GAS TO GREENBACKS

Montanans create company to capture, sell excess Bakken gas

2012-06-10T00:10:00Z 2014-08-25T16:31:22Z Montanans create company to capture, sell excess Bakken gasBy JAN FALSTAD jfalstad@billingsgazette.com The Billings Gazette

The unprecedented oil-and-gas boom in the Bakken and Three Forks shale underlying western North Dakota and Eastern Montana is creating tremendous wealth for some and an unprecedented number of jobs.

But the play also is generating plenty of pollution. Hundreds of natural gas flares have turned a once jet-black prairie night into eerie artificial daylight.

With 203 rigs each drilling a well a month across western North Dakota and 22 rigs working the Montana side, according to Baker Hughes Inc., pipeline companies cannot install pipe fast enough to connect all the wells and haul the gas to market.

So one-third of the North Dakota gas is burned off or flared.

That waste gave four Montanans the idea to start a company to capture and sell some of those gas emissions and help the environment at the same time.

“Here’s an issue that’s going to become a bigger issue,” said

Brian Cebull. “Anyone who drives over there can see the flares. This is a problem in search of a solution.”

Last August, Brian and his wife, Amy Cebull, who own Nance Resources in Billings, and two partners from Helena formed a limited liability company called G2G. The name stands for gas to green, as in environmentally green.

The company installs what is basically a mini-natural gas plant in a trailer that can be hauled out to an oil well to capture, liquefy and store gas emissions.

North Dakota has 4,377 wells connected to a pipeline, leaving another 1,094 wells waiting to be hooked up, said Justin Kringstad, director of the North Dakota Pipeline Authority based in Bismarck.

The state allows companies to flare gas for one year after production starts. Flaring can continue if the producer can show that hooking up to a pipeline is economically unfeasible or the gas cannot be sold at a profit. Production may be reduced or fines imposed.

Last fall, the New York Times reported that North Dakota was flaring 100 million cubic feet of natural gas each day, enough to heat half a million homes for a day. The flaring releases at least 2 million tons of carbon dioxide each year, an amount equivalent to a medium-sized coal-fired power plant, the Times reported.

In Montana, oil companies can flare for 60 days. Then members of the Montana Board of Oil and Gas Conservation must vote to extend or curtail the flaring permit, usually a month-by-month decision.

“Flaring isn’t a problem right now in Montana because all our new wells are connected to a pipeline,” said Tom Richmond, the administrator of the Montana Board of Oil and Gas.

World Bank statistics said worldwide gas flaring is adding some 360 million tons of carbon dioxide to the atmosphere each year, according to a May 2 Reuters article. That is equivalent to the emissions from about 70 million cars.

After nearly six years of decline, global flaring increased last year mostly because of flaring in North Dakota, according to Reuters. That increase pushed the U.S. into the top 10 gas-flaring countries, along with Russia and Nigeria.

Pipeline companies are working hard to connect to wells, and natural gas processing facilities are being built, Kringstad said, but the Bakken oil field covers an “unheard-of 18,000 square miles.”

The Bakken natural gas is unique because a larger percentage can be liquefied.

“Any technology like this to capture the value of natural gas is vitally important,” Kringstad said. “It’s exciting to see people like G2G going after this gas because there is tremendous value.”

Getting off the ground

Cebull credits his wife, Amy, for a lot of the work in setting up G2G.

The couple started Nance Resources with Amy’s father, Robert Nance, who retired in 2007, but remains a senior consultant. The Cebulls bought out Nance’s interest in 2010.

His original company, Nance Petroleum, merged with St. Mary’s Land & Exploration Co., which now is called SM Energy.

Mark C. Peterson, who owns Aspen Consulting and Engineering in Helena and helped form G2G, is a chemical engineer who specializes in air-quality permitting. The fourth partner is a mechanical engineer in Helena who doesn’t want to be publicly identified yet.

“We’re certainly reducing carbon emissions by a great deal. We taking out the most carbon-rich portion of the flare gas,” Peterson said.

In a single month this spring, Brian Cebull drove 3,000 miles selling G2G’s service, something he said is a pretty easy pitch.

“We’re creating wealth from a waste stream,” he said.

Depending on the well, G2G’s technology can capture up to three-fourths of the natural gas liquids and provide another revenue source for well and mineral rights owners.

So far, G2G has one trailer liquefying gas at an oil well within an hour’s drive of Watford City, N.D. One is undergoing final preparations, and two more are being built in Texas.

Not all the gas can be captured. Methane can technically be liquefied, but only at tremendous pressure, which isn’t practical in the field. G2G uses methane to power its equipment in the trailer.

After some of the gases are liquefied, G2G pumps the mix into 18,000-gallon capacity tanks.

“That’s the beauty of what we are doing. We’re converting the gas to liquids, so we can transfer it by truck or rail,” Cebull said.

The Montanans didn’t invent the basic technology, which has been around since the 1970s. But they signed a contract with a Texas company that agreed to make the equipment exclusively for G2G. Neither the Texas manufacturer nor a major oil company working in North Dakota that has purchased G2G’s services can be identified yet, Cebull said.

Private investors and First Interstate Bank in Billings funded G2G’s start-up costs, which weren’t disclosed.

Now that most of the technical kinks are worked out, next month G2G plans to add two trailers each month to service the Bakken.

“It’s been a long time coming, but we’re rolling now,” Peterson said.

Conversations with potential clients at May’s oil-and- natural gas conference in Bismarck generated lots of interest in G2G, Cebull said.

“They just want to see some operating history, which we’re generating now,” Cebull said.

Selling services

G2G sells its services without taking ownership of the product. The well owner is responsible for hauling the liquefied gas to a natural gas plant or other buyer.

By selling services only, G2G owners avoid the retail hassle of having a truck driver call at 3 a.m., complaining that his truck won’t start.

The trailers can be hauled to the site in a day and more trailers can be added, if needed. Bakken wells are famous for having high production rates early on, but the output declines rapidly.

Selling natural gas is more difficult now with prices lower than they’ve been in a decade.

Crude oil prices briefly dipped below $81 a barrel last week, down from a recent high of $115 a barrel and closed the week around $84.

If the low prices last, some marginal wells will no longer be economical, even in the Bakken — considered among the hottest oil-and-gas plays in North America.

Another business risk for G2G is that the pipeline companies will eventually connect to most wells.

“But there’s so much activity now they can’t keep up,” Cebull said. “Some wells are close to a pipeline. Others are so far away that they may never be hooked up. Other wells are hooked up, but the pipeline is full.”

Still, G2G is a “fairly low risk” business venture, Cebull said, although he added that all oil booms end someday.

“Just the vastness in the Bakken is proof there will always be productivity and opportunity for us,” he said.

Copyright 2014 The Billings Gazette. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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