Keystone to Begin Construction
After years of uncertainty, construction of the Keystone XL pipeline in Montana will begin early next year – 2019. Details of an exact time schedule are still being worked out.
The announcement was made by Russ Girling, President & Chief Executive Officer of TransCanada, during the Montana Energy Summit. TransCanada is the Canadian-based company building the pipeline which will extend from Hardisty, Alberta, Canada to Port Arthur, Texas. The southern portion of the pipeline has already been built, the northern portion has been delayed for the past 12 years or so trying to obtain federal approval, which is necessary since it crosses the Canadian –US border. The $8 billion project remains a very important part of TransCanada’s planned energy infrastructure and portfolio, said Girling, who thanked President Donald Trump for approving “this very controversial and crucial piece of infrastructure. This project, after significant and unnecessary delay has a pathway forward to commercialization and bringing with it the significant security benefits, environmental benefits and economic benefits.”
The pipeline will pass through eastern Montana, 285 miles, crossing through six counties —Phillips, Valley, McCone, Dawson, Prairie and Fallon.
Besides the jobs that will be created in building it, and the expenditure of capital funding, the Keystone XL pipeline will generate $80 million of tax revenue for Montana annually, $63 million of which goes to the counties through which it passes. “Over 12 and a half years that is a billion dollars of tax revenues, the vast majority going to eastern Montana counties,” emphasized Girling.
Girling said that besides having finally received its permitting from the US government, the pipeline has also been permitted by the two provinces and three states through which it passes, including in Nebraska where the company had to change the route of the pipeline to obtain final approval.
TransCanada is a leading infrastructure company in North America, with “over 60 years connecting energy resources to market.” It is a $100 billion enterprise, operating in natural gas, pipelines and liquid pipeline and power generation.
The project was blocked by the Obama Administration, as it was fought by environmental groups and entangled in law suits.
The Bakken On Ramp planned for the area of Baker, Montana is still a part of the planned system. While over the last ten years’ delay, Bakken producers have found alternative transportation, production still continues to grow and producer interest in the on ramp, continues to grow, according to Girling.
Girling said that despite the delays his company has still been able to contract “with all of our Canadian and US refining customers.” Most have 20 year contracts. Girling said that he expects the pipeline to be full by the time it is completed, and that their first order of business will be to figure out ways to increase its capacity.
Production of oil in Canada and the US continues to grow at very rapid rates, said Girling in explaining the project’s viability. The Keystone XL Pipeline is important, he said, because “it reduces our dependence on foreign supplies and positions this continent as a dependable source of supply from a stable democracy which values the rule of law, environmental protections, and strong worker standards.”
US Senator Steve Daines, who sponsored the summit commented, “This pipeline equals prosperity for our state”
Daines said that in meeting with managers of rural electric cooperatives in Montana, he was told that because of the huge volume of electricity the Keystone XL Pipeline will need, their purchases will fund future capital needs of the cooperatives, which will allow the cooperatives to keep electricity prices flat for the next ten years for all their customers. That is just another benefit of the pipeline, he said, after pointing out that it brings broad benefits to tax revenues, jobs, economic growth and the environment.
“The $8 billion project does create economic prosperity and jobs,” said Girling, adding that “those who say it will create 35 jobs, obviously aren’t looking at the details, including such impacts as Senator Daines pointed out. “
Girling also commented that “the world is different than it was ten years ago and it requires us to up our game. The public expects more of us.” But at that, according to Girly, his industry has demonstrated a 94 percent reduction in pipeline leaks from 1984 to 2014.Existing TransCanada pipelines operates safely 99.99999997 percent of the time,” stated Girling.
“Rather than cut through rivers and streams we drill underneath them… so if there is a break the oil will move down and not up… We hope that never happens but we are employing technology differently today.”
Denbury Plans CO2 Pipeline
While the price of oil is going up, Chris Kendall, President and CEO of Denbury Resources Inc., thinks it is likely to go up even more. His company is planning to build a 110-mile pipeline next year to advance the development of Montana’s most important field to meet the future demand that is being reflected in increasing prices.
About 100 million barrels of oil is used in this world daily – and the demand is still growing.
