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U.S. oil gusher blows out projections
Fuel Fix ^ | February 20, 2012 | Simone Sebastian

Posted on 02/20/2012 7:56:14 AM PST by thackney

The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quad­rupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

“It’s staggering,” said Marshall Adkins, who directs energy research for the financial services firm Raymond James. “If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”

There are doubts that energy independence is that close. But many say the booming shale oil fields in Texas and North Dakota and the growth of deep-water drilling in the Gulf of Mexico will allow the nation to cut its reliance on oil imports significantly over the next couple of decades.

Last month, the U.S. Energy Information Administration upgraded its forecast of crude production in 2025 to 6.4 million barrels per day – 1 million barrels more than were pumped in 2010.

Previously, the EIA had projected the U.S. would peak at 6 million barrels in 2022.

“The growth that we’ve seen in shale, that’s one of the biggest changes that’s contributing to our outlook,” said Dana Van-Wagener, a research analyst for the agency. “It’s evolving so quickly. We weren’t anticipating enough growth.”

Crude prices stable

By the EIA’s forecast, the United States will challenge Saudi Arabia as the world’s top oil producer when crude and other forms of liquid petroleum are included. But the U.S. is also the world’s top oil consumer, demanding nearly 20 million barrels a day. So even with an oil boom, the nation still falls far short of its energy demands.

The technology that fueled the national shale gas rush is moving into oil fields. The pairing of fossil fuel production techniques called horizontal drilling and hydraulic fracturing allowed companies to access previously hard-to-reach natural gas trapped in dense shale rock.

The rush has unleashed a flood of natural gas onto the U.S. market, causing price to dive and making some gas wells uneconomical. Companies have started to close natural gas wells and pull rigs out of gas fields.

Meanwhile, crude oil prices have remained high, with the domestic benchmark West Texas Intermediate price rising 93 cents to $103.24 on Friday.

Pumping crude out of shale rock is more expensive and difficult than getting at natural gas, said Eric Potter, program director for energy research at the University of Texas at Austin’s Bureau of Economic Geology.

Oil molecules are larger and harder to squeeze through the cracks created by hydraulic fracturing. But the high price of crude makes it worthwhile for many companies.

“With natural gas prices being as low as they are, your company could go out of business if you don’t manage this carefully,” Potter said. “People are moving quickly to get into these oil plays. It’s a matter of their existence.”

The Eagle Ford Shale in South Texas, the Permian Basin in West Texas, and the Bakken Shale in North Dakota have been hubs of the domestic crude boom. They now make up about 40 percent of the nation’s land-based oil production, noted Adkins, the Raymond James analyst. He projects that proportion will grow to two-thirds by 2015.

Fields underestimated

Adkins says the Energy Information Administration is vastly underestimating the rapid growth of those oil fields. He believes that crude oil production in the United States will reach 9.1 million barrels by 2015, some 45 percent more than the EIA’s forecast.

The reason for the varying projections about the nation’s crude potential is uncertainty about how much oil is underground and whether technological advances will make it reachable.

That also causes debate about future crude oil prices.

Adkins, for example, says the rising production will help reverse the surging price of oil, pushing it down to $90 per barrel next year.

Forecast: $4.09/gallon

Others, however, believe oil prices will continue to rise despite the growing supply coming out of U.S. oil fields. Domestic crude prices are closely tied to the world market.

That makes domestic prices susceptible to the global Brent crude benchmark price, which is on the rise due to foreign conflicts and rapidly growing energy demands in developing countries.

The EIA projects the average world oil price will reach about $145 per barrel in 2035, in current dollars, compared to the 2011 average of $93 per barrel. Meanwhile, the agency forecasts gasoline in America will rise to $4.09 per gallon.

“As far as drilling and production, it’s going to be really good and robust,” said Michelle Michot Foss, chief energy economist for the University of Texas Bureau of Economic Geology. “But consumers will be upset because gasoline prices will continue to be high.”


