XTO Purchasing Bakken Land

MONTANA, May 28 2008 (Neo Natura) - XTO Energy Inc. announced today that it has entered into a definitive agreement to acquire producing properties and undeveloped acreage from privately-held Headington Oil Company for $1.85 billion. Consideration in the transaction includes $1.06 billion of cash and 11,742,391 shares of XTO common stock valued at approximately $790 million, or $67.35 per share. The purchase includes 352,000 net acres of Bakken Shale leasehold in Montana and North Dakota.

XTO Energy's internal engineers estimate proved reserves on the properties to be 68 million barrels of oil equivalent, of which 60% are proved developed. Upon closing, the acquisition will add about 10,000 barrels of oil equivalent per day to the Company's growing production base. The acquisition is scheduled to close on or before July 15, 2008.

"Since 2004, XTO has aggressively pursued the best shale basins -- in terms of geology, productivity and economics -- to stake a claim for long-term growth. Our successful development results in these plays have created value for our shareholders and motivated additional investment for our future. With this acquisition in the Bakken Shale, our Company is now established as a leading producer and leasehold owner in this emerging oil shale play," stated Bob R. Simpson, Chairman and Chief Executive Officer. "As in our other producing arenas, the XTO team will bring experience and expertise to this multi-zoned, over-pressured and complex basin. We expect to grow production and reserves from this prolific shale into an environment of strong commodity prices."

"Across the 15,000 square mile Williston Basin, results from new Bakken wells, utilizing progressive horizontal drilling and completion techniques, are revealing the true potential of this extraordinary hydrocarbon target," noted Keith A. Hutton, President. "With over 3 billion barrels of oil held in place within our acreage position, our team expects to more than double the acquired reserve volumes over time. Drilling and operational activities should grow our production in the region by 12% to 15% annually, with about one-third of cash flow. Given the $3 per barrel production cost and high economic margin of these flowing oil wells, this expansive shale acquisition is a superb addition to XTO's portfolio of premier properties."

In a recent report, the U.S. Geological Survey published a new assessment of the Bakken Shale play of North Dakota and Montana. The report cites that 3 billion to 4.3 billion barrels of undiscovered oil are technically recoverable with current technology and industry practices. This estimate by the USGS made the Bakken Shale the largest continuous oil accumulation in the lower 48 states. In addition, the USGS has estimated total oil-in-place at 200 to 400 billion barrels.

The acquired properties are located in the Bar Trend and Nesson Anticline of the Bakken Shale development. At present, the primary producing field is Elm Coulee in Montana. Undeveloped leasehold comprises about 215,000 net acres of the total. Production volumes are 88% oil, but the associated natural gas is Btu rich in composition, realizing a 30% premium to NYMEX pricing.

"They come into a basin and they're very aggressive," Brian Corales, an analyst at Coker & Palmer in Metairie, Louisiana, who rates XTO shares a buy and doesn't own any, said in a telephone interview. The Bakken Shale "is a very hot play."

XTO said drilling and operational activities should increase production in the region by 12 percent to 15 percent annually. The acquisition brings the total of XTO's purchases this year to more than $4 billion.

"With over 3 billion barrels of oil held in place within our acreage position, our team expects to more than double the acquired reserve volumes over time,'' Keith Hutton, XTO's president, said in the statement.

A federal magistrate fined XTO Energy Inc. $10,000 and ordered it to pay another $10,000 in restitution in the deaths of two golden eagles electrocuted in 2006 by power lines leading to energy production sites near Gillette. They were charged on May 22, 2008.

Chief Executive Officer Dominic Domenici, resident agent in charge of the U.S. Fish and Wildlife Service for Wyoming and Montana, said Wednesday that XTO Energy, Inc. pleaded guilty last month to a misdemeanor violation of the federal
Bald and Golden Eagle Protection Act.

Dominic Domenici, the federal magistrate that charged them, said U.S. Fish and Wildlife Service Special Agent Tim Eicher of Cody found the dead eagles during a survey. Domenici said the birds were electrocuted after they touched improperly constructed power lines.

The Fish and Wildlife Service together with the Wyoming Game and Fish Department investigated the case, which was prosecuted by the U.S. Attorney's Office.

