Electrifying The Bakken

Basin Electric Power Cooperative and McKenzie Electric provide insight into the current challenges and realities related to the Bakken's power supply and demand.
By Patrick C. Miller | January 20, 2015

Keeping up with the rapidly expanding electrical demand created by the oil and gas industry in the Bakken—as well as the commercial and residential needs caused by a booming economy—has been no easy task for electric utilities.

“It’s kind of a clash of cultures,” says Dale Niezwaag, senior legislative representative with Basin Electric Power Cooperative. “With utilities, we like to do long-range planning. We like 10 to 20 year load forecasting and building large generating units that are meant to turn on and run at the highest efficiency. That’s the ideal world.”

However, Bismarck-based Basin Electric and the rural electric cooperatives it serves in the Williston Basin have learned to adapt to a less than ideal world.

“We’ve run into the oil and gas industry where they want electricity tomorrow, no matter what the cost,” Niezwaag relates. “They just want us to get it done because time is money and they want production to start. You have those two things clashing.”

If the utilities had not met the demand, it’s safe to say that the oil and gas activity in the Bakken would have slowed considerably without enough electricity to power the myriad of uses required for oil and gas production, not to mention increased electrical demand from homes, business and the municipal infrastructure needed to support them.

That is not to say that the job is by any means done or that it’s been smooth sailing since horizontal drilling and fracking caused North Dakota’s crude production to skyrocket to its current level of more than 1 million barrels per day.

“This year, we’re looking in the neighborhood of 20-plus substations that we have to build for various loads,” says John Skurupey, general manager of McKenzie Electric, which receives high-voltage power from Basin that it steps down for distribution to its customers in the heart of the Bakken.

“A lot of it’s for the producers and individual pumping loads,” he adds. “We still have on our plate, in terms of major construction of transmission lines and substations, probably at least two years worth of work just to get to where we’re comfortable in delivering and distributing bulk transmission to our membership.”

Basin serves 137 rural electric cooperatives in a nine-state region, making it one of the largest generation and transmission utilities in the U.S. In 2014, the co-op operated 4,913 megawatts of generating capacity. Basin is forecasting a need for 1,800 MW of additional capacity by 2035.

“Of that 1,800, 1,600 is for western North Dakota, the Williston Basin and Bakken portion,” says Niezwaag. “We’re looking at 75 to 80 percent of our load growth happening in the western part of North Dakota and eastern Montana. That’s a significant load growth we’re going to have to meet in the next 20 years.”

Because much of the demand for electricity is driven by oil and gas production, it’s different from the peaks and valleys in the loads Basin typically serves.

“What we’re seeing out in the Bakken is that there’s a pretty steady demand,” Niezwaag says. “The pumps and the transfer and gathering lines keep running 24 hours a day. You don’t have as much variability as you would in other places. It’s a load that’s pretty steady. What variability there is, having smaller plants allows us to meet that.”

Skurupey notes that McKenzie electric is about 2,000 requests behind for electrical service ranging from residential water wells to farmers and ranchers to man camps to producers to gas plants.

“If they don’t have power, they’re in the queue to get it,” he says. “And then you add on top of that all the lower voltage distribution that we have to get out there to all those entities. I couldn’t even give you an estimate of how many hundreds of miles of distribution line we have yet to build.”

It’s enough to cause both Skurupey and Niezwaag to see the production slowdown caused by low oil prices and North Dakota’s gas flaring restrictions and crude conditioning requirements as a welcome opportunity to catch up.

“I’d say that we’re a little bit behind the eight ball right now,” he says. “With the loads that we know for a fact are going to come on, we are bumping up to the edge of our ability to serve or add our next load.”

To service the forecasted load in the Bakken, Basin is currently building a 200-mile-long, 345-kilovolt transmission line that will deliver electricity generated by the cooperative’s coal-fired Antelope Valley Station near Beulah. Known as the AVS to Neset Transmission Project, it runs through portions of Dunn, McKenzie, Mercer, Mountrail and Williams counties

The construction project includes two new substations, modifications to three existing substations, river crossings, temporary construction staging sites and other facilities.