TOPICS: News/Current Events
KEYWORDS: drillbabydrill; drilling; energy; energypolicy; oil
I know we will several post asking if there is so much new drilling, why are we paying so much.

It is because oil prices are so high (combined with new technical advances opening up new plays) that so much drilling is going on. It is drawing new investment dollars. Normally, this will eventually drive the price back down.

1 posted on 02/20/2012 7:56:28 AM PST by thackney
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To: thackney

Now if only the government would just take its boot off the neck of oil production...


2 posted on 02/20/2012 7:57:41 AM PST by mvpel (Michael Pelletier)
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To: thackney

The price will eventually come back down, it will just take time. Speculators and all the garbage with Iran will play a heavy toll but supply will NOT be a factor in gas prices going forward.


3 posted on 02/20/2012 8:04:50 AM PST by Peter from Rutland
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To: thackney
Thackney,

What do you think are the chances that oil has been inflated and once the bubble bursts many of these drilling and related operators will not have enough ROI to pay for all the equipment in the field now?

It would be world of hurt to see 80’s style storage yards with rig’s, trucks, skids and equipment lined up behind chain link fences waiting for an asset auction while 10’s of thousands of roughnecks are trying to figure out how to get around and look for new work after their “Trans-Am” has been repossessed.

4 posted on 02/20/2012 8:06:33 AM PST by GulfBreeze (Still a Santorum guy !)
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To: thackney

$4 gas without oil imports is better than $3.50 gas that ends up funding Muslim extremists.


5 posted on 02/20/2012 8:09:12 AM PST by kidd
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To: thackney

You can be assured this administration will do everything within its power (and that which is forbidden by the US Constitution) to keep energy prices as high as possible. NY State is doing their best to help the Marxist in the WH by throwing up as many roadblocks as possible to drilling for natural gas.

How else can they force us into 1 light bulb/ house with a winter thermostat mandated at 55 degrees F and summer at 80? Don’t think they will do that? Ha, wait for it as it is coming.

How else can they resurrect their failed carbon credit exchange? Gore and Soros have to recover the millions they lost in that scam.


6 posted on 02/20/2012 8:09:19 AM PST by Wurlitzer (Welcome to the new USSA (United Socialist States of Amerika))
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To: thackney

Not so much that there is more drilling, but new recovery methods, especially hydraulic “fracking”, which enables recovery of the “tight” petroleum still remaining even in “dry” wells.

It is there, it is only necessary to let the price to rise high enough to make recovery and reclamation economically feasible.

The supply/demand/price curve works with almost immutable force. The only thing distorting it at the moment is the weight of excessive regulation.

Why aren’t we making oil out of organic trash? We already know how, and it has been done on a small scale at a turkey processing plant. And apparently at competitive price.


7 posted on 02/20/2012 8:10:23 AM PST by alloysteel (Are Democrats truly "better angels"? They are lousy stewards for America.)
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To: Peter from Rutland
Supply is growing; it will be part of the equation for long term pricing.

Both world-wide and in the US, Supply is growing.

http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=50&pid=53&aid=1&cid=ww,&syid=2007&eyid=2011&freq=M&unit=TBPD

8 posted on 02/20/2012 8:12:16 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

What can they do with all that oil if we have no new refineries?


9 posted on 02/20/2012 8:16:58 AM PST by raybbr (People who still support Obama are either a Marxist or a moron.)
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To: GulfBreeze
What do you think are the chances that oil has been inflated and once the bubble bursts many of these drilling and related operators will not have enough ROI to pay for all the equipment in the field now?

I think demand is fairly constrained, people are using less than the would like to use, due to high prices and poor economy. Significant amount of people, even world wide, are in a difficult economy. This has reduced consumption from its potential once the economies recover.

However, enough countries are still growing consumption to bring the world wide total into a slow growth and has for a while.

