Politics

Oil Field Innovations Change The World & Oil Industry

13 October 2019
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“You did that.”

“We need to talk about it more,” said Blu Hulsey, Senior Vice President of Government Relations and Regulatory Affairs at Continental Resources. The accomplishments and technological development of the petroleum industry goes far too much unremarked upon, Hulsey told the audience at the Montana Petroleum Association’s Appreciation Luncheon at the DoubleTree in Billings, on August 28.

The technology that has been developed within the industry “is equal to the technology of putting people on the moon,” he said,

Continental Resources is one of the largest oil producers in the Bakken.

“We are the greatest oil country in the world,” Hulsey unequivocally stated at one point.

The accomplishments of the industry “has changed the world,” said Hulsey, pointing to the recent antics of Iran capturing oil tankers and threatening other countries militarily “…and the price of gas in Billings doesn’t go up a penny,” he exclaimed. In the past, with the US dependent upon the Middle East for oil, any kind of incident like those recently witnessed, would have caused oil prices to sky rocket, but not anymore.

“You did that,” he told the room packed with representatives of all aspects of the petroleum industry. The US petroleum industry is now the world’s largest producer of oil and an exporter of oil and gas to the rest of the world.

As the cost of production continues to decline because of the new technology, and the level of production continues to increase there will continue to be a lot of changes to the world and to the industry itself.

The industry is changing how it looks at itself. “Everyone is looking internally,” he said about petroleum businesses.

You don’t need 150 rigs in the Bakken, 60 will produce just as much, now.

Returns that were projected on $70 per barrel oil prices are now being experienced with $50 per barrel oil prices. 

“We have almost doubled production in four years because of technology,” said Hulsey.

At one point it was impressive that there were 12 wells in the Bakken that hit 100,000 barrels of production in the first 90 days. Now there are 157 wells that hit that level of production in 90 days, and more and more continue to hit that goal.

“You are going to see long-term growth in the Bakken,” predicted Hulsey, “and we are going to continue to get more recovery.”

Investors are not being apprised of this reality as much as they should be, Hulsey lamented.

Hulsey praised the people in the industry. When the industry encounters barriers, “our people get better – American ingenuity is making a difference.”

Hulsey talked about the Bakken as a world class resource, saying that 150 miles wide and 150 miles long, it is comparable to the Permian Basin, which while impressive and larger doesn’t have the same quality of oil. There is more water in the Permian oil. Having considerably less water reduces production costs in the Bakken. Efficiencies being achieved in the Bakken are not necessarily found in every oil field – many won’t be found in the Permian.

The Bakken will eventually produce 30 to 40 billion barrels of oil.

Hulsey lauded the Trump administration. “We have an administration that is not stopping us from doing long-term development…that means big improvements for the long term.”

New Construction Pushes Down Mill Levies

13 October 2019
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Property taxpayers will see lower county tax levies on their property tax bills this year, in Yellowstone County, because the overall amount of taxable value on property in the county has increased by $24.88 million. Over half of that increase is due to new construction – new wealth – in the county.  

Total tax revenue for county government is projected to increase by $2.86 million in the current year.  New construction is projected to generate $1.99 million of that total, which is that much less that all other taxpayers will have to pay.

The County’s Finance Department is hammering out the FY2019-20 budget for the county, to be considered by county commissioners at their September 3 meeting. It is projecting expenditures of $117.5 million, less than one percent more than last year. Of that, $54.6 million is projected to come from property tax payers in Yellowstone County.

Non-tax revenues are projected to increase by 3.15% over FY19 to $48.25 million. 

According to Finance Director Kevan Bryan, the increase in overall valuations led to slight declines in almost all levies.  FY20 will see a decrease in the countywide levy of 1.71 mills, or 1.43% below last year’s levy total.  Bryan declared, “…the County is in sound financial shape. This is due to both decisions by the Board and the budgeting and spending approaches undertaken by our departments throughout the County.” 

The tax levy for the Big Sky Economic Development Authority is fully authorized by the Board of County Commissioners for FY20, in the amount of 3.24 mills, an increase of $56,959.