Karl Aaker, engineering manager at McKenzie Electric, says the transmission line is vital to the region’s rural electric cooperatives that supply power to the growing industrial, commercial and residential demand.

“It’s going to be our stiff backbone for supporting the base loads that we keep growing on our system,” he explains. “It’s everything from the continued growth of oil wells, gas plants, oil processing and even the commercial development and residential development in some of the cities in the area, such as Watford City.”

The line is expected to go into full service in 2017, but Skurupey says part of it should be able to serve McKenzie County by October 2016. Still, it may not happen in time to meet the expected load growth.

“We’re pushing on Basin to try to bump that timeframe up,” he says.

And that leads to another challenge of building infrastructure to meet the Bakken’s growing electrical demand: obtaining permits and easements, conducting environmental impact studies and responding to requests for information from government agencies.

Planning for the AVS to Neset Transmission Project began three years ago. Even though construction started in 2014, Basin is still waiting for a permit from the U.S. Army Corps of Engineers and on easements from landowners. Niezwaag says that construction takes less time than obtaining permits and easements, and the process becomes even more complex when federal land is involved.

“Once you move into federal land, that’s another array of permits and approvals that have to come in,” he says. “You also have several agencies that have the ability to hold up permits as you’re going through the process.”

Curt Pearson, Basin’s manager of media and community relations, notes that the cooperative goes through a painstaking process to site a transmission line to keep landowners satisfied with the routing.

“When we’re dealing with landowners on a transmission line, we’re dealing with people who buy their electricity from our member co-ops,” he explains. “In a very real sense, they’re our members as well. We really want to work with them.

“If they say ‘Don’t’ put the line here, move it over a quarter mile’ or ‘Don’t put it in front of my house,’ we definitely work with the landowners as best we can to make adjustments and make certain that the line routing is acceptable to them,” Pearson says.

Basin is also working on another transmission line project related to the AVS to Neset Transmission Project that’s specifically designed to assist McKenzie Electric’s customers. Known as the North Killdeer Loop Project, it will include 60 miles of 345 KV transmission line and three substations.

In the past, large generation and transmission utilities such as Basin Electric relied on long-range forecasts of electrical demand, constructing major coal-fired power plants that took 10 years or more to complete. These base-loaded plants are designed to run efficiently and reliably nonstop for months at a time. But beginning in 2008 with the rapid expansion of oil and gas activity in the Bakken and the constantly increasing demand for electricity, that model was no longer feasible.

“With the rapid growth that’s taken place, we have not literally had the time to put in large, more efficient plants,” Niezwaag said. “We have the obligation to serve whatever the needs are. So we’ve had to go to smaller peaking plants which are easier to permit and quicker to build. It’s mainly been a necessity situation more than a reliability and efficiency situation.”

To cope with the rising demand, Basin built two gas-fired peaking plants in 2013, one near Williston and the other near Watford City. Once in operation, these plants can come online within minutes to meet demand at peak times and they offer a number of advantages.

“We can place them in areas to meet the load and also to provide transmission support to keep the grid available,” Niezwaag says. “We can have all the transmission in the world, but if we can’t get power where it’s needed, it does us no good. So we’ve ended up putting in the smaller units.”

Basin expanded the generating capacity of both peaking stations during the past year and will further expand their capacity starting this spring. 

The Lonesome Creek Station west of Watford City became operational in December 2013 as a 45 MW unit. During 2014, two more 45 MW units were added. This spring, a third construction phase will begin to add three more 45 MW combustion turbines. The project is scheduled for completion in June 2016. The new turbines use a “dry” low-emission combustion process that requires no water to control nitrogen oxide emissions.

The Pioneer Generation Station northwest of Williston—which went operational in September 2013 as a single 45 MW unit—was also expanded in 2014 with two additional 45 MW units. Expansion beginning this spring will add another 112 MW of peaking capacity. This generation will be provided by 12 9.3 MW natural gas-based reciprocating engines. The Pioneer Station’s three existing units use LM 6000 water-injected, simple-cycle combustion turbines. Completion is targeted for June 2016.