So I don't see the present conditions as a bubble. This isn't a time where most are flying high and overconsuming compared to a stable rate. I think consumption will continue to grow globally.

10 posted on 02/20/2012 8:18:05 AM PST by thackney (life is fragile, handle with prayer)
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To: Peter from Rutland
The price will eventually come back down,
One can hope so. A lot of the costs are for regulatory/environmental management that must be borne by the producer/transporter/refiner/retailer and of course taxes. In 98 I worked on a 500 mile pipeline project. Avg cost per mile was 1,000,000 USD. of that $400,000 was for environmental and regulatory compliance.
11 posted on 02/20/2012 8:25:12 AM PST by dblshot (Insanity: electing the same people over and over and expecting different results.)
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To: GulfBreeze

In North Dakota it is still the Camaro, not the Trans Am. To graduate from many highschools in ND you have to be able rebuild a Camaro engine with a blindfold on while sipping Everclear.


12 posted on 02/20/2012 8:26:03 AM PST by Sawdring
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To: raybbr
What can they do with all that oil if we have no new refineries?

They will go through the same refineries today that are processing imported oil.

We do not have any refinery shortage. Our refining capacity has been above our demand for some time now, we are actually now a net exporter of refined products, since we are refining more than we use.

We have not built any new refineries, but we have been expanding and upgrading the existing ones for many years. That is cheaper than a new refinery, plus you don't have to build new pipelines to carry crude oil and natural gas in as well as products out.


13 posted on 02/20/2012 8:31:25 AM PST by thackney (life is fragile, handle with prayer)
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To: dblshot
In 98 I worked on a 500 mile pipeline project. Avg cost per mile was 1,000,000 USD.

I've worked a lot of big pipeline jobs, mostly natural gas but some oil and products.

I was told a couple years ago that $2~3 million was more typical now for a major line.

14 posted on 02/20/2012 8:33:36 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

The US is also going to be exporting LNG. Some of the facilities to import are currently being converted to export.
If we truly opened up ANWR and more areas offshore, energy independence and a big financial burden would be lifted off the US.


15 posted on 02/20/2012 8:36:26 AM PST by Oldexpat
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To: thackney
The number of rigs in U.S. oil fields has more than quadrupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

Something smells fishy. I know for darn sure that the past three years have not been friendly to domestic oil production. Maybe these increased numbers are because Bush approved their use before they went online?

16 posted on 02/20/2012 8:36:43 AM PST by SoFloFreeper
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To: Wurlitzer

Hmmmm! Can you say “smart meters”? Currently being installed EVERYWHERE in NV whether or not you like it. At least for now. There is some talk of a ruling to be able to “opt out” if you want to. Or, wrap your meter in aluminum foil to keep it from broadcasting. Of course NVEnergy will show up to see why their signal is being interrupted. LOL!


17 posted on 02/20/2012 8:38:03 AM PST by rktman
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To: SoFloFreeper
I know for darn sure that the past three years have not been friendly to domestic oil production.

On federal land and waters, that is true. But on private land it has been going gangbusters.

Please look at these charts of number of drill rigs, types, and in which states. Texas especially is experiencing quite a boom in drilling and associated facilities.

http://files.shareholder.com/downloads/BHI/1704849332x0x543589/24F8E2FC-321A-4518-AA6A-48756C4D87F2/na_charts_021712.pdf

18 posted on 02/20/2012 8:47:20 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

OPEC has played games before with US oil drilling. By agreeing to cut the prices of their oil, OPEC has turned US booms into busts almost overnight. However, it may be harder for OPEC to do that this time around, because their members need all the money they can get in this suffering world economy. So they will wait to see what increased US supply forces upon them, which probably will not be a whale of a lot until the US can export oil again.


19 posted on 02/20/2012 8:50:45 AM PST by HiTech RedNeck (Sometimes progressives find their scripture in the penumbra of sacred bathroom stall writings (Tzar))
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To: thackney

As much as it hurts at the pump, I still actually hope the price doesn’t come down until after the election.