The permissive medical levy will be set at 11.84 mills.  While continued escalation of costs warrant this slight increase of .22 mills, said Bryan, the State of Montana allows the county to levy up to 16.56 mills.  County Commissioners have chosen not to levy that amount, “thus saving the taxpayers $1.79 million.”

Because it is still too early to know what protests might be filed regarding property valuations, it is prudent in the process of budget-setting, for the county to error on the side of caution and make allowances for potential protested taxes. Bryan increased the set-aside for estimated tax protestes for FY20 to 4.0% for most levied funds, up from 2.4% last year.   

Staffing levels are budgeted to increase 1.8%, almost completely due to continued public safety and judicial related needs.  Of the total 8.5 FTEs projected to be added, 8 fall into this category. 

The budget allows room for the possible need for building projects and remodeling of courthouse space (or further utilization of the Stillwater building), should it be needed by the County Attorney or Justice Court, two departments that are facing “operational stress” due to increased workload and staffing in their current space.

Now that the construction of a new addition and remodeling and refurbishing of the jail is wrapping up, the county’s next major infrastructure needs are those for Metra Park. An infrastructure study of Metra Park, conducted last year, showed several million dollars of underground needs for that facility.

“Funding for those projects will prove difficult,” said Bryan, “We have been as proactive as possible with limited resources for the task.  The County has saved $3.2 million that can be utilized to begin this long process.” Administrators will be working to develop a prioritized list in the coming months.

The final budget must be adopted by the later of the first Thursday in September or 30 days after the State provides certified taxable values.

Montana Judge Will Hear Keystone Lawsuit Oct. 9

9 October 2019
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U.S. District Judge Brian Morris scheduled a hearing for Oct. 9 from environmental organizations suing to stop construction of the $7 billion Keystone XL Pipeline authorized under a new permit from the Trump administration.

“Specifically, this permit reinforces, as should have been clear all along, that the Presidential permit is indeed an exercise of Presidential authority, that is not subject to judicial review under the Administrative Procedure Act,” a White House spokesman said.

The Sierra Club, Northern Plains Resource Council, Bold Alliance, and other groups filed a suit against the U.S. Army Corps of Engineers, contending the pipeline violates the Clean Water Act.

Justice Department attorneys also will present their argument at the hearing to dismiss the lawsuit.

Trump signed the new permit after Morris blocked construction of the 1,184-mile pipeline from Canada to Nebraska, in a ruling that stated officials had not fully considered oil spills and other impacts.

Grant to Help Design Metra Park Border

9 October 2019
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Big Sky Economic Development (BSED) is applying for a CDBG Planning Grant from the Montana Department of Commerce to hire a professional consultant to create a concept play for the redevelopment of the MetraPark border with US Highway 87. A hearing date was set by the county commissioners last week to consider the application on Tuesday, Sept. 10, 9:30 am in the county commissioners’ conference room, 3rd Floor of the Stillwater Building.

The estimated cost of developing a plan is $60,000. CDBG Planning grants require a one-to-three match. The proposed application would seek a $45,000 grant paired with a $15,000 local match. Yellowstone County, Metra Park, and Big Sky Economic Development have each committed $5,000 to provide the matching funds.

BSED has created a Request for proposal for the purpose of soliciting a professional consultant to complete the proposed plan. The scope of work being requested includes a preliminary design, oversight of public meetings, coordinating the permitting process, preparing plans, schematics, visual aids, and estimates.

The proposed project is an important next step in the continuing improvement of the Metra Park facility,  said Thom MacLean, BSED Community Development Project Manager, who presented the proposal to County Commissioners.

The Montana Department of Transportation’s planned Expo and 1st Avenue North project will modify the junction of US Highway 87 and 1st Avenue North and affect the southern and western edges of Metra Park. The proposed concept plan will provide options for how Yellowstone can redevelop this area after that project is completed.

Federal Court Sends Illegal Water Rule Back to EPA

9 October 2019
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The Montana Farm Bureau announced that it is pleased with a federal court ruling that says the 2015 Waters of the United States (WOTUS) rule is unlawful under the Clean Water Act because of its “vast expansion of jurisdiction over waters and land traditionally within the states’ regulatory authority.” The court for the Southern District of Georgia found the agency overstepped not just the CWA, but also the Administrative Procedure Act, which lays out the most basic rules governing how agencies may propose and establish federal regulations.