In addition to the court fine and restitution, Domenici said the company spent $988,000 on an avian protection plan that involved retrofitting miles of power line to make it safe for birds.

Jackson lawyer Hadassah M. Reimer represents XTO Energy. She said the company examined 95 miles of existing power lines and made improvements as necessary to make sure all of it was safe for birds.

According to a Fish and Wildlife Service statement, electrocution has been identified as one of the leading killers of eagles, hawks and owls since the 1960s. The agency said current standards in the electrical industry require power lines be placed at least 5 feet apart or insulated to make them safe for birds.

The agency statement says the $10,000 restitution that XTO Energy agreed to pay will go to the Murie Audubon Society in Casper, which rehabilitates sick or injured migratory birds.

John R. Barksdale, assistant U.S. Attorney in Casper, prosecuted the case. He said the company was responsive when contacted by his office and had already taken steps to address its power lines.

"We don't like to have any birds killed, but XTO was responsive when we contacted them," Barksdale said.

New Mexico-based Yates Petroleum Corp. last year also agreed to make improvements to its power line facilities in Wyoming and New Mexico to help prevent bird deaths.

A settlement between Yates, the U.S. Department of Justice and the U.S. Fish and Wildlife Service stemmed from the discovery of four dead eagles found near power lines owned by Yates at its coal-bed methane facilities in the Powder River Basin of northwest Wyoming.

Utilities Required To Create Renewable Energy

MONTANA, May 27 2008 (Neo Natura) - Montana code 69-3-2004 requires most energy providers to produce atleast 5% of their energy through renewable resources. In 2010 they are required to produce 10%, and in 2015 they are required to produce 15% from renewables.

The law lists the accepted types of renewables energy sources as wind, solar, geothermal, water power below 10MW, biogas, nontoxic biomass, and hydrogen fuel cells. The law mirrors the federal bill regarding nuclear power in the manner that it is not considered renewable.

Natural Gas Power Plant Expansion

MONTANA, May 21 2008 (Neo Natura) - Montgomery Energy officials said Tuesday they plan to expand a proposed natural gas-fired power plant north of Great Falls.

That surprising news came after Montgomery Energy was rebuffed Friday by the Federal Energy Regulatory Commission. The federal commission ruled Texas-based Montgomery had no right to leapfrog ahead of other power-plant projects that are waiting in line to hook up to transmission lines in the Great Falls area.

But Montgomery Energy officials said they simply had been trying to move ahead of projects that were struggling.

"The FERC ruling will have absolutely no impact on our project," said Dan Hudson, president of Montgomery Energy Partners. Instead, Montgomery officials said they not only plan to build north of Great Falls a 275-megawatt baseload power plant, estimated to cost up to $300 million, but also another 125-megawatt peaking plant, estimated to cost $96 million, which would be used to fulfill extreme power needs.

The combined facility would produce 400 megawatts of electricity, cost about $400 million to build and provide power flexibly to Montana's power grid, company officials said.

"Any time we have $100 million invested in energy in Montana, it's continuing evidence of the potential we have in all forms of energy," said Evan Barrett, chief business development officer in the governor's office.

"We're number one in coal potential and number one in wind potential, but natural gas is a resource we want to use as well," Barrett said Tuesday. "To be able to use this for peaking will allow us to use the whole combination better."

Cascade County Commissioner Peggy Beltrone praised Tuesday's announcement, saying the project "strengthens Montana's position as a national provider of clean energy." She said the plant would mean more jobs and tax base for the county. Interest in wind power is growing in Montana, and electricity produced by natural gas can be use to supplement wind energy.

In an interview, Hudson said the negative FERC ruling was "no big deal" to the company because of some positive negotiations between Montgomery Energy and NorthWestern Energy, the dominant utility in Montana. In fact, Hudson said Montgomery Energy and NorthWestern Energy had discussed mutually withdrawing the complaint several weeks ago, but the issue was too far along.

NorthWestern and Montgomery have been working in recent months to winnow down a huge estimated cost of $146.7 million for Montgomery to connect to NorthWestern's transmission lines.

That figure has now been reduced to about 2 percent of the original figure, or between $2.5 million and $3 million, he said. According to Hudson, the large cost was the principal basis for Montgomery's complaint to the federal energy regulatory board.

