High prices renew interest in gas, oil exploration in Nebraska

A California oil and gas drilling company is exploring a site in Nebraska — the location of which the company declined to disclose — as early as next month, to see whether there is a potential for oil. If oil exists, the site could be home to 10 to 40 wells with 100,000 to 250,000 barrels of oil per well. Bill Sydow, director of the Nebraska Oil and Gas Conservation Commission in Sidney, said there were nearly 240 permits for new gas and oil wells issued in 2007, the most Sydow said he s seen in his 13 years at the commission.

Whether the renewed interest will translate into an increase in production, though, remains to be seen. Last year, there were 2,334,356 barrels of crude oil produced in Nebraska, a slight increase of about 21,000 barrels from 2006 and just the second year-over-year increase since 1988. The news on natural gas was a little better, with 1.4 billion cubic feet produced in 2007, up from just more than 1.2 billion cubic feet in 2006 and the second straight annual increase.

Sydow, for his part, thinks gas production in Nebraska may be ready to take off. At the end of 2006, Nebraska had proven natural gas reserves of 138 billion cubic feet, the highest level since 1981, according to the Energy Information Administration. And there is likely still more. According to a 2002 assessment of undiscovered oil and gas in Nebraska, Kansas, Colorado, South Dakota and Wyoming done by the U.S. Geological Survey, there is a 95% chance that there are more than 337 billion cubic feet of natural gas in the Niobrara Chalk formation and a 50% chance there are 843 billion cubic feet.

Segment of Nebraska gas pipeline gets initial OK

The Rockies Express Pipeline (REX) West is 713-mile project, which is laid out from Colorado to Missouri, with the bulk of the project stretching across Nebraska was only one-half of the overall $4.5 billion project. The REX East project, which involves 639 miles of pipeline installation that begins where the western segment of the project left off in Missouri will wind through Illinois and Indiana until finalizing in Ohio.

Now the second half of the REX West pipeline project has been given a crucial go ahead from the Federal Energy Regulatory Commission, who after reviewing the project’s Environmental Impact Statement, has initially approved the project. At the project’s conclusion, the 42-inch natural gas pipeline will be capable of delivering 1.5 billion cubic feet of gas across the country on a daily basis.

Ethanol saving drivers $5M per month

With gasoline prices 56 cents higher than a year ago in Grand Island, according to the Nebraska AAA, ethanol is providing motorists relief at the pumps. According to a new report from the American Coalition for Ethanol (ACE), ethanol is currently reducing the cost of gasoline by between 6 and 9 cents per gallon.

And in Nebraska, ethanol is setting new records among motorists as the cost of gasoline edges higher. According to the Nebraska Ethanol Board, Nebraska hit a record high in December as 77% of gasoline sold contained ethanol. In Nebraska, AAA reported the average price of gasoline with ethanol was $3.20 per gallon and diesel was running at a statewide average of $3.95 per gallon.

Nebraska power companies eye more renewable electricity generation

Thirty years ago, an electric utility could build a coal or nuclear plant for hundreds of millions of dollars. The Nebraska Public Power District, for instance, paid about $350 million in the early 1970s to build Cooper Nuclear Station near Brownville. Today, the price tag for a new coal-fired plant is estimated between $2.5 billion and $3.5 billion. And nuclear plants are around $5 billion. With those mega numbers, Nebraska’s three largest electric utilities — NPPD, Omaha Public Power District and Lincoln Electric System — are in no rush to build a base load power plant in the state. A base load plant runs continuously at maximum output. But billion-dollar price tags are not the only reason for pause.

Now utilities must consider a coal or nuclear plant’s environmental impact. To comply with looming regulations, for instance, NPPD could be facing a $1.5 billion bill to add emission control equipment to its Gerald Gentleman Station coal plant near Sutherland. As a result, state utilities are eyeing renewable energy projects. After months of negotiations, NPPD, along with Midwest Wind Energy and its affiliate, Elkhorn Ridge Wind, signed a 20-year power purchase deal that will pave the way for the state’s largest wind farm near Bloomfield. The $140 million, 80-megawatt Elkhorn Ridge project will be built by the end of the year.

NPPD is also negotiating with a developer to build a 40-megawatt wind farm near Bloomfield. And it’s working on a third project in South Dakota, said NPPD president and CEO Ron Asche. Other utilities have expressed interest in buying renewable energy from those projects, including OPPD, the city of Grand Island, LES and the Municipal Energy Agency of Nebraska. NPPD’s board has goal of having 10% of it energy portfolio comprised of wind power by 2020, he said.

And NPD is exploring small methane generation projects and co-generation with ethanol plants. NPPD is also seeking federal approval to extend the Cooper Nuclear’s license beyond 2013.

Meanwhile, OPPD will boost Fort Calhoun Nuclear Station’s generation capacity by 75 megawatts after a five-year, $165 million project to improve turbine efficiency, said spokesman Jeff Hanson. And OPPD is looking at adding 100 megawatts of wind to its energy portfolio by 2015, which has a potential cost of about $191 million. OPPD officials are talking to NPPD about partnering in a project.