The Georgia court kept in place a preliminary injunction preventing the rule from becoming effective in the 11 states involved with the lawsuit while the Environmental Protection Agency finalizes its own repeal and replacement of the 2015 rule.

The ruling was a victory not just for the plaintiff states, but a broad coalition of more than a dozen private sector groups, including the Montana and American Farm Bureau Federations.

The Montana Farm Bureau Federation has been actively opposing WOTUS for the past five years.

“Today’s ruling is excellent, long-awaited news for Montana’s farmers and ranchers,” said MFBF National Affairs Director Nicole Rolf. “Montana Farm Bureau has been pushing back against this rule since it was released back in 2015, for the exact reasons the court ruled it is unlawful. It expanded EPA’s jurisdiction far beyond their authority under the Clean Water Act, it disrespected state’s rights, and violated important rulemaking procedures. It’s time for full repeal and complete replacement of this illegal rule.”

“The court ruling is clear affirmation of exactly what we have been saying for the past five years,” AFBF General Counsel Ellen Steen said. “The EPA badly misread Supreme Court precedent. It encroached on the traditional powers of the states and simply ignored basic principles of the Administrative Procedure Act when it issued this unlawful regulation. The court found fault with the EPA’s interpretation of some of the most basic principles of the CWA, most importantly which waters the federal government may regulate, and which waters must be left to states and municipalities.”

Jurists repeatedly criticized the EPA’s handling of the rulemaking, in particular its interpretation of the Supreme Court’s “Rapanos” decision, which laid out guidelines for determining where federal jurisdiction begins and ends.

The American Farm Bureau Federation, in partnership with a coalition of groups, urges repeal and replacement of the 2015 rule to ensure clean water and clear rules.

Fed President will Speak on Sept. 26

8 October 2019
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Do you have a question about how the Federal Reserve System affects you as a business professional, community leader, student or consumer? Wondering about economic disparities, regulating big banks, or the Fed’s recent interest rate decisions?

On September 26, Minneapolis Fed President Neel Kashkari will discuss these topics and more in Billings at MSU-Billings’ Petro Hall.

Kashkari is a member of the Federal Open Market Committee, the body of the Federal Reserve System that sets national monetary policy.

Since taking over as president of the Minneapolis Fed in January 2016, he has spearheaded several initiatives, including releasing a plan to end the too big to fail problem and launching the Federal Reserve’s Opportunity & Inclusive Growth Institute, housed at the Minneapolis Fed. Doors for the program will open at 11:30 am, with opening remarks by Neel Kashkari beginning at 12 pm, followed by questions and answers at 12:15, ending at 1 pm. 

Free parking for attendees is available in the Virginia Lot (located on the corner of Virginia Lane and Rimrock Road on the west end of campus).

Court Gives XL a Victory

8 October 2019
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TC Energy Corporation announced last week that the Nebraska Supreme Court has affirmed the November 2017 decision by the Nebraska Public Service Commission that approved the Keystone XL Pipeline route through the state.

The Montana Chamber of Commerce greeted the news declaring, “This is exciting news, as the Keystone XL pipeline is critical infrastructure that will enhance the energy sector in Montana and North America.” Todd O’Hair, Montana Chamber of Commerce president /CEO, stated, “In addition to providing safe, good-paying and local jobs in Montana, it will be a great economic boost for the state. We are excited to see this project continue moving forward.”

The Keystone XL section of the pipeline, is a $8 billion project that would between Alberta, Montana, South Dakota, Nebraska.

Despite having gone through three major federal environmental reviews, the project has confronted delaying legal hurdles by opponents since 2008. Three more lawsuits still stand in the way of construction.

Keystone XL has permits to construct in all three states along the route, along with a presidential permit.