Hudson explained the smaller connection fee of less than $3 million is "a straight interconnect," rather than a more complex arrangement to join NorthWestern's larger network.

Mike Cashell, chief transmission officer for NorthWestern Energy in Butte, said Tuesday he could not confirm the figure of less than $3 million, but he agreed it is substantially less than before.

"There are two types of interconnections," Cashell explained.

One type of connection looks at integrating a proposed project into NorthWestern's network, and determines what type of "significant upgrades" would be needed, Cashell said. In the case of the natural gas plant, NorthWestern figured a new 238-kilivolt line would need to be built for the gas plant starting at Great Falls. That would have given Montgomery Energy all the room it needed on area transmission lines, any time of the day or night, he explained.

"We have to clear the congestion that might exist when this plant comes on," Cashell said.

Instead, Montgomery Energy opted for the second kind of connection, a simple hookup to NorthWestern lines, and to use NorthWestern's lines "if there is excess transmission available," Cashell said. "They would only get access as the transmission capacity is available."

That might be a problem for a power plant, except Hudson said his plant's prospective customers already have plenty of space reserved on transmission lines to more than cover the size of the Montgomery Energy plant.

Cashell agreed it's possible Montgomery's customers could clear the way for Montgomery to access those transmission lines.

Hudson said Montgomery Energy is still working to line up customers for what it hopes will be its 400-megawatt project, and that construction could begin late this year or in the spring of 2009.

"We need a couple things to fall into line," he said. "The design is completed."

Montgomery has a number of potential customers, including rural electric cooperatives, NorthWestern Energy itself, the city of Great Falls and customers in Alberta who could be reached through a proposed new transmission line between Great Falls and Lethbridge, Alberta, he said.

Great Falls has said it gets its power through the umbrella group Southern Montana Electric Generation & Transmission Cooperative, and SME officials have criticized wind power and natural-gas power as too expensive.

But Hudson contends SME and Great Falls may still be interested in buying power from Montgomery Energy, and/or wind farms, if plans for the proposed coal-fired power plant near Great Falls do not pan out.

"It's very hard to finance coal plants right now," Hudson said. He said Montgomery already has the money to build its project. The Rural Utilities Service earlier this year declined to finance SME's Highwood Generating Station.

Brett Doney, president of the Great Falls Development Authority, said one long-term solution is to build more transmission lines.

"We obviously want to see both projects go ahead," Doney said.

Montgomery Energy Partners' chief executive, Frank Giacalone, added, "We have the track record, are farther along in the development process, and have the ability to provide the relief to the energy needs of Montana sooner than anyone else." He said the company has built four similar facilities in the last two years, twice each in Odessa and Wharton, Tex.

Hudson said his company has been working with wind developers in Montana, since energy generated by wind turbines can complement natural-gas-fired electricity. He said Montgomery Energy's gas-fired facilities at Odessa manage 4,000 megawatts of total wind power being produced in the area.

"Our plant manages all the wind production for that area," Hudson said. "We really know how to manage it." He suggested the company could do the same in Montana, where wind development is on the rise, and said the Great Falls Energy Center is being designed to handle more than 2,000 megawatts of wind power.

Hudson said the Great Falls main plant might be expected to run about 40 to 60 percent of the time, while the smaller peaking plant might run between 15 and 40 percent of the time to accommodate customers' "extreme needs."

Hudson conceded natural gas is more expensive to burn than coal, but he noted natural gas generators are less costly to build than coal plants. The estimated cost of Montgomery Energy's 400-megawatt facility is about $400 million, half the estimated $800 million cost of the 250-megawatt coal-fired Highwood Generating Station.

Montana Wind Resource Map

MONTANA, May 19 2008 (Neo Natura) - The Department of Energy's Wind Program and the National Renewable Energy Laboratory (NREL) published a new wind resource map for the state of Montana. This resource map shows wind speed estimates at 50 meters above the ground and depicts the resource that could be used for utility-scale wind development. Future plans are to provide wind speed estimates at 30 meters, which are useful for identifying small wind turbine opportunities.

