by Amanda Hvidsten
For our state, the energy industry is number one. We have 800 years of lignite and we also have the number one status of wind potential in the U.S. We are the fifth largest oil and gas producer. That’s promising for jobs, both blue-collar and white-collar. There’s a lot of work out there generated by the energy industry – it really touches all ends of campus in terms of prospective graduates from UND or graduates looking to get into a new industry.” – Ryan Rauschenberger, ’06, North Dakota deputy tax commissioner
The following articles are a glimpse at the tremendous energy business booming across the state of North Dakota. From fossils to renewables, North Dakota is leading the way.
Big Oil
Often in the hot seat, oil companies get a lot of attention. Prices, production levels, environmental issues, dependence, independence…they all make headlines. But, when we think of oil, do we think North Dakota? We should.
Oil production is big business for the state, economically, environmentally, and otherwise. Robert Harms, ’80, is president of Northern Alliance of Independent Producers, which represents oil and gas producers, and companies aligned with those interests in the Dakotas and Montana for matters of public policy, environmental concerns, and the like.
“It’s an important industry for North Dakota and the country,” said Harms. “Economically it provides enormous benefit for the people who live in North Dakota. Nationally it is a key part of our energy mix and will be for decades to come.”
North Dakota is the fifth largest oil‐producing state in the U.S., and most of the supply is drawn from the Bakken Formation near Stanley, N.D. While there’s no way to tell exactly how much oil is in the Bakken, a 2008 U.S. Geological Survey report estimated that recoverable oil could be about 4.3 billion barrels.
Extracting oil from the Bakken has had its ups and downs since it was first discovered in 1951. Ryan Kopseng, ’99, has followed in the footsteps of his father, Loren Kopseng, who attended UND in the late 1960s. Their business, Missouri River Royalty Corporation, was founded in 1984 by Loren and his longtime business partner Don Russell with one oil well. It is now a fully diversified energy company called United Energy Corporation. But, the great opportunity of the Bakken has come with its share of challenges. “There is an old saying in the oil business that the best place to find oil is where it has already been found,” says Ryan. “Geologists have known that the Bakken Formation in North Dakota contains huge amounts of oil since the 1950s but it was not economic to drill for it until recently. The Bakken is known as a ‘resource play’, meaning geologists know the resource is there– figuring out how to get it out of the ground economically is the challenge.”
Ron Ness, president of the North Dakota Petroleum Council, also referenced the Bakken’s main hurdle. “Certainly the Bakken has a lot of challenges because it’s a very difficult resource to produce oil,” he said. “It requires a high oil price to make production economical but we are doing groundbreaking work every day to deal with this.”
Booms and busts are part of the industry’s history, but new technologies have made this era of oil drilling much more sustainable. Advances in drilling operations are one example. Says Ryan Kopseng, “The advent of horizontal drilling and fracture stimulation have unlocked the vast potential of the Bakken. Horizontal wells capable of initially producing over 1,000 barrels of oil per day are now very common in North Dakota.” He said, “The most prolific wells discovered to‐date are in Mountrail County, near Stanley and Parshall. Some of the wells in Mountrail County initially will produce as much as 3,500 barrels of oil per day and will ultimately produce more than a million barrels per well. These wells cost between $4 million and $6 million to drill and complete.”
Horizontal drilling is where the technology advances prove huge dividends. A directional driller is able to drill vertically for many thousand feet into the earth’s surface and then drill sideways into a pocket of oil. Horizontal drilling increases oil production because these types of wells can expose more oil for recovery. So much so that the added cost in drilling horizontally is easily made up for by the increase volume of recovered oil.
Harms comments, “We can go out to an oil rig, meet a directional driller sitting at his own office, managing three to four computers monitoring the drill string/drilling pipe. In the meantime, he’s in consultation with a drilling company in Dickinson or a geologist in Denver or an engineer in Houston online. It’s exciting to see all that happen – it’s phenomenal the kind of technology being applied to the industry today.” He explains there are still “rough necks” working on the oil rigs as he had done while in college, but the person who is doing the actual drilling is the directional driller using computerized methods and controlling the drill bit with what looks like a video game joystick.
