engineering program. Drilling activity in the Elm Coulee was a spark for it. In 2002, the department had an enrollment of 130 students. By 2005, we were seeing increases of 10-15% per year.

In 2011 Montana Tech had grown to be 8th in size out of 19 US undergraduate petroleum engineering schools. And this fall, we're at an all-time high enrollment of 350 students seeking degrees in petroleum engineering.

In today’s economy, students are probably seeing the benefits of training in something that has practical application and a healthy job market, and for the foreseeable future, the oil and gas sector isn’t going anywhere.

High school students are also influenced by what they see. I went to high school in a western Dakota town of 1500 people, of whom about 15 were doctors at our regional medical center. Unsurprisingly, there was a steady stream of graduates from our high school who went on to medical school at a rate far above that of most rural towns.

Likewise, having the Bakken booming in the eastern part of the state is going to get many enterprising students to thinking -- if truck drivers are making up to $100K a year, there are probably jobs to be had in a booming oil industry that require college educations. And indeed, Heath states that 40% of their students are from right here in Montana, with most of the rest being from the greater region surrounding Montana. There are additional advantages for companies who recruit the typical Montana Tech student:

They've grown up outdoors. They come, a lot of them, from a background of doing hard work outside. They have an appreciation of the land, and they are comfortable around machinery. And they know if they do the work here, they can find a good job somewhere.

Heath does point out that most of the entry-level jobs in petroleum engineering are going to be at regional offices, and not in Montana, so the opportunities they create are pathways of success for their students, but not necessarily ways of allowing students to stay or return here. Still, it is a net positive for Montana Tech and its students to benefit from the attention the Bakken activity has stirred up. As a final note, Montana Tech is also involved in some research projects in Montana’s portion of the Bakken -- another way in which the school is tapping into the boom.

Coal development in Montana and surface rights

There were recently a couple of articles that highlight some competing interests regarding coal mining in Montana. The first is a Daily Interlake editorial decrying the "war on coal" by the EPA, spurred by the closing of a PPL Montana coal plant, with ownership citing EPA regulations as the proximate cause of rendering the plant unprofitable to keep open.

The story is a familiar one -- the plant would have to be refitted to the tune of $38 million in order to meet current regulations. As someone who breathes the air in this part of the Yellowstone Valley and who has experienced some respiratory problems that were new to me until I moved here, I confess that I would want to know a bit more about just how out-of-date the plant is with regard to emissions before completely dismissing the EPA's standards as unreasonable.

Still, it seems inescapable that the editors are correct that the current bunch at the EPA have "declared war" on coal.

Rick Hill landed a nice body blow to Steve Bullock in the debate the other night on this very topic:

Hill used his question to attack Bullock’s record on coal development, asking why Bullock failed to join 24 state attorneys general from coal-producing states this year when they challenged new Environmental Protection Agency rules Hill said would harm coal-fired power plants.

It seems as though Bullock has a problem choosing which battles to fight. He could tilt at windmills by trying to take down Citizens United singlehandedly. But he couldn't be bothered to file a brief against Obamacare in spite of that law's unpopularity in Montana, and he wouldn't join in challenging EPA coal regulations in spite of his claim to support coal development.

I digress, however. The other article that was interesting to note was this piece in the Washington Post regarding the conflicts that some Montana ranchers are having over coal development.

The strip mining of coal is, without a doubt, the most unpleasant kind of energy resource development to have in one's backyard, since its footprint is so large. It is not a permanent footprint, given modern regulations about the restoration of the soil and landscape, but for a given generation, it probably feels like forever while it goes on.

The fundamental problem, however, is the American system of decoupling surface rights from mineral rights. I am fortunate to own the rights on my own ranch, but not all ranchers are blessed in that way. One thing is certain (at least to me) -- nothing, and I mean nothing, should be allowed to compromise the long-term viability of agricultural activity on anyone's land. Oil wells will eventually run dry, coal beds will be stripped, natural gas will be bled off. But as long as the rain falls and the sun shines, and as long as the soil is pure and ground water is uncontaminated, agriculture can go on -- theoretically forever, if things are taken care of. It is the ultimate renewable resource.