As a renewable resource, wind is classified according to wind power classes, which are based on typical wind speeds. These classes range from Class 1 (the lowest) to Class 7 (the highest). In general, at 50 meters, wind power Class 4 or higher can be useful for generating wind power with large turbines. Class 4 and above are considered good resources. Particular locations in the Class 3 areas could have higher wind power class values at 80 meters than shown on the 50 meter map because of possible high wind shear. Given the advances in technology, a number of locations in the Class 3 areas may suitable for utility-scale wind development.

This map indicates that Montana has wind resources consistent with utility-scale production. Good-to-excellent wind resource areas are distributed throughout the eastern two-thirds of Montana. The region just east of the Rocky Mountains in northern Montana has excellent-to-superb wind resource, with other outstanding resource areas being located on the hills and ridges between Great Falls and Havre. The region between Billings and Bozeman also has excellent wind resource areas. Ridge crest locations have the highest resource in the western one-third of Montana.

Gail Gutsche Runs For Public Service Commission

MONTANA, May 16 2008 (Neo Natura) - Gail Gutsche explains that she is running for the Public Service Commission because "this is a really critical time for a change in the energy future of Montana."

She said she will work to help find solutions to the dramatic price increases consumers have seen since the Montana legislature deregulated electricity.

"We need to think about how we're going to do energy in the future and clearly it's going to be in a carbon-constrained world--Congress is going to set carbon standards," she said. "I want to help create jobs for Montanans, and help shield them from the expected dramatic increases in fossil-fuel-based electricity. Montana has the opportunity to bring back fair and reasonable utility rates, but we can't do it by maintaining the status quo."

The PSC is a regulatory body that examines rates set by the energy utility companies. The PSC commissioners work closely with legislators to promote changes that can benefit Montana ratepayers.

Gutsche said she wants to work with the PSC and the utilities to develop Montana-based generation facilities, while solving the problems caused by deregulation.

Gutsche, a Democrat and former Montana state legislator from Missoula, is seeking the seat held by former Republican legislator Doug Mood, Seeley Lake. As a legislator, Mood was a staunch supporter who voted for deregulation, she pointed out.

"What happened with deregulation is that Montana Power sold its generating dams on the rivers and its interest in coal-fired power plants to Pennsylvania Power and Light (PP&L). In this new deregulated environment, the only restriction was competition from other suppliers on the open marketplace," she explained.

Deregulation failed because Montana's small population and large distances were not attractive to companies and they did not compete for the Montana market, she said. The end result was the worst of all possible worlds: no competition, a sole supplier, and no way to control rates.

That means that Montanans saw dramatic price increases while purchasing the bulk of their power from the deregulated PP&L. The dams and the coal plants owned by PP&L are not regulated by the PSC.

The PSC does regulate the transmission and distribution system, and can work to ensure that Northwest Energy has fairly priced services for its customers, but the PSC has no say over PP&L, she pointed out. "We don't have any say over what PP&L does. Therein is the problem."

Everybody's energy bills utility bills have dramatically increased some peoples bills have as much as doubled since we deregulated. "I'd like to work to find some solutions to that," she said.

The last legislative session enacted partial re-regulation, allowing PSC oversight of any new generation facilities that Northwest Energy acquires. But the PSC still won't be able to affect anything happening in Pennsylvania.

"There are other things we can do to rein in PP&L, mostly through legislation," she pointed out.

For example, the PSC could lobby legislators to generate revenue for rate relief, either by increasing the wholesale energy transaction tax, or adjusting the property tax relief on large power generators, or enacting a hydroelectricity production tax.

Interestingly, the PSC is made up of all former legislators and would be able to work with the Montana legislature on developing new policy.

Gutsche served four two-year terms in the Montana House of Representatives during the legislative sessions in 1999, 2001, 2003, and 2005. She served on the Judiciary Committee, the Fish, Wildlife and Parks committees, and was vice-chair of the Natural Resources Committee. She also chaired the Law and Justice interim committee. She was elected Democratic Whip in 2005.

She recalled serving at the same time as former Rep. Paul Clark (HD-13), who is now running for Sen. Jim Elliott's former seat in Senate District 7.

Her main legislative interests involved public access to land, improving habitat for wildlife, preserving clean air and water, and health care, especially for low-income folks and women.