“This generation supports some base load, but it also helps with reliability in the event that any of the transmission lines coming into this area are taken out of service for maintenance or there’s some kind of outage,” Aaker says. “That generation in this area will keep our reliability high and keep the power on to supply power to the increasing growth.”

Niezwaag says the gas-fired peaking plants have advantages and disadvantages.

“They’re not as efficient as we’d like them to be and, from an emissions standpoint, you’ve got several stacks instead of one,” he explains. “But they do provide some benefits where you’ve got that ability to ramp it up as needed. With the gas generation peakers, they’re quick on, quick off.”

To meet future demand, Basin is considering construction of a high-efficiency combined-cycle natural gas-fueled plant, possibly in Emmons or Morton counties. The plant would have two turbines fueled by natural gas and a third powered by steam produced from the other two turbines. If pursued, the plant would be in service by 2020 or 2022.

“We were originally looking at 2019, but now with a couple things that have happened—what people said they were going to be able to build and get online—they haven’t been able to build it as quick as they thought or load demand has leveled a little bit,” Niezwaag says. “With the price of oil and the Keystone pipeline, all those things are getting pushed back a little bit. Our timeline is moving on when that large plant is going to be needed.”

Combined-cycle power plants are something of a departure from the coal-fired power plants Basin has traditionally constructed. 

“When you compare a coal plant to a combined-cycle plant, you get a little bit more flexibility,” Niezwaag said. “A coal plant can take a day or two to come online. With a combined-cycle, it’s not as quick as the peaking plants. You’re talking a matter of hours to get a combined-cycle plant up and running compared to three or four minutes for a peaking plant.”

A combined-cycle plant would be considered an intermediate power generating solution, Niezwaag says.

“With coal, you consider that base load because you can turn it on and have it run all the time. With the peakers, you just turn them on when they’re absolutely needed,” he explains. “With combined cycle, you can bring it on, but also turn it off when you don’t need it. So it’s more of a 7 a.m. to 7 p.m. generating plant. You’ve got a little bit more flexibility with that.”

Wind is also part of Basin Electric’s plan to meet energy demand in the Bakken. The cooperative went from almost no wind generation in the early 2000s to having 750 MW of generation today.

“We’re probably going to be adding another 300 to 400 megawatts of wind in the future,” Niezwaag says. “We’re looking at the EPA compliance and, depending on what the rules are going to be, we feel that wind is going to have to be part of our portfolio.”

The abundance of natural gas from the Bakken gives Basin access to another fuel source and provides greater flexibility in meeting the increasing demands on electrical generating capacity.

“The ability to combine the wind with the gas gives us a marketable product,” Niezwaag says. “Wind is intermittent and it doesn’t run all the time. But if we have as much gas as wind, it allows us to turn our gas on when the wind’s not blowing. If we have good wind, we can shut some gas down.

Environmental concerns and potential EPA regulations intended to curb global climate change have made the traditional coal-fired power plants less attractive as a means of providing future generation. It also creates uncertainty about the cost of electricity.

“We usually owned or had long-term contracts for coal, so you always knew what your price was going to be,” Niezwaag explains. “Now, with the environmental situation being more prevalent and more of an issue with our members and with the regulators, it’s putting coal under pressure.

“Wind and gas generation allows us to meet the environmental side of it,” he continues. “The other side that we lose, though, is the price stability. If the EPA regulations get really strict on coal, we can go to the wind and gas and have some generation there. You’re hedging on a lot of different areas with a diverse portfolio.”

As with all infrastructure development in the Bakken, the challenge for both Basin and McKenzie Electric has been to build enough infrastructure to meet demand without overbuilding.

“You don’t want to waste the consumer’s resources,” Niezwaag relates. “You don’t want to build all a transmission line and then all of a sudden have things slow down. They’re paying for an 18-wheeler when all they needed was a station wagon to get by.”