The point here is that while perhaps our legal system shouldn't allow a limitless veto power to surface owners, they should have a powerful say about what mining and drilling happens on land they own -- precisely because they and their descendants will be ranching and farming that land long after the resources beneath the ground are gone. If ranchers are trying to block coal development, it seems pretty clear that they as surface owners aren't being compensated fairly and their concerns aren't being adequately addressed.

While readers of Montana Headlines know that I am pretty bullish on traditional energy development, this is one place where I have to cast my vote with the sometimes curmudgeonly Cattle Queens (and Kings) of Montana.

Steve Bullock and the pipe-dream choice between high-tech and oil/coal

There's not a lot of burning news in the Montana energy world this week that I felt worth commenting on, so how about discussing Attorney General Steve Bullock's recent comments?

He is trying to play the old "high-tech vs. extraction industry" game that Democrats love. Democrats don't want to be accused of being entirely anti-business, and yet they want to keep their base happy, which is largely anti-business in practice. So what to do?

For one thing, talk a lot about alternative energy and all of those ethereal "green jobs" they think could be created if only enough government funding could be thrown at it. I've already expressed my opinion on what I think about trying to force alternative energy technologies into mass production that aren't ready for prime-time, so I won't go on about that.

The other game to talk up is the "we want high tech" thing. Here's Bullock:

There’s no way Montana shouldn’t be leading the nation and being the next Silicon Valley...

Well, duh... who doesn't want high-tech jobs in their states? Name one governor who doesn't want to have "the next Silicon Valley."

A couple of states spring to mind as ones who are making serious strides. Texas for one, and North Dakota for another. Here is an interesting quotation from the latter article:

Doug Burgum, known locally as the godfather of software for building Fargo’s Great Plains Software into a billion-dollar business, told attendees at a conference last week that the absence of “massive socioeconomic problems” makes North Dakota an ideal place for tech companies to grow.

“We have a state with a surplus. We can invest in the future,” Burgum said. “If you’re in Illinois, you are not having this conversation because you’re talking about the possibility of the state actually being bankrupt.”

Exactly. As I have pointed out before, there are two important factors needed to attract companies -- high-tech or otherwise. One is an overall healthy climate for business from a tax and regulatory standpoint, and another is bursting state coffers. To quote myself:

There are those who want Montana to try to attract "green jobs," high-tech industry, or even manufacturing instead of promoting the grubby business of extracting coal, oil, and natural gas from the ground. The reality is that in order to attract business, a state needs a "grub-stake," as the old time prospectors used to call it.

"Only" 25% of state revenue comes from energy in North Dakota, but what that revenue allows for is tax structures that promote other kinds of business development in the state. Broad-based economic growth requires a positive attitude toward business in general, and the North Dakota experience is proving that.

So let's come back to Attorney General Steve Bullock, who unlike the current governor has voted against developing Otter Creek coal. In general, he has made the obligatory symbolic gestures to act like he is supporting natural resource development like coal, oil, and gas, but when it comes right down to it he is far more anti-energy than our current Democratic governor and can therefore be reasonably expected to accomplish even less in terms of energy development -- and Montana is being left in the dust as it is.

Montana does indeed need to continue to look for ways to further diversify our economy, including encouraging high-tech and other non-energy related industries to start or relocate here. Doing so, however, requires a commitment to across-the-board business development, including robust traditional energy development. Think Rick Hill.

Absent that, Bullock and Montana Democrats can indulge in all the pipe-dreams and empty rhetoric they want to about wanting to be "the next Silicon Valley."

As 49 other state governors would say, "good luck, and get in line, bud..."