“The Supreme Court decision is another important step as we advance towards building this vital energy infrastructure project,” said Russ Girling, TC Energy’s President and Chief Executive Officer. “We thank the thousands of government leaders, landowners, labor unions and other community partners for their continued support through this extensive review process.  It has been their unwavering support that has advanced this project to where it is today.” The pipeline would carry oil from Canada through Montana, South Dakota and Nebraska, where it would connect to an existing pump station in Steele City, Nebraska. From there it would continue through Kansas, Oklahoma and Texas until it reaches Gulf Coast refineries. Business groups and some unions support the project as a way to create jobs and reduce the risk of shipping oil by trains that can derail.

The pipeline faces intense resistance from environmental groups, Native American tribes and some landowners along the route who worry about its long-term impact on their groundwater and property rights. But in Nebraska, many affected landowners have accepted the project and are eager to collect payments from the company. The Nebraska Supreme Court upheld the decision of state regulators who voted in November 2017 to greenlight a route through the state. The court sided with the Nebraska Public Service Commission saying it is the agency responsible for determining which pipeline route is in the public interest, and that it did so after months of consideration. “We find there is sufficient evidence to support the PSC’s determination that the (alternative route) is in the public interest,” Justice Jeffrey Funke wrote for the court.

An attorney for the opponents said they were weighing their legal options, including a possible federal lawsuit challenging the route the PSC approved.

Annexation Threat Stalls TEDD

8 October 2019
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Whether the TEDD in Lockwood will be able to move forward in the development of a successful industrial park is currently in doubt.

The TEDD (Targeted Economic Development District) is a tax increment finance district created to help fund the creation of a “turn –key” facility for industry to locate and expand in Yellowstone County. It is located at the intersection of Johnson Lane and Interstate Highway 89, outside the city limits of Billings.

Concern about whether the City of Billings will be able to capture property tax revenue, as the industrial park develops in the future has prompted Billings City Administrator Chris Kukulski to insist that property owners within the TEDD waive their right to protest any future annexation proposal, before agreeing to expand the boundaries of the Lockwood Water and Sewer District. Acquiring water and sewer service will be essential to facilitate the success of the industrial park, which therefore necessitates expanding district boundaries to include it.

Property owners are refusing to relinquish their protest rights, which leaves the future prospects for the TEDD uncertain, according to Woody Woods, a member of the TEDD Advisory Board. Woods explained the situation in a report to county commissioners about the next year’s work plan for the TEDD.

Woods told the commissioners that the TEDD Advisory Board will be sending them a formal letter expressing their concerns and asking that they take up the matter with the city. The County Commissioners hold the ultimate authority in administering the TEDD.

Formation of the TEDD / industrial park was spearheaded by Big Sky Economic Development in a process that began some three years ago. The project was initiated by BSED following a feasibility study which identified the need for an industrial park in Yellowstone County that would provide the infrastructure that would give potential new industry the ability to locate quickly and easily in the Billings area.

The Lockwood site was identified as the best prospect for such development, located as it is with easy access to transportation such as the railroad and the interstate, as well as utilities. The proposed Billings bypass which will begin construction this fall will advance construction over the next two years to pass through the TEDD.

The development plan for the industrial park is dependent upon the LWSD expanding its boundaries to include it within its service area. However, the Lockwood Water and Sewer District has an agreement for sewage treatment with the City of Billings that requires city approval to expand the district’s boundaries.

Under that agreement the Lockwood sewer district pays the city for sewage treatment based upon the level of use, and in addition the district pays the city a monthly reserve capacity fee for potential future expansion. That fee has fluctuated since the agreement went into effect in 2008, but is currently $21,491 a month, plus a monthly surcharge of six percent, which brings the total monthly payment to about $23,000.

In a conversation the county commissioners had with Kukulski a couple months ago, they posed a unified front in opposing the idea of annexation.

Woods said that the BSED will also be sending a letter to the City Council expressing their opposition to  efforts to force the property owners to accept future annexation.

Several years ago the City of Billings declined the idea of annexing Lockwood after conducting an assessment of the costs involved to bring its infrastructure up to standards. City officials at that time said the expense would greatly exceed any potential tax revenues they would receive from Lockwood property taxes.