Hydraulic fracturing is another method used in production. The Bakken Formation is a shale configuration that spans approximately 200,000 square miles. According to the Energy Information Administration, hydraulic fracturing has been used in oil fields since the 1920s, but in the Bakken, the shale has not been conducive. The process in general is defined as “pumping a fracturing fluid into the well bore at a rate sufficient to increase the pressure down hole to a value in excess of the fracture gradient of the formation rock. The pressure then causes the formation to crack which allows the fracturing fluid to enter and extend the crack further into the formation. In order to keep this fracture open after the injection stops, a solid proppant is added to the fracture fluid. The proppant, which is commonly sieved rounds and, is carried into the fracture.” Shale can expand when exposed through fracturing a vertical wellbore, therefore sealing off an oil pathway. Whereas, with horizontal drilling, as detailed above, the fracturing process is now better suited for the Bakken environment.
North Dakota’s oil industry prospects are estimated as some the best in the country, if not the world, since they are American‐owned and now more easily accessible. Ryan Kopseng said, “It has been said that Bakken play in North Dakota and Montana is the biggest on‐shore oil discovery since Prudhoe Bay on the Alaskan North Slope. The huge size and potential of the resources has caused oil companies to invest billions of dollars in North Dakota. Millions of acres of land in Western North Dakota remain untested and prospective.”
One of the biggest benefits of the oil industry to North Dakota has been the generated tax revenue. In 1997, under then‐Governor Ed Schafer, ’69, the state approved a permanent oil trust fund, which takes a portion of the oil and gas tax and puts it in the Bank of North Dakota. This trust fund has grown over the last decade or more to be roughly half the $1 billion surplus North Dakota enjoys while many other states are facing deficits.
“The Bakken is really a game‐changer for North Dakota,” said Ness regarding its economic impact. “If we can advance the technology to improve the productivity of The Bakken in other counties like we have in Mountrail County, it has potential to change our state’s financial resources forever. Look at schools in western North Dakota that have been losing students for decades. They are growing. It’s because the wages are high for these jobs, averaging nearly $80,000. And, these are long‐term jobs. Once you drill a well, it’s like putting up a business with a $6 million storefront. It has to be developed and maintained.”
Bringing the benefits of the industry full circle, Harms pointed out that not only is the oil tax revenue driving our economy, but that revenue stream should be sustainable based on oil use. Nation‐wide oil continues to be the most economic fuel for our energy needs. “We have an entire energy structure based on economics – oil is the most economic,” Harms said. “We have a growing renewable industry but it’s never been above eight to 10 percent of the industry. That’s why as a state and country, oil will continue to be a significant part of the energy mix for the foreseeable future. For North Dakota, we are blessed to have that here to provide enormous benefits long term.”
This sentiment is echoed by the Department of Commerce. Ryan Rauschenberger, ’06, is deputy tax commissioner and former manager of energy development for the Department of Commerce. “The Commerce department and the Governor’s Office highly value the energy industry. It has played a huge part of North Dakota economy for a long time particularly in terms of the traditional forms of energy. We expect it to go for long time into the future,” he said.
What’s especially exciting is that UND graduates, including those referenced within this article, are dominating this industry, locally and otherwise. Said Ryan Kopseng, “Hundreds if not thousands of UND grads are directly and indirectly employed by the oil business in North Dakota. Most of the oil and gas attorneys in the state are UND grads. A large number are employed as oil and gas landmen, engineers, and geologists. We are everywhere in the oil patch.”
A UND degree carries a lot of weight within the industry, particularly as the demand for more and more employees in and around the industry increases. “UND graduates virtually dominate the landscape of the industry in the state,” said Ness. “It really is remarkable how many people who work in this industry have received their degrees at UND. We hope that the University continues to educate these kinds of people because we need them all.”
Investments by the University’s School of Engineering and Mines to this regard include a new undergraduate concentration on sustainable energy, with the potential for a master’s program in the future. For more information on this topic, see page 40. Energetics, engineering entrepreneurship, and petroleum engineering are also critical areas of emphasis to develop the best and brightest in the industry.
Wind Energy
"It's windy at our place. Can we put up a wind farm?"
A simple, logical question that comes from many North Dakotans. Dubbed the “Saudi Arabia of wind,” Nodaks are used to windy days, especially in the Red River Valley, which the U.S. Geological Survey indicates as having 10‐20 percent higher wind speeds than the rest of the state.
National Wind Assessments is a regional company that specializes in meteorological (met) tower installations, wind data collection and assessment. They are often asked this simple, logical question about putting up wind farms.