Re-routing the Keystone XL pipeline -- implications for Montana and the Bakken

The last we heard, the Canadians were going to deal with the Obama administration's refusal to approve the Keystone XL pipeline by building one west to the Pacific instead, allowing for easier delivery to hungry Chinese and east Asian markets -- a move that would have left Montana and the Bakken fields out in the cold.

It seems that Transcanada is going to try again, by proposing a new route through Nebraska. The Obama administration had used Nebraska's failure to sign off on their portion of the route as the ostensible reason for nixing the project entirely.

As a U.S. News article points out, however, it really wouldn't matter what magical route could be found through Nebraska:

The regulation redundancies only scratch the surface of many environmentalists' concerns over the pipeline. Their beef with the project is further upstream and involves the extraction and processing of the oil sands themselves, an issue no amount of creative pipeline re-routing can address.

Exactly. While the Nebraska route and environmentally sensitive areas may be the immediate reasons given for torpedoing the project, the real problem is that the oil pipeline would carry.... well... oil.

Even if the Canadian oil sands produced oil without a process that emits greenhouse gases, environmentalists would still oppose it, because oil pipelines carry... well... oil.

I've heard some Obama partisans criticize the Obama administration for not laying all of the blame for the Keystone XL pipeline debacle squarely at the feet of the state of Nebraska, which would allow President Obama to escape responsibility.

Such arguments miss a fundamental feature of the landscape: the President is a true believer in shutting down traditional energy development. Were he to use the Nebraska problem to full rhetorical advantage, he would be boxed into approving the pipeline should a Nebraska route eventually be approved. Should he be re-elected (an eventuality that MH predicted long ago) he will use whatever reason is convenient to torch the project.

Transcanada obviously is hoping for the best, but one suspects that their best plan will be to start planning their pipeline route through the Canadian Rockies. Montana and the Bakken will just have to keep hauling much of our oil by the more environmentally destructive means of truck and train...

Railroads and the Bakken

Good news from Burlington Northern -- they are going to increase their shipping capacity for oil from the Bakken. As we have noted before, there is a shortage of pipeline in the Bakken fields at present, especially on the Montana side of the border, so train transport of crude oil is vital to getting the product to market.

As we have noted before, this is a good thing, since increased traffic increases railroad revenue and gives them more profits to reinvest in the infrastructure of their tracks and equipment -- and anyone shipping products in or out of Montana by rail will benefit.

The railroad said it has also formed a dedicated Unit Energy Desk that works directly with customers to help coordinate and plan unit train movements to and from the Williston Basin.

These efficiencies plus increased numbers of oil cars on the BNSF trains will account for most of the increased volume.

According to the Chicago Tribune:

(BNSF)had previously said it would spend $1.1 billion to buy locomotives, freight cars and other equipment, much of which would serve North Dakota.

Furthermore:

The railroad is investing $197 million on projects like track surfacing, building two inspection tracks and replacing 121 miles of rail line, among others, in North Dakota and Montana.

Again, that's private infrastructure -- and we're all supposed to like spending on infrastructure, correct? And this is infrastructure that doesn't get paid for out of the public coffers.

Other good news is that increased rail capacity is helping drive recent improvements in the "Bakken discount" (i.e. the lower prices paid for Bakken oil due to more limited transportation capacity and thus higher transportation costs.)

Of course, one can't help but wonder this: rail transportation of oil is much more expensive than pipeline transport, and it furthermore pollutes the air more (those diesel engines) and arguably carries more risk for spills that can damage the environment.

Democratic Party icon Warren Buffett's Berkshire Hathaway owns BNSF -- does he know something the rest of us don't when it comes to the prospects of more pipeline being built? Is he gambling on what he suspects will happen, or will sympathetic players in the government put up more roadblocks to pipelines in order to keep his railroad's costs competitive? Or was cancelling the Keystone pipeline enough to ensure profitability?

We'd like to think not -- level playing field and all of that sort of thing -- although rent-seeking is hardly unknown in the often tidy relationships between big business and big government. We can be sure that Buffett's liberal fans won't call him on the carpet for profiting from carbon-based fuels that will cause the oceans to rise (unless Obama ever gets around to raising his staff and commanding the raging seas to calm themselves), profiting from fracking and drilling and burning fuel and all of that sort of thing.

