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North Dakota Oil and Wind Energy Update: Dr. Cole Gustafson Insights February 2011

This update by Dr. Cole Gustafson provides an overview of North Dakota’s oil and wind energy landscape as of February 2011. It highlights oil production statistics, including 321,042 BOPD and over 5,000 producing wells. Additionally, the state’s wind energy capabilities are outlined, showcasing operational turbines with a capacity of 1,223 MW and future plans for increasing power generation. The report discusses local economic impacts, the cost of energy production, and important considerations for landowners and investors in the wind energy sector.

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North Dakota Oil and Wind Energy Update: Dr. Cole Gustafson Insights February 2011

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  1. Oil and Wind Energy: North Dakota Update Dr. Cole Gustafson Feb. 9, 2011

  2. North Dakota Production • July 2010 – 321,042 BOPD • July 2010 – 320,371 MCF/D • 5,051 Producing Wells Courtesy: Neset Consulting

  3. Williston Basin Deposition - ND Courtesy: Neset Consulting

  4. Relative Thickness Courtesy: Neset Consulting

  5. ND Bakken and Three Forks Courtesy: Neset Consulting

  6. Mud Motors Drillpipe Courtesy: Neset Consulting Non-magnetic Drill Collar Bent Sub Mud Motor Rotating Sub

  7. Rebuild Gravel Road $300,000/mile Road Repair Paving $1,000,000 / mile Graveling $3600 /mile Courtesy: Neset Consulting

  8. Farm Windmill--Aermotor

  9. 262 ft 242 ft Overall Diameter Incl. Hub: 252 ft

  10. Wind Generation in North Dakota • Operational: • Turbines 770 • Rated Capacity 1223 Mw • Under Construction: • Rated Capacity 76 Mw • Planned: • Rated Capacity 6684 Mw

  11. Power Generation Capacity in North Dakota MegawattsPercent • Wind 1223 21 • Hydro-Electric 515 9 • Coal-Fired 4071 70 Total 5809 100

  12. Some “Back-of-the-Envelope” Numbers… Rough Cost at 39% Capacity Factor: ¢/kWh Capital Cost ($2.2Million/MW, 6%, 23 yrs): 5.2 ¢/kWh Land Lease: 0.1 ¢/kWh O&M / Insurance: 0.9 ¢/kWh Property Taxes: 0.2 ¢/kWh Total Estimated Cost: 6.4 ¢/kWh Less Offsets… Production Tax Creditor 30% Treasury Grant Accelerated Depreciation Renewable Energy Credit Sales Net Cost After Tax -- Less than 4¢/kWh

  13. Local Economic Impacts - Langdon • 106 1.5mw towers • $500 million investment, $1 million lease payments, $456,000 local tax payments • Met tower (2004), FPL (2006)

  14. Wind - Local Government Issues • Large Wind – Infrastructure, labor, housing community services • Small Wind – Zoning, siting, setback, inspections, complaints, decommissioning • Taxation/investment • Purchasing – How much? • Generation – Where? Size? Own/Contr.?

  15. www.ndsu.edu/energy • Common Landowners Questions on Wind Lease Contracts • Basics of Farm/Residential Small Wind Turbines • Wind Energy Development: Key Financial Considerations • Managing Your Expectations - Sizing a Small Wind Turbine To Your Land • Understanding Wind Energy Leases • Public Involvement and Land Issues Relating to Wind Projects

  16. Questions? Cole.gustafson@ndsu.edu 701-231-7096

  17. Investment & Risk Comparison Project Developer • Transmission Risk • 2-3 years wind studies • Engineering $$$ • Permitting Risk • Operating Risk • Market Risk • Tax Risk Landowner ¼ to ½ acre ofland per turbine Revenue: $4-$6000/turbine/yr Cost: $3-5 Million/turbine

  18. Gas is a likely partner for wind energy Wind will displace the system’s highest cost fuel Fuel Cost of Electricity…

  19. 6 - 8 MPH Cut-in 1475 kW @ 26 MPH 250 kW @ 13 MPH Power Curve:Generation vs Wind Speed Reaches Rated Capacity at 26 - 31 MPH 56 - 62 MPH Cutout

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