Debbie Jacklitch‐Kuiken, ’05, is a meteorologist and mechanical engineer serving as a project manager for wind resource assessment with the company. On the technical side of such a simple question she responds, “We need a lot of data to use wind energy well, at least a year, and more than five years is great.” The finer details, she points out, are efficiency, typography, roads for getting equipment to a wind farm, environmental issues such as migratory bird paths, wildlife refuges, water protection areas, potential issues with noise pollution from turbines, flicker or the shadow cast from turbine blades, distance of turbine sites to roads and residences or occupied and unoccupied buildings. The list goes on.
As with anything the devil is in the details.
The time it takes for a wind energy project to go from concept to production can average at least five years. Once a site is proposed and data is gathered, estimates of annual energy production are made down to monthly and even hourly numbers. The layout of the wind farm is designed by engineers and then the approval process begins. Jacklitch‐Kuiken noted Public Service Commission, Fish and Wildlife Services and the community‐at‐large have to sign off on the project, land agreements need to be made, and turbine manufacturers get involved to make sure the land and the design work with their turbines. “Everything is double and triple checked,” she said.
Crossing all the Ts and dotting the Is can be daunting. Yet, according to Lauris Molbert, ’79, ’83, executive vice president and chief operating officer of Otter Tail Corporation, a leader in local energy market, “We tip our hats to public policy in North Dakota because they’ve made it very business friendly. There’s a lot to get through but North Dakota is very embracing of getting it done. There are many other political environments where it isn’t nearly as friendly.” Otter Tail’s reach spans both the electric and manufacturing aspects of the energy industry. Specifically for wind, its operating company, DMI Industries, is recognized as a leader in wind energy tower production; and its operating company, Otter Tail Power Company, is believed to have the highest percentage of owned wind generation by a regulated utility in the nation.
In the case of North Dakota, perception is reality when it comes to being windy. North Dakota is the leading state for wind energy potential in the nation. In fact, according to American Wind Energy Assessment, Germany is the world leader in terms of installed wind power with over 22,000 megawatts (MW), enough to power more than five million homes, yet it has only a fraction of the wind energy potential that North Dakota has.
Turning opportunity into action, turbines have been installed over the last number of years adding wind to the state’s energy production portfolio. North Dakota is currently the 13th largest producer in the U.S. According to a June 2009 Grand Forks Herald article there are 488 wind turbines operating in the state, producing roughly 715 MW of electricity. That level of energy can power more than 205,000 homes. It was also noted that the Public Service Commission estimates output will increase to nearly 1,000 MW, or enough to power about 290,000 homes.
State incentives have helped that capitalization. Ryan Rauschenberger, ’06, is deputy tax commissioner and former manager of energy development for the Department of Commerce. He has worked with energy companies, both generation and manufacturing, to lay out how the state is an attractive place to do business. Bridging both economic development and finance, Rauschenberger has been able to talk financing, tax incentives, workforce development, and regulatory information. Pointing out specific tax advantages, he said, “For wind and renewable energy generation, there is a three‐pronged tax approach: Sales tax exemption on any equipment used, an 85 percent reduction in property tax, enhanced income tax incentives and a 15 percent state income tax credit.” The credits were also expanded in North Dakota’s 2009 legislative session to span longer periods of time. “Developers say we are competitive,” he added, “because our state income tax isn’t high to begin with. We have an all‐inclusive approach where other states may rely on one tax arm, not all three.”
In addition to projects currently online across the state, there are another 149.1 MW under construction. Companies that have developed wind farms in‐state include NextEra Energy Resources, Otter Tail Power Co., Acciona Energy, Distributed Generation Systems, and Global Renewable Energy Partners. And, one of the newer projects is a community‐owned wind farm partnership between Griggs and Steele Counties. Jacklitch‐Kuiken explains the idea came forth in the late 1990s. The counties put up a met tower to collect data and were designated a federal “empowerment zone.”
M‐Power LLC was formed in 2006 by the area residents to manage the wind farm’s potential and economic benefit. It is the largest community‐owned wind energy development project in North Dakota. The first phase of the project could provide enough electricity to power nearly 44,000 homes.
In 2008 Otter Tail Power Company purchased a site from M‐Power and began construction on a wind farm in May. It’s expected to be part of the Luverne Wind Farm, a larger project built by NextEra Energy Resources with the ability to produce 169.5 MW.
