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PETROLEUM INDUSTRY IN MONTANA September 2008 MONTANA PETROLEUM ASSOCIATION David A. Galt, Executive Director PowerPoint Presentation
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PETROLEUM INDUSTRY IN MONTANA September 2008 MONTANA PETROLEUM ASSOCIATION David A. Galt, Executive Director. The Industry in Montana. Transportation. Refiners. Service Companies. Producers. MSU-Billings Economic Study Points. $9 BILLION: Total economic impact 12,000 TOTAL JOBS

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slide1
PETROLEUM INDUSTRY IN MONTANASeptember 2008MONTANA PETROLEUM ASSOCIATIONDavid A. Galt, Executive Director
the industry in montana
The Industry in Montana

Transportation

Refiners

Service

Companies

Producers

msu billings economic study points
MSU-Billings Economic Study Points

$9 BILLION: Total economic impact

12,000 TOTAL JOBS

4,500: Direct jobs

7,500: Indirectly supported jobs

Economic impact of an additional 1 million barrels of oil produced

86 Full time positions

$18.5 million in labor income

A 10% increase in drilling activity could lead to 315 additional jobs.

employment and wages in the industry 2008
Employment and Wages in the Industry 2008

Oil & GasExtraction

Refining

Transportation

Montana’s Average Annual Wage

2,985 Employees Average Pay: $57,732Total Wages: $172,330,020

975 Employees Average Pay: $91,744

Total Wages: $89,412,551

354 Employees Average Pay: $64,487Total Wages: $22,839,190

$31,426.20

slide5

Oil and Natural Gas Production Tax Revenue Collections

Total State Share: $615,658,548

Total Local Share: $654,099,145

TOTAL $1,269,757,693

u s natural gas production and consumption
U.S. Natural Gas Production and Consumption

26.1 Tcf

Net Imports

21%

16%

20.5 Tcf

Projections

History

Consumption

Production

14

Source:Annual Energy Outlook 2007

Natural Gas Projections from EIA and Six Others: March 28, 2007

age of natural gas supplies
Age of Natural Gas Supplies

Last year – 50% of the natural gas consumed in the US came from wells drilled in the prior 40 months

2 years ago – 50% of the natural gas consumed in the US came from wells drilled in the prior 48 months

challenges
CHALLENGES
  • Access
    • State and Federal Public Lands
    • Wildlife Issues
  • Taxes
    • Production tax drilling incentive
    • Central Assessment of Gathering Systems
bureau of land management montana oil gas lease sale protest
Bureau of Land ManagementMontana Oil & Gas Lease Sale Protest

