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Gov. Doug Burgum speaks at the 2021 North Dakota Petroleum Council's annual meeting in Watford City, where ehe challenged the oil and gas industry to join the state in reaching net carbon neutral by 2030.

The year started out with news that TC Energy had gotten its water certification from Montana for the Keystone XL’s permit to cross under the Missouri River. Days later, however President Joe Biden signed an executive order cancelling the pipeline’s permits to cross the Canadian border with the U.S., after which TC Energy suspended its project — much to the dismay of many North Dakotans and Montanans who had been counting on those construction jobs to help carry them through the pandemic.

Pleas from the MonDak Congressional delegation, which even included Sen. Jon Tester now and then, to rethink this decision fell upon deaf ears. The pipeline remains in mothballs but TC Energy has filed a $15 billion trade complaint, seeking to recoup what it has already spent to date on building the pipeline.

Alberta, which had loaned TC Energy funds to help build the pipeline, is also mulling a similar suit.

That wasn’t the only executive order to cause angst in the Bakken and other Oil Patches across the nation. Biden also signed an executive order just a few short days later suspending new federal oil and gas lease sales, pending a review of the program.

Several states, including Montana, successfully filed suit to force the federal government to resume lease sales. North Dakota, meanwhile, filed a separate suit seeking to impose a deadline by which sales would resume.

The Bureau of Land Management said it would indeed resume sales in accordance with a Louisiana court judge’s ruling — but added that it would do so in ways consistent with the responsibilities Congress had given it to manage the sales responsibly. The resulting slow walk meant only one lease sale before the end of 2021. That’s despite the fact the agency was ordered to resume the sales in July. And despite the fact that the sales had already been through the usual public process and should have already been teed up and ready to go.

Meanwhile, Congress worked out the details of a bipartisan infrastructure bill that included $12 billion or so for investments in the oil and gas industry, including carbon capture and a restyled Bakken restart program for the nation to plug its abandoned and orphaned oil wells.

Dakota Access avoided a shutdown

It seemed like a near thing, but the Dakota Access pipeline avoided a shutdown order that was weighing heavily on Bakken oil and gas differentials and that likely discouraged at least some capital investment during 2021.

The legal wrestling mach between DAPL and the Standing Rock and Cheyenne River Sioux is far from over of course. Dakota Access filed an appeal in September, asking the United States Supreme Court to reverse the lower court ruling that ordered the U.S. Army Corps of Engineers to complete a more extensive environmental study of the disputed crossing 90 feet under Lake Oahe.

Briefs have been filed by both advocates and opponents to Dakota Access Pipeline’s motion, and the justices are set to meet in January to decide what cases they will hear. The Supreme Court does not hear all the cases sent to it. The justices can and often do decline to hear any case that won’t be precedent setting or ground breaking.

Meanwhile, the U.S. Army Corps of Engineers has not slowed down its efforts to complete the lengthier environmental study, which they said should be complete by Nov. 2022. After that, the record of decision is likely to attract more litigation regardless of which way the study goes, from whichever party didn’t get what they wanted.

Dakota Access has completed an expansion of the line while all this was going on, raising its capacity from 540,000 barrels per day to 750,000. That is less than the full expansion proposed for Dakota Access, which was ultimately for 1.1 million barrels of oil per day.

On a different DAPL legal front, North Dakota’s damage suit related to the Dakota Access pipeline protests won the right to proceed, prompting settlement talks with the relevant federal agencies for the state’s $38 million claim.

Carbon neutral by 2030

It raised some eyebrows at first, but Gov. Doug Burgum’s challenge to reach net neutral by 2030 is already proving to be a magnet for investment capital from around the globe.

Burgum issued the attention-getting challenge during the Williston Basin Petroleum Conference and said the state would achieve the goal of net neutrality not through regulation, but innovation. The state has hit the “geologic jackpot,” Burgum added, meaning that North Dakota can decarbonize not only its own fossil fuels, but potentially other states as well.

Burgum’s pledge has attracted more than $25 billion in potential capital to the state already, the governor later said. Included in that is a joint venture between Mitsubishi Power Americas and Bakken Energy to build out what would be one of North America’s largest and lowest cost blue hydrogen hubs.