County Commissioner John Ostlund replied to Woody Woods that “it doesn’t seem to make a lot of sense to incorporate industrial properties into the city because it takes away the opportunity to recruit business to develop in areas of lower taxes. If they are going to do that, what is the point of having a TEDD?”

He said there is a reason that the state legislature exempted industrial properties from forced annexation into cities.

State Shirks on Jail Rates

3 October 2019
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Sheriff Mike Linder is sending a letter to the state Department of Corrections (DOC) to inform them that the actual cost to Yellowstone County to house a prisoner is $77.22 a day – not the $69.31 that the Montana State Legislature set as a cap of what the state will pay. The real cost is actually higher than that, said Linder, but the state will not allow capital costs to be calculated into the per diem rate.

The state is asking the county for a contract to confirm the rate and Yellowstone County officials are not too sure what such a contract would really do. Some counties have refused to enter into a contract, said Linder. Others, such as Gallatin County, refuse to accept state prisoners.

Deputy County Attorney Kevin Gillen said that such a contract is called “a contract of adhesion.”  “You take it or you leave it,” he said.

In a discussion, on Monday, county officials concluded that they will accept a contract with the state but the bills that they send to the state will include the real per diem cost of housing prisoners, even though they know they will only get paid the lower sum. This way there will be a record of what it is really costing, they concluded. The finance department estimated that the county stands to lose about $45,000 annually through the lower rate, based upon 2017 figures.

The state’s rate of $69.31 is actually a new rate – 31 cents higher than what the state has been paying.

Four years ago the state was paying $76.94 a day, but during a session in which the budget was very tight, legislators arbitrarily lowered the rate, and now they seem to like it there.

The good news, said Linder, is it will go up another 30 cents a day, in another year.

The federal government pays Yellowstone County a per diem rate of $97. When Yellowstone County holds prisoners for other counties those counties pay $100 a day, which includes the capital costs associated with building and maintaining the Yellowstone County Detention Facility. The City of Billings also pays $100 a day if the prisoner being held is being held on a violation of city ordinances rather than state laws – there are usually few of those. The city pays nothing on inmates charged with violations of state law since the city is part of Yellowstone County and taxpayers do pay public safety mill levies.

Gillen commented that what the DOC is really doing is “parking people in jail” because the state doesn’t have the capacity. He suggested that, while accepting the lower per diem rate, the county can insist that they get inmates out of the county jail in a more timely fashion.

No county is required to accept prisoners from the state. The prisoners are usually people who were county prisoners until they were prosecuted and sentenced in court, at which point they become “state prisoners.”

The number of prisoners held at the county by the state have declined, but said Gillen the trend is that they are released from state custody sooner without probation, which leaves them free to return and “re-offend”, at which point they again become the county’s problem.

On any given day the county holds between 40 and 50 state prisoners.

State Fund Recognizes MBIA Safety Record

17 September 2019
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Montana State Fund (MSF), Montana’s largest workers’ compensation insurance company, presented a check worth nearly $540,000 to the Montana Building Industry Association (MBIA). The check is in recognition of MBIA’s GRIP program (Group Retention Insurance Program) and their superior efforts to improve workplace safety. Approximately 250 of MBIA’s 1500 members participate in the program which is designed to reduce on-the-job accidents through safety training and awareness. Montana is near the highest in the nation in workplace accidents and fatalities, and the construction industry is one of the most dangerous.

“Montana State Fund applauds the efforts and determination of the Montana Building Industry Association’s GRIP program to reduce workplace accidents and send their workers home safely at the end of the day,” said Laurence Hubbard, President and CEO of MSF. “It is commitment like theirs that will have a lasting and meaningful impact on Montana’s workplace safety culture.”

MBIA Executive Director, Steve Snezek said “MBIA’s GRIP program has a strategic vision to reduce on-the-job accidents and fatalities. We know Montana, and especially the construction industry, leads the nation in these types of incidents. MBIA’s GRIP program is designed to reduce the occurrence of accidents and we are grateful to have a partner like Montana State Fund in this endeavor. The program is working, and this check proves that safety pays.”

The MBIA GRIP program has been in existence with MSF since 1997 and has resulted in nearly $6M in returns to deserving policyholders who are committed to operating a safe workplace.