Regardless, this increased capacity is a good thing for Montana and North Dakota oil producers if it gets them better prices for their crude oil.

We would parenthetically note that a good reason to vote for Republicans for statewide offices this fall is to make things run a little more smoothly for granting easements for pipelines. We note that our Democratic Superintendent of Public Instruction, Denise Juneau, recently cast a vote against granting an easement for a pipeline that already exists! (Her reason was that she didn't think the state was charing enough.) Exxon Mobil was wanting to replace existing pipeline -- what's not to like about that -- replace older pipe with newer and presumably safer pipe? The easement passed, but one is confident that Republican Sandy Welch would not have cast her vote against that pipeline.

Million Dollar Way and the Bakken

Happy Labor Day to all. Hope everyone is out laboring, making the engine of our economy hum. You can be sure that nothing is stopping in the oil fields of the Bakken today -- think good thoughts of gratitude about those hard-working guys while filling up your gas tank on your way to or from work (or recreation) today.

As I ease my way back into things after my surgeries, I want to use today's energy post to thank Bruce Oksol at Million Dollar Way for mentioning Montana Headlines. He had previously linked to my American Spectator piece on Montana and the Bakken, and recently caught the fact that I had linked to him.

Anyone who is interested in what is going on with oil production in the Bakken formation -- especially in North Dakota -- needs to browse through Bruce's blog from time to time. It is the gold standard for just getting lots of information out there.

Montana Headlines is really less a blog than it is a web publication where I put out three columns a week. Million Dollar Way is what a certain kind of blog can be -- multiple posts a day filled with raw information that simply isn't gathered elsewhere. And if the number of hits that arrived at this site within hours of Bruce's post are any indication, a lot of people are following his blog closely.

The material, furthermore, is assembled and aggregated by a thinking human being, and not by a computer program (we've all seen those useless aggregating sites.) So check it out.

I'll be back with more in-depth considerations of energy development in Montana next Monday.

Billings company moves into the Canadian oil sands market

It has been three years since Ed Kemmick wrote his fantastic series of pieces for the Billings Gazette on the explosion of activity in the Alberta oil sands.

At the time, he noted that there was a downturn in what had been an expected jump in activity in Billings to service that particular oil boom. Now, however, signs point to a resurgence of business here.

In a recent Gazette article, Tom Howard reports that "a Texas company involved in a high-stakes plan to provide equipment used in developing the Canadian oil sands is counting on its Billings manufacturing plant to get the work done on time and under budget." The project's international dimension adds to its exotic panache, going beyond the obvious benefits of its 200 Billings employees (with a predicted 50 more to follow shortly.)

Indicative of the kinds of long-term vision and risk involved in such a venture, in 2008 Bay Ltd. purchased a former Holland loader manufacturing facility in Billings, converting it to make large and complex "modules" that are used in extracting oil from the Canadian sands. We realize that they "didn't build that," but for the moment, lets humor the company by pretending that it did have something to do with it.

But Bay Ltd.’s Billings venture doesn’t come without risk. The company is awaiting approval from the Montana Department of Transportation to transport the big loads along Montana highways to the Canadian border. The modules are 24 feet wide, up to 25 feet tall, up to 120 feet long and weigh up to 156 metric tons.

Luhan said Bay Ltd. is working with 10 power companies to arrange moving power lines to accommodate the large loads as they head north. More than 470 power lines have to be moved. Once the loads cross the international border, it will be easy transport because the Canadian government has developed a “high and wide” corridor to accommodate large loads, Bay Ltd. officials said.

And there are further flies in the ointment: the shop is non-unionized, which has local unions upset rather than happy for the blokes who have found good jobs in this economy. We suppose we can expect the unions to use their political clout to try to make approval for the above logistical issues more difficult. But such hardball would probably run the risk of backfiring in the court of public opinion, which likes it when jobs are created.

