[Graeme]

As Evacuation Ends For Explosive Oil Train Crash, Officials Hint At The Persistent Threat Of Rail Transport

$this->bbcode_second_pass_quote('', 'W')hile the crash of a train carrying crude oil in North Dakota led to fireballs rocketing into the air, clouds of thick black smoke for 15 miles, and the evacuation of nearby residents, officials are saying the incident could have been much worse.

The residents of Casselton, North Dakota who evacuated have been cleared to re-enter their homes following the crash, which happened Monday when a 106-car train carrying crude collided with a derailed soybean freighter. Officials say residents were not exposed to any of the deadly toxins that explosive crude might give off, though one woman in the town said the particulates in the air alone were enough to make you “want to barf your guts out.”

In a press conference on Tuesday, Casselton officials acknowledged that even carbon monoxide poisoning would not be the worst potential outcome from such a serious crash.

“We could have had this go so many different ways,” said Paul Laney, sheriff of Cass County, which includes Casselton and is home to the highest rate of train derailments in the state of North Dakota. “If that thing happened a half mile into town, we’d be looking at a very, very different discussion here today.”
There’s no need to imagine the scenario of a massive crude accident closer to a residential area. Back in July of 2013, a tanker carrying North Dakota crude derailed in the Quebec town of Lac-Mégantic. It destroyed about half of the downtown area and left 47 dead.

North Dakota trains now carry more oil across the country than the controversial Keystone XL pipeline would. Ninety percent of the fossil fuel-rich state’s oil is carried by freight, shipped off to refineries all around the U.S. and Canada. One of those freighters turned up in a massive derailment in Alabama in November of 2013, when a 90-car train derailed and caught fire, sending flames 300 feet up into the air.

Still, rail transport of crude is proliferating in North America. A new proposal for a rail terminal in California may soon bring North Dakota crude to that state, too. And the executive of a major oil company has even deemed rail a good alternative to pipeline transport. The surge in rail transport, he added, is calling into question the importance of the Keystone XL pipeline.

[Synapsid]

Graeme,

That executive of a major oil company talking about no need for Keystone XL is Harold Hamm, Chairman and CEO of Continental Resources, major producer in the Bakken/Three Forks of North Dakota. He's talking specifically about the US oil industry, and has said before that his company doesn't need KXL for shipping its production.

Keystone XL was not designed for the US oil industry and does not depend upon it. Its purpose is to ship Canadian crude to refineries on the Texas Gulf Coast. Hamm's company had previously contracted to ship something like 30 000 barrels a day on KXL, which has a capacity of 830 000 barrels a day; it was never a major customer.

[SteveO]

Are the trains spaced too close together to stop?

I'd like to believe that the oil train was warned about the derailed train, but if it didn't have time to stop, it sounds like a recipe for disaster.

[Keith_McClary]

$this->bbcode_second_pass_quote('SteveO', 'A')re the trains spaced too close together to stop?

I'd like to believe that the oil train was warned about the derailed train, but if it didn't have time to stop, it sounds like a recipe for disaster.

[Surf]

$this->bbcode_second_pass_quote('', 'A')re the trains spaced too close together to stop?

I'd like to believe that the oil train was warned about the derailed train, but if it didn't have time to stop, it sounds like a recipe for disaster.

[SteveO]

$this->bbcode_second_pass_quote('Surf', '
')Traffic controllers may have not known the both tracks were blocked. Also,The two trains were probably to close for any warning to arrive in time

[Unit30Bull]

$this->bbcode_second_pass_quote('ROCKMAN', 'A')lso remember that mineral lease don't last for ever: don't drill before the lease term end and you've lost your investment in that lease. Given how high leases price got that could be a considerable loss.

[ROCKMAN]

All very good points Bull. But every operator can face that " cut bait or fish" moment. When the shale gas boom hit east Texas back in '08 Devon committed to 18 long term drilling contracts. When NG prices crashed by the end of the year they pulled the plug. Not only did they eventually lose leases they also paid $40 million in cancellation penalties by dropping 14 of those 18 rigs. As you say different operators will have different bail out prices based on a variety of factors.

As far as cutting back on the producing wells I've pointed out before for most companies cash flow trumps profit. I've seen more operators increase production in the face of falling prices than reduce their flow rates. And yes: I've seen many instances when an operator knowingly sold production for less then it cost to develop it. Debt has to be serviced and salaries paid.

[sparky]

.
This is funny in a sad sort of way ,
that's exactly the price/production dynamic of the Oklahoma wheat growers
when the depression cut the price , they produced more , which drove the price down even more
( then the winds started )

[ROCKMAN]

Sparky - In both cases it can get worse then sacrificing profit for cash flow: selling the assets for less than what was invested. I'm sure someone with the cash bought up a lot of the dust bowl very cheaply. Same model Big Oil has used to add reserves for almost a century. If we see a sustained drop in oil prices you'll see ExxonMobil et al go into a feeding frenzy making offers smaller companies won't be able to refuse. Not only because Big Oil has a huge cash reserve but often such acquisition include taking over big debt. And so many companies, like Chesapeake, have borrowed many tens of $billions to keep the Red Queen running. The Big Boys have an almost bottomless credit line. With their size they can easily weather a 5+ year down turn.