“The glut is gone, the market is tight,” said Kendall, who went on to say that he believes there is under investment in oil development. “On the whole investment in oil is very low. I think that lack of investment is going to eventually show up in the market… and, we need ‘all of the above.’”
Denbury is an enhanced oil recovery (EOR) company, which uses CO2 to extract more oil out of the ground than was initially gathered. Denbury is unique as an oil company, since about two-thirds of its production is the result of EOR using CO2 which it obtains from its own sources. Denbury properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. Their northern properties are headquartered in Baker, Montana.
The company acquired interest in Bell Creek Field in southeast Montana as part of a merger with Encore in 2010. They also acquired Cedar Creek Anticline (CCA), what Kendall called the company’s “crown jewel.” It is their largest potential EOR property, over 300 million barrels, and their largest producing property, contributing approximately 24 percent of 2017 total production. The field is primarily located in Montana but covers such a large area (approximately 126 miles) that it also extends into North Dakota.
CCA is located approximately 110 miles north of Bell Creek Field. The company’s Greencore Pipeline which carries CO2 from Wyoming terminates at Bell Creek Field. The plan is to extend that pipeline to CCA or the Cedar Creek Anticline, in order to initiate CO2 flooding of the CCA.
Denbury will begin constructing a pipeline in 2019 that will “put us in a position to begin injecting CO2 in 2020 and begin EOR production in CCA in 2021.”
Denbury is Montana’s largest oil producer. “We are in a great position for our production now and we have great plans for what we are going to do with that in the future.” The company has invested nearly $3 billion in Montana since 2010 in the acquisition of property and capital investment in those properties.
Denbury development is currently investing $200 million to $300 million annually in developing the CCA, “but because of the gigantic resource that we have here, we see it as ultimately a multi -billion dollar, multi- decade investment that will be a great source of employment and economic power for Montana for decades to come .”
Denbury investments in Montana annual operations generate nearly $50 million in taxes and royalties. The company as a whole produces about 60 thousand barrels a day and about a quarter of that production is in Montana. Denbury employs 111 people in Montana.
“As a result of what we do, we are an extraordinarily high leveraged oil company. About 97 percent of our production is huge oil resources,” said Kendall. Denbury has 260 million barrels of crude reserves. Kendal said, “There is incredible potential here in Montana. In aggregate we see potentially over a billion barrels of resource for Denbury.”
“We actually have a challenge to think about what the price of oil is going to be long term.”
“It certainly is healthier for our company to look at oil that is definitely well above the 30 dollar range. During the downturn we looked at making ourselves more efficient and being just that much better at $50.” Denbury is now structured for $50 oil.
“Because of the nature of our business, I call us a carbon -conscious producer. We take nearly 3 million tons of carbon dioxide annually that is produced from industrial sources and inject that into our reservoirs.”
For Denbury carbon dioxide is “a great solution to find economic value through the taking of industrial sourced CO2 and putting it into the ground and putting it to economic value for the production of oil.
Denbury’s sources for CO2 are in Wyoming, and southwest North Dakota. They also a own huge supply, over 5 trillion cubic feet in Mississippi, used in Louisiana and Texas.
In explaining how the CO2 recovery process works, Kendall said, “a simple way to think about it is as though it is a solvent… We pump CO2 in. It collects and combines with oil.” The dissolved oil with the CO2 is then pumped out and the CO2 is removed and reused.
EOR gives the producer a third level of production. The initial stage of production gets about 20 percent of the oil. A second stage of water flood gets another 20 percent, and the third stage can add another level of production from the same well from 15 to 20 percent more oil depending on what kind of rock is involved. “We can recover nearly as much as we can recover in primary or secondary recovery,” said Kendall.
Denbury gets its CO2 from Wyoming from such facilities where they hold partial ownership, such as at Pinedale, Wyoming, or Lost Cabin, Wyoming.
VK Clean Focuses on Montana
Montana is “the single largest effort” of VK Clean Energy, according to Mark Klein, who is a co-partner in the company with Ross Vrba. VK Energy is a utility scale solar generating company with headquarters in Utah.