A leader in ownership of wind energy by integrated utilities, Otter Tail partners with other energy companies in order to diversify its business and capitalize on opportunities. Molbert pointed out that while the company is large in the region, it is small nationally and internationally. To do big things, it needs to partner with others who can bring other expertise or resources to the table. “We’ve made a substantial investment in wind,” Molbert said. “We’re continuing to look at ways to leverage that.”
He went on to say, “North Dakota is very fortunate because it has so much energy diversity between fossil fuels like oil and coal, and wind. And, it’s populated by hard workers and entrepreneurial thinkers. It’s a very big deal and North Dakota comes out well no matter which way energy policy goes – whether it’s greener or more carbon‐based energy.”
The biggest hold up in the wind power business is storage. There aren’t any viable options for storing wind energy at this point, so what is produced needs to be used immediately. And, since wind varies from day to day, it’s difficult to rely on a set level of wind power. On any given day, there may not be enough wind to power what’s needed. On another, there may be more than enough. Without a way to store it the extra energy is wasted.
Still, wind is one of North Dakota’s growing industries with much potential yet to be opened. The strides that have been made have grown the industry from its research stage, much of which was done at UND’s Energy and Environmental Research Center, to its development stage. That shift has created jobs, and opened up opportunities for smaller communities, both economically and environmentally. According to Wind Power Monthly in January 2009, wind power shows as a strong global competitor to other energy sources such as coal, nuclear and gas. That case is well evidenced across our state.
Igniting the Power of Lignite
Coal Creek Station, 50 miles north of Bismarck, is a nationally top‐performing power plant in terms of reliability and cost‐efficiency. These are two characteristics by which, arguably, North Dakota is known as a whole.
North Dakota’s reliability and frugal nature can be attributed to its low‐profile, hard‐working, sometimes underestimated residents. The state’s largest power plant, Coal Creek Station, is certainly not underestimated but its power source, lignite coal, just may be.
Lignite, typically known as a brown coal, is considered the lowest rank of coal, and is also a geologically younger coal. However, it is easier to convert into gas and liquid petroleum products than higher ranking coals.
With recoverable reserves estimated at 25 billion tons, North Dakota has the single largest deposit of lignite in the world, according to the Lignite Energy Council. The North Dakota Geological Survey estimates that the state’s lignite reserves will last more than 800 years at current rates of consumption.
This can mean great things for Coal Creek Station and for its owner and operating company, Great River Energy.
“It provides our member cooperatives and their consumers with a huge advantage,” said Dave Saggau, ’86, ’89, president of Great River Energy. “The plant is very large and very efficient, and the energy it produces comes to us at a fraction of the cost of building a new facility. And, it’s not by accident. We spend a tremendous amount of effort and money maintaining Coal Creek Station. That particular plant is our bread and butter, no question about it. I hope that facility runs for another 100 years.”
The energy value of North Dakota’s tremendous lignite reserves is equal to almost three times the entire proved reserve of oil in the U.S. That says a lot for the state’s lignite industry, which mostly operates on the western half.
The National Lignite Energy Council is based in North Dakota with the purpose of maintaining a viable lignite coal industry and to enhance the development of the region’s lignite reserves to generate electricity, synthetic natural gas and valuable byproducts. “I’m guardedly optimistic,” said John Dwyer, ’73, president of the Lignite Energy Council, in terms of the outlook for lignite in the state. “We have an affordable product and we are well‐positioned with expertise, production and manpower.”
As the demand for more domestically produced energy increases, says Dwyer, the industry is working to attract companies to build coal‐conversion plants in the state using advanced technology. The Lignite Vision 21 partnership between the state of North Dakota and the lignite industry is a method to accomplish this. Its premise is to encourage base‐load power plants and coal gasification projects that can produce synthetic natural gas and liquid fuels.
Saggau commented, “Vision 21 will invest state dollars to improve energy resources in North Dakota. It is designed to help lessen the pain of studying or researching if a plant should be built and where, which is an expensive project to undertake.
“North Dakota is so smart – it targets resources where they should be targeted. North Dakota helps companies get seed money to find out where the best investments are.”
According to the industry, environmental concerns are at the forefront and new technologies, such as ways to increase efficiencies and control emissions, are applied to all Lignite Vision 21 participants. Dwyer said, “The primary challenges are environmental; however, we’ve solved a lot of the problems so far which makes me confident we can solve the carbon challenges we face, as well.”