Perhaps the most important quotation in the piece was this, however:

Rick Leuthold, director of business development for Sanderson Stewart, a Billings-based engineering company, said the manufacturing processes used by Bay Ltd. could translate into new industries that serve communities involved in energy development.

This is the operative concept -- successful businesses attract and inspire more of the same. Photos in the article show Montana GOP legislators touring the facility -- one hopes that they come away with ideas for how Montana can create a healthy business climate that encourages more manufacturing concerns like this one.

A Tale of Two Maps: Natural gas production in Montana and South Dakota -- plus some thoughts on fracking

Maybe it was watching the recent “Dark Knight Rises,” but somehow I have lately ended up with Charles Dickens's “A Tale of Two Cities” on the brain. It has even spilled over into my musings on energy production in Montana, as the title of this post indicates.

According to the Billings Gazette, North Dakota’s oil production is on track to triple by 2025. All of those wells currently being drilled are going to keep pumping out oil and producing natural gas for a long time. Will Montana’s oil production triple? Who knows?

What really caught my eye in the article, though, were the natural gas production numbers:

North Dakota produced a record 650.8 million cubic feet of natural gas in April. Montana produced 85 million cubic feet for the month, and South Dakota's production was pegged at 42.1 million cubic feet.

I have before discussed North Dakota’s “stratospheric” oil production numbers and compared them to Montana. But this isn’t going to be another post comparing ND to Montana.

No, what made me sit up and take notice was that South Dakota produces fully half the natural gas that Montana does.

You see, as I sit writing this, I am at the family ranch in South Dakota, about 25 miles from the Harding county oil fields. While there are a few wells in the far southwestern corner of the state, more than 90% of oil and all of the gas production takes place up here in the far northwestern corner of the state. In fact, South Dakota's “vast" oil fields currently take up all of 1/2 of one county -- take a look at the map.

By contrast, Montana’s potential oil fields are far more extensive (see the partial map of Montana at the top of the post) and are in multiple parts of the state. It is hard to see how South Dakota’s minuscule fields could reach 10-20% of Montana’s natural gas production, let alone 50%.

One possible contribution could be fracking. I spoke to state Rep. Betty Olson, who along with state Senator Ryan Maher comprises the entirety of the "oil and gas caucus" in the South Dakota legislature, and she noted that while fracking isn’t necessary for oil production in the Red River formation that underlies the South Dakota fields, it has been used there for natural gas production since 1979.

Given that we have some who strongly and vocally oppose fracking in Montana and have increasingly stringent DNRC regulations regarding fracking, it is reasonable to wonder what effect this is having on Montana’s gas production numbers (which have dropped) -- another subject for inquiry, I suppose.

The first question I asked Betty after she mentioned fracking was whether, in 33 years of using that technique to enhance natural gas production in South Dakota, she had heard of any instances of it affecting the quality of well or surface water. Her reply? Not a single one.

Betty and her husband Reuben have been ranching in Harding County for as long as I can remember. I got to know Reuben from his years as one of the members of the crew that long sheared sheep for us and pretty much every other sheep rancher in our area. Betty is also the head of the Harding County Historical Society, and last year I had the pleasure of joining that group for a tour of historical sites in the North Cave Hills -- something I hadn’t done since I was a kid.

I can attest to their love for this land and their concern that this beautiful part of the country not be spoiled for future generations.

Betty is part of an interim SD legislative committee that is studying the impact of the Bakken oil boom as its effects continue to spill over into northwestern South Dakota. The committee is also trying to be proactive about oil and gas development and its effects on landowners, emergency services, schools, roads, and the like -- knowing that it could increase in South Dakota as well.

My point is that while she favors oil and gas development, my impression is that her visceral loyalties lie with the ranchers and other long-time residents in the area. At the first whiff of trouble for water supplies in this arid part of the South Dakota, Betty would be the last person to turn a blind eye to any dangers posed by fracking.