Since leaving the House, she has served on an advisory council for the Department of Corrections.

On the PSC, she said she would seek to develop Montana's renewable resources, especially wind power, but also solar power and geothermal.

In 2005, the Montana legislature passed a renewable energy standard that requires utilities to obtain 15 percent of their energy from renewables by 2015, she noted. The Northwest Energy Judith Gap project is already halfway to that goal, and costs less than the average cost of the rest of the portfolio.

"I think the PSC's role is to encourage Northwest Energy to look at renewable sources, and to work with the legislature to work with the utilities again," she said. "There are many opportunities in Montana for renewables and energy efficiency. Conservation and energy efficiency is our best response because using less energy has significant benefits over developing any new sources of power." Consumers can help hasten the transformation by demanding more efficient and more renewable energy, she suggested. "It's certainly an important part of the recipe."

New technologies like "smart grids" will create jobs, and Montana can be at the forefront, she suggested. Smart grids increase energy effeciency through methods such as setting your appliances to come on and off at off-peak hours

"We need to do what we can to rein in outlandish energy prices, especially when large energy companies are posting huge profits. PP&L is making record profits, charging record prices. We need to hold these companies accountable," she said.

If she serves on the PSC, she promised to keep a lid on rising rates for working folks and others who have to make the choice between paying for food, medicine, and energy. "I want to be an advocate for those folks," she said.

Gail Gutsche is also a staff member of the Wild Rockies Field Institute.

Colstrip Power Contamination Lawsuit

MONTANA, May 15 2008 (Neo Natura) - An attorney in a water contamination lawsuit against eastern Montana's Colstrip power plant says the plant's five corporate owners have agreed to pay $25 million to settle the case.

The 57 plaintiffs - including some plant workers - alleged plant officials knew the plant was contaminating water supplies beneath at least one Colstrip subdivision for four years before notifying the community. A second subdivision and trailer park also suffered contamination, the plaintiffs claimed.

Plaintiffs attorney Jory Ruggiero said no sicknesses resulted, but he said many homeowners and the Colstrip Moose Lodge lost use of their underground wells.

"These companies fought every step of the way," Ruggiero said. "You can't hide the facts when you're testing wells and they're coming up contaminated."

The lawsuit, filed in 2003, had been scheduled to go to trial in early June. The defendants were PPL Montana, Puget Sound Energy, Portland General Electric, Avista Corp., and PacifiCorp.

The corporations jointly own the 2,100 megawatt plant, which is operated by PPL Montana to generate electricity for West Coast markets.

The contamination came from pollutants removed from the power plant's smokestacks to meet clean air requirements. At least two of the holding ponds where that waste was kept leaked.

The lawsuit also alleged another reservoir - Castle Rock Lake, which provides water to operate the plant - leaked in volumes great enough to raise the water level under the town and cause structural damage to some homes.

A PPL Montana spokesman, David Hoffman, said his company has acknowledged contamination, but only near the surface of Colstrip's aquifers and not in the vicinity of deeper residential wells.

PPL Montana bought into the plant in 1999 when it acquired the Montana Power Co. - two years after the contamination problems emerged publicly.

"We certainly believe this tentative agreement is in the best interest of all parties involved," Hoffman said. "We recognize there had been some evidence of contamination in the shallow aquifer."

He said the two holding ponds where the contamination originated have since
been lined with a rubber material meant to prevent further leaks.

In a seperate lawsuit former employees who sued Montana Power Co. 10 years ago will finally get a trial - but it's still two years away.

District Judge Kurt Krueger set a trial date of Jan. 11, 2010, in the lawsuit filed by past Montana Power employees. They are seeking workers' compensation benefits they claim they were due from Montana Power.

Montana Power eventually went bankrupt and was bought by several entities, including NorthWestern Energy. The lawsuit alleges the company breached its contract with the former employees.

DOE Evalution on Water Quality Law

MONTANA, May 08 2008 (Neo Natura) - During 2005, the Montana Board of Environmental Review (BER) announced proposed changes to Montana water quality regulations. The proposal was directed to discharges of water from coal bed natural gas (CBNG) production, and if adopted, could substantially reduce the amount of CBNG production in Montana. Potential impacts could also extend to Wyoming CBNG production through much greater restrictions on water quality that must be met at the interstate border.