The Synfuels plant in Beulah represents a unique opportunity for this venture since it already has an authothermal reforming unit. That, combined with underground carbon storage already being put in place, means the plant will produce blue hydrogen that has very near the same carbon intensity of green hydrogen.

An outgrowth of the public discussion of ESG rules and net neutrality for the state led the legislature to create the Clean Sustainable Energy Authority, which has been tasked with finding emerging technologies that can help North Dakota’s energy sector make the transition to a low-carbon ESG world. The body made its first grants at the end of 2021, including two projects in Williams County.

Those included the proposed $2.8 billion Cerilon GTL plant in Trenton, which plans to convert roughly 240 million cubic feet per day of natural gas into low-sulfur diesel, military grade jet fuel and other specialty products like naphtha. The other award went to Wellspring Hydro, which wants to extract commodities from produced water like salts and lithium, which would help reduce and reuse a waste product of the oil and gas extraction process.

Mergers and acquisitions flyEnergy mergers and acquisitions were the name of the game in 2021, and several Bakken operators were participants. Oasis Petroleum, newly emerged from bankruptcy, sold its Permian assets for less than half what it paid for them in 2017, and used the money to buy out Diamondback’s QEP acreage. While it seems counterintuitive given the recent bankruptcy, the purchase helped the company reach an appropriate economy of scale so it could negotiate better contracts and reach a level of production that sustains future exploration and drilling.

Canadian-based Enerplus, meanwhile, swooped in and bought up Bakken acreage from Hess and others, ultimately quadrupling its holdings in the Williston Basin.

Whiting, too, placed its bets on the Bakken, divesting its Colorado assets and picking up 8,752 net acres in Mountrail County from an undisclosed seller for $271 million. The acreage was a bolt-on for its existing operations in the Sanish Field. Whiting, in 2020, was the first Bakken company to declare bankruptcy.

ConocoPhillips, meanwhile, added a $9.5 billion Permian purchase to its portfolio, but said the Bakken will still have an important place in the company’s assets.

TENORM talk

A pilot slurry well continued to perform well in McKenzie County fueling hopes that the state will find a new way to approach TENORM disposal in North Dakota, after applications for two solid waste disposal landfills became the subject of heated public discussion. Ultimately, both landfills did receive their conditional use permits from Williams County, but not until after a regional study took a closer look at what the market really needs, as well as several public forums to answer the public’s questions about the permits.

State loses its No. 2 spot

Production in the state hovered just over a million barrels per day throughout most of the year, and tracked well with state forecasts, but did not meet pre-pandemic highs. The flatline didn’t keep pace with production in the Permian, which bumped the state from the nation’s No. 2 producer to No. 3.

Catching up with New Mexico seems unlikely, particularly in the short term, as a workforce shortage continues to hamper the oil and gas recovery in the state. Some 18,000 jobs are listed by North Dakota Job Services, but the real number of openings is probably more like 30,000.

Another, less talked about factor that is holding shale back is the fact that so many oil companies had hedged their bets at $50 oil for 2021. That means despite $70 to $80 prices for a barrel of oil, those companies are only getting $50 of that on hedged oil. The banks are getting the rest.

Once those old hedges come off, this will no longer be the case, and oil companies will be realizing the full price for their barrels of oil once again. Several companies have already said in many earnings calls that they expect to grow production 3 to 5 percent in 2022, versus the 1 to 2 percent most of them stuck to for 2021.

Despite losing its No. 2 producer status, the Bakken remains an economic play for investment capital, North Dakota Director of Mineral Resources Lynn Helms said during more than one of his monthly oil production reports.

An EIA report said the Bakken was the only shale play in the nation to improve its efficiency during the pandemic, an outcome Helms attributed to longer 3-mile laterals, better technology, and better approaches to Bakken shale.

State’s biggest spill gets biggest fine

Summit Midstream paid out $35 million for failures related to the release of 700,000 barrels of produced water near Blacktail Creek, which is not only North Dakota’s largest brine spill, but the largest inland spill in the nation. In a consent decree filed in court, the company admitted it knew it had a problem as early as August 2014 but didn’t walk the line until January 2015. It also admitted it under-reported the true volume of the spill by hundreds of thousands of barrels.

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