Talking to her, I was struck by the combination -- favoring oil and gas development and being clear-eyed about the potential problems and the necessary infrastructure and long-term planning that will be necessary to manage any boom the future might bring.

A couple of links related to my Montana Bakken piece

I’m happy to note that RealClearEnergy (part of the RealClearPolitics family of websites) included my American Spectator piece on Montana and the Bakken on their July 6th “Morning Edition.”

I was also happy to see that it got some attention from the mother of all Bakken blogs, Bruce Oksol’s Million Dollar Way.

That blog’s subtitle, incidentally, used to be “All Bakken All The Time,” but has since changed to "Some Bakken Some of the Time" -- something I can relate to, since the subtitle here at Montana Headlines has likewise been through a few changes as the emphasis in my writing has evolved.

Interestingly, one of the parts Bruce Oksol picked up was the effect of Montana’s higher percentage of federal land, and a commenter provided an interesting link to the Rocky Mountain Oil Journal about the 2010 Montana “permitorium,” in which the BLM suspended 61 oil and gas leases in Montana that had already been granted. The BLM was responding to litigation from a number of environmentalist groups hostile to traditional energy development.

It all makes for interesting reading.

Montana Headlines may be a little thin for a few weeks. I’ve got several deadlines for articles I have to have written before going under the knife to have my knee operated on. God willing, I’ll be healed up and wading the Stillwater River in search of trout by October.

Montana coal trains ready to “spew”?

Railroads make money by hauling things that people want to buy. That money can in turn be used to improve rail service.

This is vital in places like Montana that depend on rail and highway transportation to access markets around the country and around the globe. As demand rises in Asia for coal from Montana and Wyoming, traffic from trains hauling coal will increase in Montana. On that point, opponents of coal mining in Montana are right.

Whether the trains will "spew coal dust across several states,” as the purple prose of the Billings Gazette photo caption states (using the language of coal opponents in an indirect quotation without identifying who used that word -- the text of the article doesn’t say), remains to be seen. With increased traffic does come the necessity for improvements, whether of safer crossings, more overpasses and underpasses, or lines that are routed around denser population centers -- all the things that high-volume rail traffic requires.

Coal opponents, as the Gazette article reports, claim that "the local impacts could be severe for local and state governments dealing with the increased rail traffic,” and that state and local governments could be left picking up the tab.

It is true that railroad crossings involve government funding, and that is because railroad crossings are a shared responsibility between governments and railroads. Railroads own the railway rights of way and the tracks, while governments own the roads and streets involved. This is primarily a federal responsibility, not a state and local one. The federal government brings in a great deal of tax revenue in corporate and individual income taxes from the coal industry. Any costs that state governments might incur will be more than made up for with royalties, excise taxes, and income taxes that the state collects.

What we are talking about here is what our friends on the left claim always to want the government to build -- infrastructure. But infrastructure that greases the wheels for traditional energy development (and that is a shared private/public responsibility, no less) apparently isn’t the kind of infrastructure they have in mind.

Why, the logical person asks, don’t opponents take a collaborative and constructive attitude toward coal development and the railway service that builds up around it? Just once, it would be nice to hear something to this effect: “We fully support the development of coal mining in Montana -- and we look forward to working with the coal industry and railroads to improve our railway infrastructure in Montana. We want coal development and we want rail traffic that disrupts our lives and our air quality as little as possible. So here are some suggestions that we think will work to everyone’s benefit...”

Would that be so hard? If the real agenda is global warming activism, I suppose it would be very hard indeed. If the real agenda could instead become economic development and our state’s fiscal health, then we might hope for something more constructive and collaborative.

Coal development should go full speed ahead in Montana, and those who are concerned about rail traffic should put their energies into finding ways to improve railway crossings and routes rather than into stopping coal-mining in Montana.

Montana Democrats -- caught between a frack and a hard place

Three recent pieces in the press give an indication of just how and why Montana Democrats are torn over how to approach traditional energy development in Montana.