With all the monkey business Soros and his crooked friends played on the oil market running up to the 2004 and 2008 elections, a little turn around is fair play... although, I am sure the crusty old evil man will make billions off the high oil prices and will pour a few millions into getting more of his cronies into office.

His prize was Obama.


20 posted on 02/20/2012 8:53:57 AM PST by FreeAtlanta (Liberty and Justice for ALL)
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To: alloysteel
Not so much that there is more drilling, but new recovery methods, especially hydraulic “fracking”, which enables recovery of the “tight” petroleum still remaining even in “dry” wells.

There is a huge amount of new drilling.

http://files.shareholder.com/downloads/BHI/1704849332x0x543589/24F8E2FC-321A-4518-AA6A-48756C4D87F2/na_charts_021712.pdf

What has made the biggest new change is the use of steerable, horizontal drilling. Combined with hydraulic fracturing used for decades before, this made a drastic change in both production per well, and the ability to economically produced previously know thin layers.

It is there, it is only necessary to let the price to rise high enough to make recovery and reclamation economically feasible.

Very true, we would not be doing all this drilling into difficult formations with expensive horizontal methods at $20 oil.

Why aren’t we making oil out of organic trash? We already know how, and it has been done on a small scale at a turkey processing plant. And apparently at competitive price.

Is it competitive without tax payer subsidies?

21 posted on 02/20/2012 8:56:39 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

“The United States’ rapidly declining crude oil supply has made a stunning about-face”

Pretty Sad when the very first sentence starts out by repeating the BIG LIE. There is more recoverable in California than most of Saudi Arabia, and in the US the amount of recoverable oil is Astronomical. 100% of all Oil Shortages is a result of Government and it started with Jimmy Carter when he created the Dept of Energy to lessen our dependence on foreign oil which at the time was 35% or so, now it is reversed and we only produce 30-35%. Funny how it all coincided with the Saudis throwing out the Brits who by the way Built the Entire Saudi Oil Fields and Infrastructure. The Enemy is our own Government and the Democrat Party as a Whole, with a Majority of Republicans willing to go along with the scam as long as they can make a few bucks in the process..


22 posted on 02/20/2012 9:18:49 AM PST by eyeamok
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To: eyeamok
Pretty Sad when the very first sentence starts out by repeating the BIG LIE.

Sorry, not a lie. Oil supply is not measured by oil in the ground. That is reserves. Oil supply is oil being brought to the market. Regardless of it being constrained by economics, politics or available reserves, oil supply (domestic production) was declining for years.

The shortfall was made up by imports, which now has been declining. We still import too much, and far too much from hostile nations.

23 posted on 02/20/2012 9:33:06 AM PST by thackney (life is fragile, handle with prayer)
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To: SoFloFreeper

“Something smells fishy. I know for darn sure that the past three years have not been friendly to domestic oil production. Maybe these increased numbers are because Bush approved their use before they went online?”

No the timing is about right. It will be the next president who has to deal with the bad decissions being made now.


24 posted on 02/20/2012 9:46:24 AM PST by dangerdoc (see post #6)
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To: thackney
U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quad­rupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

You can bet this will be a big Obama talking point in the upcoming months.
"It's because of meeee ."

25 posted on 02/20/2012 9:47:40 AM PST by Vinnie
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To: Vinnie

We have to push back at such announcements and point out to any media promoting Obama with data. Reality is that drilling and production has increased on private property while declining on federal land and water.


26 posted on 02/20/2012 9:55:22 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
Is it competitive without tax payer subsidies?

It probably either did not scale up well, or ran into reliability problems which priced it out of the market price of oil. Besides, except fo the DC area, there just ain't enough bird crap around to make any significant quantities of oil and the DC product is mostly hot air which makes it uneconomic to convert.

