Drilling advances

All things considered, aside from the occasional mechanical malfunction or supply chain snafu, moving rigs, mud and the like from Point A to Point B was not looked upon as an especially overwhelming component of an onshore E&P operation. Nowadays, however, access to suitable thoroughfares has emerged as a daunting, and expensive, proposition.

High-weight traffic throughout the shale plays of Texas, North Dakota and Pennsylvania, and elsewhere, has steadily done a number on country roads that historically were more accustomed to accommodating livestock and produce haulers. Collectively, the industry directly, and indirectly, has spent millions repairing and constructing roadways, and from all indications, their wallets will have to be opened even wider going forward.

The transportation issues of individual companies, however, pale in comparison to the one confronting a subsidiary of GE, which reportedly stands to lose upwards of $75 million after an unexpected legal roadblock prevented it from moving a key piece of equipment to the Canadian oil sands. More on that later.

Meanwhile, officials in shale-producing states find themselves at a convoluted intersection, trying to juxtapose local concerns over deteriorating roads, with the multi-billion-dollar tax revenue that shale production is funneling into the coffers of once economically stressed communities. In late October, the Texas Department of Transportation (TxDOT) said the $250 million in state funds, that it came up with to repair damaged roads, would be insufficient to pave over the potholes and other deformities in the key transportation arteries for the Eagle Ford and Permian basin plays. In Texas, most of these arteries are designated as farm-to-market roads, plainly attesting to the nature of the loads that they generally were designed to handle.

Lacking enough funds to pave all the surfaces in disrepair, the state agency proposed that nearly 84 aggregate miles of South and West Texas roads be converted to gravel. This prompted an outcry from local administrators, who complained that gravel would be no match for heavyweight oilfield traffic.

The Houston Chronicle reported on Oct. 20 that TxDOT has since backed off, saying it would postpone its gravel plan, while individual counties come up with alternative financing for asphalt pavement. Among the possible funding sources, TxDOT listed “donations” from operators—the same operators, who in South Texas have already contributed an estimated $61 billion to the local economies.

It’s much of the same in largely bucolic and sparsely populated North Dakota, where the state and the counties within the core of the Bakken shale recently funneled a combined $523 million to roadwork. Officials said that the typically gravel, state and county-controlled roads approaching drilling sites today handle as many as 1,000 oilfield-related vehicles per day, compared to a pre-Bakken daily average of fewer than 50 much smaller vehicles. Nearly one-half of the funding for repairing damaged roads comes from the state’s gross oil production tax.

To the northeast, there is no pretense of an operator “donation” for road restoration within the Marcellus shale fairway, which has long been the national epicenter for the anti-fracing coalition. The Pennsylvania Public Utilities Commission (PUC) imposes an impact fee on gas producers, much of which goes into roads and other infrastructure improvements. Kathryn Klaber, the former CEO of the Marcellus Shale Coalition, told the Scranton Times-Tribune in July that Marcellus operators had spent more than $500 million to repair and replace Pennsylvania state roads, since the play unfolded. She said that total is above the nearly $406.7 million that the state has collected in impact fees.

$75-million hold-up. This brings us back to GE Resource Conservation Company International (RCCI), which remained stuck last month at a Snake River port in Clarkston, Wash., with a mammoth produced water evaporator that is legally blocked from being delivered to an unnamed client in the Alberta oil sands. While GE filed an appeal, hoping to resolve its legal limbo, an article in the Oct. 17 Wall Street Journal reported that the blockade could cost the company up to $75 million in lost revenue.

An evaporator could be considered the oil sands equivalent of a drilling rig, if the latter was the size of a space shuttle orbiter, as wide as a two-lane highway and required two heavy trucks to move it. At issue is the planned transportation route to Alberta, which would traverse a scenic highway that cuts through the Nez Perce National Historical Park and the Clearwater and Lolo National Forests. An RCCI executive told the WSJ that the company was ready to proceed, confident that it had acquired all the necessary state and federal permits. That was until the sovereign Nez Perce Native Americans and a state conservation group objected, citing an infringement on tribal values and the potential of changes to the character of the national historical park and forest. A federal judge agreed and put the brakes to the transportation plan.

At last report, RCCI was scampering for a legal resolution. Changing to a less-contentious route was said not to be an option, as the evaporator will not fit beneath the overpasses of the interstate highway system.

At the end of the day, those irritated over oilfield traffic might want to consider something my former father-in-law, a retired railroad executive, used to say every time I griped about being stuck at a railroad crossing, waiting out a crawling train. “Don’t complain,” he’d shoot back. “That’s money moving.”

Enough said.