The first appears to be the account of another local success story in the making. Jan Falstad provides another fine article in the Billings Gazette on Bakken-related business development, this time telling the story of two Montana brothers, Sivert and Richard Mysse, who put their farm-boy know-how to work in developing a new truck for heating fracking fluid. After noticing how many trucks were needed to heat water at a fracking site in the Bakken oil fields, they got the idea of constructing an innovative truck that they say is "twice as big, one-third more efficient, and safer than the competition," according to Falstad’s report. By heating the water for fracking, fewer chemicals are needed, and the entire process is more efficient. The brothers sold some ranch land near Ingomar and used other “creative financing” to build the $2 million truck, and they are now marketing their services in the Bakken.

Whether their enterprise will be a financial windfall for the brothers remains to be seen, but this is the kind of entrepreneurial spirit -- seeing a need and coming up with an innovative way to meet it -- that is inspiring. We suspect that given the demand for services of every kind in the Bakken, they will indeed be successful. Small businesses like this are the lifeblood of a healthy economy. Concerns that employ a half-dozen people here and there add up quickly.

Meanwhile, we have a guest editorial in the Helena Independent-Record decrying the fact that the Montana Land Board voted 3-2 in 2010 to take another step toward finally developing the Otter Creek coal reserves. The lead author of the op-ed is Montana writer Phil Condon, and he was joined by 3 other Montana authors (including William Kittredge,) actress Margot Kidder, and the chair of a Livingston-based liberal women’s activist group.

The authors criticize Gov. Brian Schweitzer, Sec. State McCulloch, and State Auditor Monica Lindeen for “siding with Big Coal.” They state that Attorney General (and Democratic nominee for governor) Steve Bullock and Secretary of Public Instruction (sic) Denise Juneau oppose the permits, which indicates that there will be a change of attitude in the state house if Bullock is elected governor. While we have been critical of what has seemed like 8 years of foot-dragging on the part of Gov. Schweitzer, at least his rhetoric has often been there, favoring coal development of one sort or another. And in this case, his vote seems to be there as well.

I’m not familiar with most of the authors of this editorial, but have enjoyed a couple of William Kittredge’s books (even while failing to share some of his cynical attitudes toward the West in which he grew up.) As public intellectuals, their voice has a certain influence in Montana and they deserve to be heard out, as do all who express their opinions thoughtfully.

In my recent American Spectator piece, I made the observation that many Montanans of a certain bent seem determined to be stuck in the past (hard to believe that I as a pretty old-fashioned conservative am even writing that,) noting that AG Steve Bullock’s arguments in the Citizens United case seem appropriate for 1912, but not really for 2012. The Copper Kings are long dead and they aren’t coming back -- the alphabet soup reasons (EPA, OSHA, DEQ...) why the landscape has dramatically and permanently changed when it comes to “Big Mining” of any sort are well-known to everyone. And yet, predictably, the Condin piece leads off with the “Copper Kings.” Pretending not to know how irrelevant this argument is in 2012 amounts to an inexcusable rhetorical mendacity on the part of skilled and experienced writers who know exactly what they are doing with their words.

The authors’ concerns about contaminating water supplies used by ranchers find great sympathy here at MH. What one would rather see, however, is an attitude that seeks both to strictly protect water supplies while also encouraging mining and development. Instead, the real argument is found deeper into the piece -- coal mining’s purported effect on global warming. Take away the global warming argument, and the pressures to find a “win-win” situation are inescapable. Include it, and any rhetorical weapons -- relevant or not -- are justified in the fight to save the planet, whatever the cost to individuals or to local economies. The intended audience of this article really consists of just three people, just as many of those ranting articles in the media leading up to the Obamacare decision were really only being written for one reader. In the latter case, the pieces were being written for Chief Justice John Roberts. In the former, the piece is being written for the three Democrats who are perceived as favorable to proceeding with the coal leases -- only one would need to flip a vote to stop the development cold in its tracks. But the calculus is more complicated than that for Montana Democratic politicians.