[sparky]

.
That's also the way they operate their business model ,
......pick the winners ,
they usually let the brave and the bold do most of the hard , risky , high failure rate work
then they step in and put the money on the table ,
they usually buy over the price but it doesn't matter since it's a no risk
corporate is indulgent for overspending but totally unforgiving for a straight failure
they know that in the long run tax break and rising prices will cover the blemishes

this is not totally true but is close enough
of course you will point out some spectacular failures and some stake in drilling
but if you have pockets deep enough ,
why take risk and depend on competent individuals , their characteristics make them bad corporate elements
just buy success

[Pops]

My latest charts of Bakken Growth, this is 12 month average volume change thru January:




This is 12 mo average percentage change

[Plantagenet]

Oil production from the Bakken is getting closer to its peak.

On the bright side, the WSJ had an article on Williston ND and said that about 450 million bbls have been produced from the Bakken so far, out of the 7 billion bbls thought to be present. This suggests that about 92% of the oil is still in the ground.

[Tanada]

I find it interesting that despite an ever growing number of wells producing oil in the Bakken the rate of increase seems to be declining at a steady rate, not growing as the number of wells grows.

[Pops]

Yeah, right now just looking at net new wells and bbls 'd guess it takes 50-60 new wells to make up for declines in existing. Obviously that number should continue to grow if the declines are as constant as predicted - more new wells to make up for more declining wells. There really wasn't much of a bump in new volume like I expected last summer and fall.

Remember, my plot is a 12 month running average so doesn't show the big swings of the monthly number like Rons at the top of this page but it does kinda smooth out the late winter weather disruptions and spring thaw road restrictions, etc. Should be easier to see the long term trend.

. . . not saying 12 months is a long term trend in tight oil, but . . .

LOL


P.S. Here are all the "Directors Cuts" reports from the ND DMR

[Tanada]

$this->bbcode_second_pass_quote('Pops', 'Y')eah, right now just looking at net new wells and bbls 'd guess it takes 50-60 new wells to make up for declines in existing. Obviously that number should continue to grow if the declines are as constant as predicted - more new wells to make up for more declining wells. There really wasn't much of a bump in new volume like I expected last summer and fall.

Remember, my plot is a 12 month running average so doesn't show the big swings of the monthly number like Rons at the top of this page but it does kinda smooth out the late winter weather disruptions and spring thaw road restrictions, etc. Should be easier to see the long term trend.

. . . not saying 12 months is a long term trend in tight oil, but . . .

LOL


P.S. Here are all the "Directors Cuts" reports from the ND DMR

$this->bbcode_second_pass_quote('Tanada', 'A')ctually given the massive decline rates 12 months might be 'long term' in the Bakken LOL.

[Pops]

If only all of your predictions had come true!

Actually, googling "global oil production" just now it looks like they have. There is such a disconnect its is eerie, to look at all the gushing (from stock pumpers, not wells) and then look at oil prices and production you'd think you clicked on the wrong chart. Prices are at record highs and production growth is at record lows - not counting the rise of OPEC anyway.

On second thought the disconnect isn't strange at all. Just before the '08 crash every single blogger, talking head and "journalist" was beside themselves slapping Wall Street on the back for discovering the perfect price discovery mechanism and raving in wide eyed rapture over the never deflating RE market. LOL

$this->bbcode_second_pass_quote('Pops', 'I')f only all of your predictions had come true!

[copious.abundance]

Am I a bloody f-ing genius, or what? Not only did I correctly predict that the Bakken (here using the state of ND as a surrogate) would reach 1 million barrels/day, and it even came a little earlier than I predicted!

Posted Wednesday, March 19, 2008, 6 years ago ...
$this->bbcode_second_pass_quote('OilFinder', 'T')hat gets up to 550 wells planned (assuming no joint ventures among the ones listed) just from those 3 companies from around 2007 to 2011. Couldn't find plans for EOG, Hess, Brigham and some others which are active there. Add those others in, plus some smaller companies, and we're probably talking about 1,000+ new wells by 2010-2011 or thereabouts. Assuming these new wells produce the same 500 bpd average, that would get us halfway to the million bpd by around 2010-11 (assuming pipeline capacity increases by then, too). I read one article recently which said that the state of ND received applications for 90 drilling permits in January. If that pace holds for the entire year, that's 1,080 new well permits in 2008 - though of course that doesn't mean they'd all be drilled right away. So we could be seeing 1 million bpd in ND by around 2015 or so.