27 posted on 02/20/2012 9:56:55 AM PST by nuke rocketeer (File CONGRESS.SYS corrupted: Re-boot Washington D.C (Y/N)?)
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To: Sawdring

They require you to slow down to a sip huh? I imagine throws a lot of them off having run rich for all those years.


28 posted on 02/20/2012 9:59:45 AM PST by GulfBreeze (Still a Santorum guy !)
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To: thackney
I know we will several post asking if there is so much new drilling, why are we paying so much.

1. The price of oil is based on the international supply, not just our domestic supply.

2. The current rise in the price of oil is due to speculation by financial groups who are trying to corner the market.

29 posted on 02/20/2012 10:25:28 AM PST by wideminded
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To: thackney; alloysteel

The plant is in Carthage MO. They have a demonstrated capacity to turn organics into a distillable oil but are not making a profit.

They planned on getting free feedstock but the turkey plant found another buyer for their offal which forced the company to pay for feedstock by the ton, that and the did not qualify for the federal renewable energy funds. They say that they could have survived either of the events but combined, they cannot turn a profit.

I haven’t been down that way for a few years, I don’t know if the plant is still running. They kept it going as a demonstration plant and were trying to sell plants to Europe where they expected to be more profitable.


30 posted on 02/20/2012 10:32:25 AM PST by dangerdoc (see post #6)
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To: thackney
Reality is that drilling and production has increased on private property while declining on federal land and water.

We have a winner! Give the man a cigar!

31 posted on 02/20/2012 10:48:30 AM PST by 6ppc (It's torch and pitchfork time)
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To: 6ppc
Reality is that drilling and production has increased on private property while declining on federal land and water.

Which unfortunately plays even bigger for Obama. "I allowed private industry to do what it does best because I am a capitalist and I kept federal lands protected from those other greedy 1%'ers."

32 posted on 02/20/2012 11:38:56 AM PST by AmusedBystander (The philosophy of the school room in one generation will be the philosophy of government in the next)
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To: Peter from Rutland
The price will eventually come back down, it will just take time. Speculators and all the garbage with Iran will play a heavy toll but supply will NOT be a factor in gas prices going forward.

This is new supply via new technology making old fields productive, new ways of recovering oil from shale rock, tar sand, deep water etc. But it is more expensive to extract....the easy stuff is nearly gone. Because of the high cost of extraction and as an investor in the energy sector I expect the price of oil to remain at a high level for the foreseeable future.


33 posted on 02/20/2012 12:32:27 PM PST by Donald Rumsfeld Fan
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To: thackney

Sat, this weekend, Ed Wallace of KLIF radio show, said in his Oil Report, that Wyoming oil is selling on spot market at $60 and that Chicago gasoline is 40 cents lower than long term gas prices due to local glut. These short term gluts in certain market areas are not showing up for the national price of oil.


34 posted on 02/20/2012 1:25:58 PM PST by q_an_a (the more laws the less justice)
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To: q_an_a
These short term gluts in certain market areas are not showing up for the national price of oil.

And since we get far more oil from OPEC than Wyoming, a large impact from WY is more than offset by a much smaller price rise in the international oil market.

We do need more pipeline transportation in country to take domestically produced oil to existing refineries running on too much imported oil.

It is only a local glut because of the lack of infrastructure to deliver it to more markets. It doesn't affect the global market because it is physically separated by it. Oil is fungible, but only at market price less the cost of available transportation.

35 posted on 02/20/2012 1:47:11 PM PST by thackney (life is fragile, handle with prayer)
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To: thackney

No thanks to BO.


36 posted on 02/20/2012 9:50:54 PM PST by Paleo Conservative
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To: thackney

thanks for helping me see the system. To bad our political folks don’t share it with their voters like you do wiht Freepers.