Which brings us to the third article -- a Washington Post piece that centers on Montana’s Democratic Senators, Jon Tester and Max Baucus, and their support for the Keystone XL pipeline. Sen. Baucus has, according to this report, been particularly open to lobbying for the pipeline. Sen. Tester has been supportive but seems more muted. The financial politics of Senate races play a significant role here, one would think. Baucus, with his role as head of the powerful Finance Committee, has an endless stream of people and entities in the financial sector who are lining up to line his campaign's pockets. Baucus doesn’t have to worry about money -- he just needs to worry about votes, should Montanans (who overwhelmingly support the Keystone XL pipeline) decide they care more about energy development than about what Baucus’s seniority can do for the state.

Sen. Tester, on the other hand, is heavily dependent on the sort of bicoastal left-leaning fundraising that gave him an edge when he took on then Sen. Conrad Burns. At the same time, he also needs those votes. So Sen. Tester seems to be trying to navigate the shoals carefully -- give enough support to the Keystone pipeline to satisfy Montana voters, while being quiet enough about it so as not to dry up his out-of-state funding sources. Whether out-of-state fundraising is playing a role in AG Bullock’s decision not to support Otter Creek is an interesting question for which there is not, as yet, an obvious answer.

One thing would seem likely -- entrepreneurs like the Mysee brothers and their employees will likely cast their votes for those who at the very least are not hostile and obstructive when it comes to traditional energy development -- while Condin, Kittredge, Kidder, et al. could play havoc with Democrats’ ability to raise money from liberal sources should they continue to push the issue.

As the title above says, Montana Democratic politicians in high-dollar races are indeed between a frack and a hard place.

My piece in The American Spectator

My recent web article at The American Spectator on Montana and the Bakken can be found here. I’ll be chatting with the redoubtable Aaron Flint about it this morning on Voices of Montana.

Thanks to everyone who patiently answered my background questions and who gave useful critiques on the piece while it was in preparation -- you know who you are.

I’ll be returning to my usual Friday series of book reviews, movie reviews, and other cultural offerings next week. And of course, please tune in again Monday for more on energy development in Montana and on Wednesday for commentary on Montana politics.

Signal Peak Energy -- Coal in the Bull Mountains

It's Monday, and time for more on old-fashioned energy development in Montana.

Signal Peak Energy has submitted their bid to lease state land for coal development in the Bull Mountains near Roundup. Their bid of $3.5 million essentially meets the minimum bid that the state said it would accept -- 30 cents per ton, which was the same bonus payment Signal Peak had agreed on with the BLM for its land in the area.

This is, of course, just an upfront bonus. The state will also receive additional money in the form of royalties (set by Montana law at a minimum 10%) on all coal actually produced.

We are a long way from coal actually being mined, though. The state Land Board (made up of our 5 statewide officeholders -- currently all Democrats) must approve the lease, and then all of those agencies have to go to work on their studies and reviews and analyses and inquiries. One or more agencies can be predicted to make things difficult -- we'll see down the road -- and we'll see whether any objections are solid or simply obstructionist.

There is a time for public comment on the bid, but one would expect that the Land Board will approve the lease, this being an election year and all.

One thing worth noting -- Signal Peak is the only bidder and was probably willing to make the bid because it already has operations and infrastructure in the area. If Montana's government were going out of its way to encourage developing what the governor calls the "Saudi Arabia of coal" we have in this state, wouldn't we have a business climate that would encourage more players to be in on the action?

In the long run, having multiple competing coal developers actively working in Montana would not only increase the amount of coal being produced, with attendant state revenue, jobs, and economic development -- it would also eventually lead to bids actually being part of a... yes!... bidding process -- as in competition -- which generally leads to higher bonuses and royalties.

We should, however, perhaps consider ourselves fortunate that we have at least one company willing to meet the minimum bids set by the state. We could, after all, have thrown a coal party where no guests ever arrived.