August 26, 2008 Sale--Protest

Western Environmental Law Center--Protest Letter

Montana Trout Unlimited--Protest Letter

June 17, 2008 Sale--ProtestWestern Environmental Law Center--Protest Letter

April 8, 2008 Sale--Protest

Western Environmental Law Center--Protest Letter

November 27, 2007 Sale--ProtestMontana Trout Unlimited

Hellgate Hunters and Anglers

National Wildlife Federation

Montana Wildlife Federation

Theodore Roosevelt Conservation Partnership

July 31, 2007 Sale--Protest

Montana Trout Unlimited

Theodore Roosevelt Conservation Partnership

Montana Wildlife Federation

Hellgate Hunters and Anglers

May 30, 2007 Sale--Protest

Montana Trout Unlimited

March 27, 2007 Sale—Protest

Montana Fish Wildlife and Parks

Montana Trout Unlimited

Theodore Roosevelt Conservation Partnership

Jan. 15, 2007 Sale—Protest

Montana Fish Wildlife and Parks

species involved in protests
Species Involved in Protests

Sage Grouse

Sharp Tailed Grouse

Waterfowl

Bald Eagles

Eastern Red Bat

Pallid Bat

Spotted Bat

Townsend Big Eared Bat

Long-billed Curlew

Sprague’s Pipits

Baird’s Sparrows

Ferringous Hawks

Lark Buntings

Swainson’s Hawk

Grassland Song Birds

“Other” raptors

Mule Deer

Elk

Prong Horn Antelope

West Slope Cut Throat

Ling

Great Plains Toads

Spade Foot Toads

no surface occupancy recommendations
No Surface Occupancy Recommendations

Sage and Sharp Tailed Grouse—March 1 through June 15

Mule Deer Winter Range– December 1 through March 31

Water Fowl- April 1 through July 15

One quarter mile setback on rivers

slide22

Producing Wells and Sage Grouse Active Leks in Montana

Red = Gas; Black = Oil; Yellow = CBNG; Green = Birds

sage grouse issues in montana
Sage Grouse Issues in Montana

Present Stipulations

No Surface Occupancy within ¼ mile of an active sage grouse lek

No new activity between March 15th and June 30 one mile from an active lek.

Proposed Stipulations

No Surface Occupancy within 1 mile of an active sage grouse lek

No new activity between March 15th and June 30th four miles from an active lek

No more than one well per 500 acres.

slide24

SAGE GROUSE MANAGEMENT PLANMITIGATION STANDARD

Timing Restrictionfor breeding and nesting2 mile radius (8,000 acres)

Surface Activity Prohibited¼ mile radius (125 acres)

slide25

NEW FWP RECOMMENDATION

Timing Restrictionfor breeding and nesting4 mile radius (32,000 acres)

Surface Activity Prohibited1 mile radius (2,000 acres)

production tax incentive
Production Tax Incentive

Current tax rate is .76% of the value of production for the first 12 months on vertical wells and 18 months for horizontal wells.

After Drilling incentive time frame tax rate reverts to standard rate of 9.26% for working interest owners

Purpose is to encourage drilling by helping operators to recoup costs. Also, to give Montana a competitive edge in the region.

increased cost factors 1999 2007
Increased Cost Factors1999-2007

Well completion costs have increased 150%

Leasehold costs increased 200%

Operating costs increased 125%

Since 2004 rig rates have increased from $8,500 to $22,000 PER DAY

Projections for 2009 will increase 12%

New built rig rates for 2009 will range between $25,000 and $30,000

central assessment of gathering systems
Central Assessment of Gathering Systems

Treats all inter-county operating units as one continuous system threatening to bring equipment usually taxed at class 8 (3%) into central assessment class.

The issue is pending before Montana supreme Court. MPA filed an Amicus Curiae Brief.

MPA analysis shows unit valuation method used in central assessment increases valuation by approximately 20%.

Raises tax rate from 3% of value to 12%, an increase of 400%

Significant increase in tax liability.

refinery production
Refinery Production

8.2 Million Gallons of Products per Day

40% Distributed in Montana

60% Exported to 7 Other States

Gasoline, Diesel, Jet, Avgas, Propane, Fuel Oil, Asphalt

fuels production
Fuels Production

Value of Refined Products Produced $7.3 Billion

50% of the total Manufacturing Production

10% of the total Industrial Production

alternative fuel concerns
Alternative Fuel Concerns
  • Alternative Fuels
    • Mandated volumetric requirements in transportation fuel.
    • Quality verification of 100% bio fuel
    • Biofuel transportation requirements: these fuels are not accepted in pipelines that transport multiple fuel types
    • Require infrastructure enhancement at terminals, some locations very difficult and expensive
event sponsors
EVENT SPONSORS

ENCORE OPERATING

GOUGH,SHANAHAN, JOHNSON AND WATERMAN

contact information
CONTACT INFORMATION

MONTANA PETROLEUM ASSN.

David A. Galt, Executive Director

PO Box 1186

Helena MT

(406) 442.7582

MPA@montanapetroleum.org

www.montanapetroleum.org

2008 legislators briefing tour sponsors
2008 Legislators’ Briefing Tour Sponsors

Bitter Creek Pipelines

ConocoPhillips

Devon Energy Corporation

Enbridge Energy Company, Inc.

Encore Operating, L.P.

Enerplus Resources (USA) Corporation

ExxonMobil

Fidelity Exploration & Production Co.

Gough, Shanahan, Johnson & Waterman

Montana Refining Company

Noble Energy Production

Williston Basin Interstate Pipeline Co.