Wednesday, July 29, 2015

Government Finance Committee Receives Updates on Oil & Roads


The future of oil
While oil activity has slowed down, it is far from being a bust. That was the message Director of Mineral Resources Lynn Helms delivered to lawmakers Monday at the capitol. Helms spoke to the Government Finance Committee on the current activity along with projections. To summarize, he says the current wells can easily maintain our current production; but growth will not be seen at the rate it has been in the past few years. Oil production and development will be a major topic as legislators work through the interim in preparation for the next session as oil revenues dump into several state funds.
“There are drastic differences when comparing today’s activity to that of nine months ago,” says Helms. “However, the boom is far from over. Companies are still obtaining permits at a level seen in 2011 and 2012. And if you remember, there was strong activity at that time. Companies may be putting drilling activity on the back burner, but they want the permits in their hand so they can flip a switch when prices rebound.”
Vern Whitten Photography
Helms predicts in three to five years there will be more than double the wells that currently exist. There are 12,659 wells pumping oil in North Dakota. What he expects to see next are more wells being drilled on existent pads. He told legislators they can expect to see six to 32 wells per spacing unit. The core area of the Bakken around Watford City and New Town is where you will see the highest concentration of wells per spacing unit.
Driving through oil country you are sure to see fewer rigs. Currently only 74 rigs are drilling, primarily in McKenzie, Mountrail, Williams and Dunn counties where it remains profitable even when prices are low. Dunn County has the lowest breakeven price per barrel at $24.  Helms says he expects to see 1200 less wells in 2015 than he projected in October 2014. While the rig count has dropped significantly, Helms says companies have found efficiencies. In 2015 a rig can drill 20-24 wells in one year compared to in 2009 when a rig would drill only 10 wells a year. So 74 rigs can drill 2,000 wells. In the beginning of the boom, 200 rigs would have been strained to drill that many holes.
The loss in rigs does mean a loss in workers. Helms told legislators almost 18,000 jobs were lost as 100 rigs packed up. Lawmakers indicated they would like to hear more from Job Service on unemployment numbers at a future meeting.
Road Construction Update
A slow-down in oil drilling activity has not carried over to less traffic. Director of North Dakota Department of Transportation, Grant Levi, showed committee members traffic counts from the first part of 2015. Where the traffic has been higher January through May in 2015 compared to 2014 and far exceeds 2010 numbers.
Levi says, “From 2010 to 2014 traffic increased 26% on all state highways. There is more traffic than the system was designed for. One stretch of US 2 near Stanley was designed for 20 years of traffic, but it reached its life expectancy in six years.”
 His facts reiterated the great investment need in transportation. $807 million of work on state highways, city and county roads will be done in 2015 alone. “A program of this size is only possible because of the Legislative Body passing Senate Bill 2103, otherwise known as the “Surge” bill.”
A map of 2015 construction projects shows work being done across the State. You can see the locations by visiting dot.nd.gov
In total, legislators appropriated $2.3 Billion for transportation funding statewide for 2015-2017.  

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