For McKenzie Electric, it’s been a balancing act between being too conservative, meeting the customer’s needs and not going far beyond what’s needed.

“Hopefully, we’re building to meet their needs in the future,” Skurupey says. “And, hopefully we’re not overbuilding so that we’re not wasting money. That’s always the challenge. How do you be as efficient as you possibly can?”

Thus far, keeping up with demand has been far more of a challenge than overbuilding.

“When this all started, there were going to be two wells per pad, one going one direction and one going the other way,” says Niezwaag. “That quickly changed from two to four to eight. Now we’re hearing up to 18 to 20 wells per pad.”

Skurupey compares the situation to shooting at a moving target.

“We end up having to rebuild brand new facilities within two or three years,” he says. “We’re putting in lines that are quite expensive, and then finding out that we have to go back in and replace them. It’s not a simple thing. It’s almost a wholesale replacement.”

Niezwaag points out that producers are still experimenting with the optimum number of wells on a site and the amount of separation between them. In addition, other developments on the horizon could impact the electrical load in the Bakken.

For example, if carbon dioxide is used for enhanced oil recovery, Niezwaag believes it will increase energy demand. If the U.S. Forest Service allows drilling on federal grasslands, it will not only increase the demand for electricity, but also create difficulty in obtaining permits to build transmission lines into those areas.

Compounding the difficulty in forecasting future energy needs for the Bakken is the unwillingness of producers to provide information about their plans.

“What we finally decided to do about a year ago is poll all the producers that drill in our area,” Skurupey says. “We asked them for a 3 to 5 year projection. They don’t like doing that because everything’s confidential. It’s like pulling teeth to get information out of some of them.”

However, the effort eventually paid off.

“They finally gave us some fairly good information,” Skurupey notes. “We designed our transmission and substation build-out accordingly. We think that we’re going to be set so that we don’t have to rebuild anything on that side of the system in the future—hopefully.”

Looking down the road at what the future holds for electrical demand in the Bakken, Niezwaag says, “If there’s three areas to look at, it would have to be the technology in the Bakken, the price of oil that creates volatility and federal regulations. Those are the three things we have to keep an eye on and try to anticipate and meet.”

Despite the stress caused by trying to keep up with the growing demand for electrical generating capacity and new service requests, Skurupey sees the positive side of being a rural electric cooperative in the Bakken.

“There are a lot of people throughout the United States who would love to have our problems,” Skurupey says. “It’s just a challenge. Everybody we serve—it doesn’t matter if you’re a rancher or a multi-billion-dollar corporation—each one is still a member of ours, and we try to do our best to meet their needs, no matter what happens.”

And, he adds, “It’s come on a little fast, but we’ve been pretty good at adjusting. We put a lot of load on our contractors and consultants. We’re drawing on their resources from all over the United States. I think we’re doing a pretty darn good job if you consider everything that’s gone into this boom.”

Basin Electric has had to change the way it plans for new generating capacity and for building new power plants, not only because of the Bakken boom, but also because of changes in national energy policy and environmental regulation.

“In days past, we used to be able to build coal plants, which was a 10 to 12 year process and why we needed to do long-term planning,” Niezwaag relates. “Right now, with the EPA regulations, we’re pretty much limited to handle meeting our growth with gas generation and renewables—mainly wind generation. For the past 10 years, we’ve gone from meeting our demand with the large coal-based plants to meeting it with smaller gas-fired generation along with the renewable of wind.”

Although lower oil prices and new regulations might reduce North Dakota’s oil and gas production, as well as lead to a slowdown in economic growth, Skurupey believes that McKenzie County will continue to see a high level of industry activity.

“It is the sweet spot of the Bakken,” he explains. “If any drilling continues, it’ll likely happen here, even though it may be reduced a little bit. The fact that they’re able to drill 21 wells on one pad, they’re going to realize their efficiencies and reduce their costs. I’m pretty confident that we’ll still see rigs working in our service area, even though the price of oil is down.”

Author: Patrick C. Miller
Staff Writer, The Bakken magazine
701-738-4923
pmiller@bbiinternational.com