Lignite production in North Dakota has remained steady over the past 20 years, mining approximately 30 million tons annually. Lignite is produced via surface mining in North Dakota using processes approved by the Public Service Commission to ensure environmental and safety concerns. The opposite of tunnel mining, overlying soil and rock (commonly referred to as overburden) is removed, unearthing the coal. This type of mining is used for a number of reasons, which may include the coal being relatively close to the surface of the earth, or the earth around the coal being structurally unsuitable for tunneling. The Surface Mining Control and Reclamation Act of 1977 requires that reclamation of such mines occur in order to protect and rebuild the environment during and post production.
Additionally, the North Dakota lignite industry is recognized as an industry leader for installing and operating emissions control technologies including electrostatic precipitators (air cleaner), scrubbers, spray dryers and baghouses (air pollution control equipment) to reduce particles and other emissions. Approximately $2 billion has been recently spent on environmental controls for existing plants. Looking to future coos, carbon sequestration is the buzz word of the industry. North Dakota’s Great Plains Synfuels Plant is a partner with Canadian oil companies in the world’s largest carbon capture and sequestration project.
“The EERC’s Plains CO2 Reduction (PCOR) Partnership is a leader in assessing the northern Great Plains region for potential geological storage opportunities of carbon dioxide,” said EERC Senior Research Advisor Ed Steadman. “In 2007 the PCOR Partnership initiated a field‐based test in Burke County in northwestern North Dakota to evaluate the potential to simultaneously store CO2 and enhance natural gas from a lignite coal seam to demonstrate the economic and environmental viability of geologic CO2 storage in the U.S. Great Plains region. Ultimately, geologic carbon sequestration is expected to play an important role in mitigating greenhouse gas emissions and combating climate change,” he said.
To date, no field studies have been conducted on the ability of lignite coal seams to store CO2. The field‐based investigations conducted will provide previously unavailable insight regarding the sequestration of CO2 in low‐rank coals. This insight can be broadly applied both within the region and more broadly, as low‐rank coal seams are known to occur throughout western North America.
The Lignite Field Validation Test is one of four tests the partnership is conducting under the validation phase of the regional partnerships program. These four tests, plus two large‐volume sequestration tests that the PCOR Partnership is planning as part of the development phase of the partnerships program, have created more than 400 jobs that will continue through 2017.
The PCOR Partnership is managed by the EERC and includes more than 90 public and private partners in all or part of nine states (North Dakota, South Dakota, Minnesota, Montana, Wyoming, Nebraska, Iowa, Missouri, and Wisconsin) as well as four Canadian provinces (British Columbia, Alberta, Saskatchewan, and Manitoba). The Partnership is part of the U.S. Department of Energy National Energy Technology Laboratory’s Regional Carbon Sequestration Partnership (RCSP) Program.
This type of responsible partnership between the energy industry and those monitoring the state of our environment is critical. In North Dakota, the Great Plains Synfuels Plant converts approximately 18,000 tons of lignite into an average of 145 million cubic feet of synthetic natural gas each day.
Competition between lignite and other sources of energy is another driving factor of the industry. In fact, Dwyer lists it as one of the industry’s main challenges in the future, saying, “We have to be competitive.” One of the ways to capitalize on opportunity against the competition is to be as efficient as possible through partnerships. Dwyer says that, “Utilities and mining companies in North Dakota are all integrated – they operate together. We can’t transport lignite so we have to use it here. We are best served by developing it in state and then shipping the energy out.”
As a whole, the process is working well and the industry is growing. It has been tagged as the state’s fourth‐largest industry, employing 4,300 workers directly and nearly 24,000 indirectly. Some of the residual benefits of this have played out financially, such as an estimated $100 million in total annual taxes in 2009 paid to the state. This type of sustainable revenue has helped North Dakota remain economically strong.
“North Dakota is very good to work with,” noted Saggau. “They really understand what we’re trying to accomplish – we need to build more resources to meet the demands. The state is very welcoming and fair with the way they deal with us [energy companies]. They try to understand our business as best they can and are generally supportive. The business climate is good for a company like us that invests hundreds of millions of dollars. This makes it an attractive place for us to build our large facilities. Plus, I’m from there!” ■