37 posted on 02/21/2012 4:26:33 AM PST by q_an_a (the more laws the less justice)
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To: mvpel; thackney; TigerLikesRooster; landsbaum; Signalman; NormsRevenge; steelyourfaith; ...
See this video...:

Newt for Energy --- would remove CAFE Standards on Autos; more

38 posted on 02/22/2012 3:43:42 PM PST by Ernest_at_the_Beach ( Support Geert Wilders)
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To: Ernest_at_the_Beach; TenthAmendmentChampion; SolitaryMan; Dr. Bogus Pachysandra; grey_whiskers; ...
Thanx for the ping Ernest_at_the_Beach !

 


Beam me to Planet Gore !

39 posted on 02/22/2012 3:55:49 PM PST by steelyourfaith (Expel the Occupy White House squatters !!!)
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To: thackney; raybbr
Nothing new under the sun:

ACCEPTED BY RESIDENTS
The project (which has been planned since August 2005 under the Gorilla Project codename) has now reached the stage at which Union County, South Dakota residents voted by 58% to 42% to allow the 3,300 acres of former farmland just north of Elk Point to become the site for this oil mega-project. Hyperion will try to obtain options on land around the site for 20 square miles (18,000–20,000 acres) to form a buffer and security zone.[snip]
The construction is expected to begin in 2010 and the four-year building period will create a further 4,500 jobs.
http://www.hydrocarbons-technology.com/projects/elkpointrefinery/

SD judge asked to throw out oil refinery permit

Jan 12, 2012 – Opponents of a proposed $10 billion oil refinery urged a judge Thursday to strike down a state permit that would allow the project to be built in southeastern South Dakota. ... It would be the first new U.S. oil refinery built since 1976.
http://www.businessweek.com/ap/financialnews/D9S7P6403.htm

As an aside, we're still waiting, since 9/2000, for the "new" particle physics lab to be up and running in the former Homestake Mine

40 posted on 02/22/2012 10:14:14 PM PST by ApplegateRanch (If any of their "Alternatives" actually works, the Greenies will proceed to kill it.)
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To: nuke rocketeer
It probably either did not scale up well, or ran into reliability problems

One factor was increased costs of feed stock. Seems that as soon as they were ready to symbiotically work with the Con-Agra turkey plant, that plant suddenly wanted paid for their waste that they had previously been paying to get rid of.

A second factor was public complaints. They could not control the stench of the supposedly stench-free process. It was reportedly worse than early paper mills, and IIRC put them in violation of their permits.

IAC, it was far from a rousing success.

41 posted on 02/22/2012 10:30:24 PM PST by ApplegateRanch (If any of their "Alternatives" actually works, the Greenies will proceed to kill it.)
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To: ApplegateRanch

I don’t understand how some people are obsessed with building a new refinery when it is far cheaper to expand existing refineries.

We have built the equivalent of several new refineries by expanding the existing ones.

Elk Point was planned to be a 400 MBPD refinery. We have added the equivalent of about six refineries this size.


42 posted on 02/22/2012 10:58:45 PM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Expanding existing refineries is also easier to get around EPA regulations.


43 posted on 02/22/2012 11:13:47 PM PST by upsdriver (We Tea Partiers need Sarah Palin for president.)
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To: thackney

$10,000 per barrel/day cheaper to expand, according to one of the articles.

OTOH, 1,000+/- fewer miles of pipeline to build from the source to refining, while not then having to ship finished product all the way back again.


44 posted on 02/22/2012 11:27:34 PM PST by ApplegateRanch (If any of their "Alternatives" actually works, the Greenies will proceed to kill it.)
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To: thackney

EPA coming in to shut it all down in 3...2...1...


45 posted on 02/22/2012 11:47:52 PM PST by Tolerance Sucks Rocks (Occupy DC General Assembly: We are Marxist tools. WE ARE MARXIST TOOLS!)
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To: upsdriver

The same EPA regulations apply. In the refinery expansions I’ve participated in, filing for those permits was always a big requirement.


46 posted on 02/23/2012 6:23:36 AM PST by thackney (life is fragile, handle with prayer)
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