The company has three of its largest projects in Montana and three smaller ones. The facilities include MT Sun, Meadow Lark Solar and Yellowstone Projects around Broadview. MT Sun is an estimated $100 million, 80 mega-watt solar energy project, to be located just north of Billings. Their largest solar project is in Wyoming (Sweetwater Project) and VK Clean just finished a 20 megawatt project in Utah, and two 20 megawatt projects in South Dakota.
One of the reasons Montana has become such a focus of his company, said Klein, is the speed with which they can get permitted. It takes but one year compared to typical two year experience in other states. “We have had a very, very supportive state in terms of what we are trying to do,” said Klein.
The company will generate 500 megawatts of power in Montana, with a capital investment of between $500 million to $700 million. About 400 megawatts of that power is scheduled to be exported out of state.
Klein commented that he would very much like to see more transmission capacity out of the state.
Copper Mine Hopes for 2019 Start
The time line for opening the Black Butte Copper Mine is “going well,” reported Nancy Schlepp, Vice President of Communications and Corporate Secretary. The mine has almost all of its required state permitting because most of the mine is located on private property.
“We are expecting to be through the EIS (environmental impact statement) by the end of the year and to have our record of decision by the end of the year. We hope to have construction crews on the ground the beginning of the next year. It is expected to take two to three years to be completed.
Black Butte Copper Miner is a project of the Sandfire Resources America Inc., (formerly Tintina Resources, Inc.). The proposed mine is located north of White Sulphur Springs. And, “believe it or not we are not on the banks of the Smith River,” said Schlepp. The mine is 19 miles from Smith River.
Black Butte Copper project is a highly engineered underground mine. “Probably the first of its kind,” said Schlepp, “because as we are going to cement all the tailings (the ground up left over rock), and put half of the rock back underground where it came from.” The other half will be put in a double-lined facility “which is going to be pretty amazing.”
The company is investing $300 million to build the mine. Schlepp added that the recent federal tax reforms were beneficial to the company. At the current price of copper ($3.05), “we will have pretty good returns. And, the state will have $3 million a year in metal mine taxes.”
“The technology that is being employed is amazing,” said Schlepp.
The highlight of the project is that “We can protect all water quality and quantity and we will not treat water in perpetuity, which is very important to all of us in our future. All land gets returned to agriculture. There won’t be any rock left on the surface. We are creating 240 great paying jobs for fourteen years, and we have found another — a second deposit, which has to go through another permitting process, which could add another five years to the productive capacity of the mine.”
“We have found one of the highest grade deposits in the world.” The copper concentration is 3.4 percent. “It is the second highest grade under permit right now. The lower zone is incredible at 6.4 percent. To give you an idea where this falls, what they are mining in Butte is .1 to .3 — so, it’s a concentration ten to 15 times higher. That allows you to go underground and do all the extra environmental things you need to do.”
The foot print of the mine is small, according to Schlepp. The largest facility at the mine is the cement tailings which covers about70 acres.
Once in production the operation will take ore out in sealed containers, moving about 400 tons of concentrate a day to the railroad in Townsend or Livingston.
(Sandfire America’s CEO John Shanahan died June 11, 2018. Rob Scargill has been appointed the interim Chief Executive Officer of Sandfire America.)
Transmission Line Planned
Absaroka Energy is “very quietly but in a determined fashion” working on the development of a transmission line from Colstrip into Wyoming. It will provide access to other markets for Montana, and improve the functionality of the Colstrip system, which now just terminates at the power plant,” said Carl Borgquist, founder of the company.
Absaroka Energy is a company that focuses on the development of utility-scale energy storage, transmission, geothermal, wind and solar projects throughout the Western Interconnect. Their primary project in Montana is the Gordon Butte Project, which is in the process of FERC (Federal Energy Regulatory Commission ) licensing . “That process is not for the faint of heart,” said Borgquist.
The Gordon Butte Project is a closed loop pump storage facility located near Martinsdale. This very large and fast acting battery, will be hooked into the backbone of the grid to provide back-up and to keep systems running smoothly. It allows electrons to be stored in off peak hours, stored and brought back to be used on peak. [Wind and solar power requires back up power generation for periods when the wind doesn’t blow or the sun doesn’t shine.]
The system can move quickly from pumping to generating, explained Borgquist. It has the ability for pump storage to act as a shock absorber —for wind and solar — “to keep everything reliable is essential and critical,” said Borgquist.