DOE’s interest in this proposal stems from the importance of CBNG to U.S. natural gas supply. CBNG currently accounts for 9 percent of U.S. natural gas production and the Powder River Basin, situated in Montana and Wyoming and having a recoverable resource potential in excess of 25 trillion cubic feet, is a prime future source for U.S. natural gas supply. This is especially important in these times of tight natural gas supply and high prices.

DOE conducts technical and regulatory analyses to assist federal and state agencies in developing regulatory requirements that provide environmental benefits commensurate with their economic and energy impacts. These analyses serve to provide a scientific basis for regulatory and land management decision making.

For the proposed Montana CBNG water management rule, DOE tasked Argonne National Laboratory and Sandia National Laboratory to evaluate various aspects of the proposal. Argonne focused on regulatory and policy issues and their interrelationships with technology, and Sandia focused on water treatment and engineering, hydrologic and geologic technical issues associated with the zero discharge requirements of the proposal. The findings of these efforts were submitted for the record to the Montana BER.

Big Sky Carbon Sequestration Partnership

MONTANA, May 06 2008 (Neo Natura) - Montana State University's Big Sky Carbon Sequestration Partnership has received a $157,000 grant from the Montana Board of Research and Commercialization to help fund a study of the potential for geologic carbon sequestration at Kevin Dome in northern Montana.

The study is a part of the partnership's Validation Phase research activities being funded by the U.S. Department of Energy's National Energy Technology Laboratory.

Carbon capture and sequestration (CCS) is a technique that removes CO2 in flue gas from power plant smokestacks and buries it in deep geologic formations. CCS is ready for use now, despite the protestations of grant-hungry researchers. The Shady Point power plant in eastern Oklahoma has been removing CO2 from flue gases and pumping it into depleting oil wells for years. CO2 emissions from a cement plant in Montana are pipelined to oilfields in Canada for sequestration. A busy market buying and selling CO2 operates today in the petroleum industry.

Kevin Dome is a subsurface dome-shaped rock structure. This study, led by MSU geologists David Bowen and David Lageson, will evaluate the potential of the dome as a storage site for man-made carbon dioxide emissions. The scientists will use existing well logs, core samples and a variety of subsurface data, including seismic surveys, to characterize the porosity, permeability, thickness, areal extent, and structural features of the dome.

Thirty years of experience in finding, transporting and injecting CO2 into geologic formations to move more oil out of a reservoir to the surface demonstrates that CCS is a viable, secure way to dispose of CO2.

Until recently, the only source of CO2 for oil recovery lay in naturally occurring geologic traps in New Mexico and Colorado, secure in rocks more than 60 million years old. That ancient leak-proof sequestration history should satisfy even the most skeptical critic.

Trapping mechanisms — porous rocks capped by sealing rocks like salt or shale — are common round the world. Norway says its saltwater aquifer used in sequestration in the North Sea can provide enough disposal space for all the CO2 Europe will produce in the next 100 years. Injection of CO2 works in west Texas; in Oklahoma; in Alberta, Canada; and off Norway in the North Sea. How can we doubt that CCS represents a solution for disposing of CO2 from coal-fired power plants today? Now comes the sticking point: cost. The equipment for removing CO2 from flue gases is specialized and therefore expensive. However, when a huge market develops at coal-fired plants, the price for mass-producing the equipment will come down. The result: a bonanza of new manufacturing jobs in the US.

Geologic studies near the plants will be required to locate one or more sealed saltwater aquifers in which to inject the CO2. In many states, enough wells drilled for oil and gas can provide reliable information about subsurface conditions.

Some concern has been raised about injecting CO2 near populated areas. In west Texas, the cities of Midland and Odessa, with some 250,000 residents, are surrounded by many CO2 injection wells with no escaping CO2 detected for 30 years. A new technology, coal conversion to synthetic gas, or syngas, which is composed of hydrogen, CO2 and carbon monoxide, provides a further boon. This almost inexhaustible supply of hydrogen can power fuel cells, while the carbon gases can be sequestered.