Nebraska senators hold firm on roads budget, fuel tax increase

For the second time during the budget discussion this year, state senators refused to change the funding for the Department of Roads and refused to eliminate a small increase in the state fuel tax. The budget includes an additional $14.5 million to pay for increased salary and health insurance costs in the Roads Department budget. That will likely trigger a 1.2-cent per gallon increase in the gas tax Jan. 1.

Earlier in the week, senators refused to eliminate the $14.5 million from the budget. Yesterday, they defeated Bayard Sen. Phil Erdman’s proposal that the $14.5 million come from the cash reserve fund, rather than from gas- and vehicle-related tax receipts. Senators gave second-round approval to two of the three budget bills (LB960 and LB961) Wednesday after making minor changes and are expected to finish second-round approval of the other bills today before recessing for the Easter weekend.

Nebraska is 25th in the nation on gas tax rankings, Sen. Deb Fischer of Valentine said. And Nebraska is one of the few states that fund road construction completely with user fees. “We don’t raid the general funds. We don’t go after the cash reserves. We don’t use credit cards and bonds. We have the people who use the roads pay for the roads,” she said. This is the second year of a two-year budget cycle. Senators are making some adjustments to the $6.86 billion two-year budget first approved last spring.

NPPD deal to energize wind farm

The Nebraska Public Power District said Monday that it would buy the electricity produced by wind generators planned near Bloomfield, Neb., opening the way for construction of the state’s largest wind energy farm. The Columbus, Neb.-based utility signed a 20-year agreement to purchase power from Midwest Wind Energy LLC of Chicago and its affiliate, Elkhorn Ridge Wind LLC, which would generate 80 megawatts of electricity, enough to power about 25,000 Nebraska homes a year. NPPD operates a wind farm near Ainsworth, Neb., that can generate 60 megawatts of electricity. By contrast, NPPD’s Gerald Gentleman Station coal plant near Sutherland, Neb., has a capacity of 1,300 megawatts.

Ethanol sales in Nebraska hit record high

As the price of oil hit $110 per barrel and regular gas prices in Grand Island averaged $3.25 per gallon Thursday, ethanol was providing motorists some relief. With as much as a 7- to 10-cent-per-gallon difference between gasoline with 10% ethanol and regular unleaded, more Nebraskans are turning to ethanol to ease the higher cost of gasoline.

According to the Nebraska Ethanol Board, ethanol sales in Nebraska hit a record high in December as 77% of gasoline sold contained ethanol. According to the latest short-term energy outlook from the U.S. Energy Information Administration, ethanol will reduce U.S. petroleum demand by 130,000 barrels per day in 2008.

Nebraska-based U.P. praised for fuel-saving effort

A regional effort at publicizing ways to prevent pollution and reduce waste is recognizing Union Pacific Corp.’s fuel conservation training and rewards program for locomotive engineers. Looking at how trains operated, the railroad determined that the locomotive engineer was the main driver in saving or burning fuel.

In 2004, Union Pacific began a pilot program in North Platte, Neb., rewarding engineers with up to $100 in monthly fuel cards to gas up their own automobiles if they kept their diesel fuel usage below average for their territory. The Fuel Masters program has spread to 130 other crew locations across Union Pacific’s 23-state region, railroad officials said.

The effort has saved millions of gallons of diesel fuel, Union Pacific officials said. As Union Pacific has proven, going green can save a lot of money,” said Paul McMeekin, a graduate assistant at UNO’s College of Business, which is involved in the awareness program. The Pollution Prevention Regional Information Center (P2RIC) is operated by the Nebraska Business Development Center at UNO.

The center is working to improve the way businesses and agencies in Iowa, Kansas, Missouri and Nebraska share environmentally sound programs.

Feds to issue permit for Keystone oil pipeline, which will run through Nebraska

The U.S. State Department intends to issue a permit this month for a $5.2 billion pipeline that would transport crude oil from Canada through seven states. The State Department, in a decision published Monday in the Federal Register, said that if no other federal agency objects, a permit will be issued within 15 days for the Keystone pipeline, a project of TransCanada Corp. of Calgary, Alberta.

A permit would allow the project to move forward this spring. The entire 2,148-mile pipeline will be able to carry 590,000 barrels of oil daily by late 2010. It would carry crude oil across Saskatchewan and Manitoba, and through North Dakota, South Dakota, Nebraska, Kansas, Missouri, on the way to refineries Patoka, Ill. and Cushing, Okla.

The project also will bring more tax revenue to communities along its route, as well as construction jobs and a demand for food, lodging and other construction-related services.

Nebraska business leaders support road improvement bill

Good roads are an economic development priority, perhaps as important as tax incentives, the business leaders said Wednesday in a hearing before the Legislature’s Revenue Committee. When prospective companies look at a community, the transportation system and roads are high on their priority list, said Pat Gorup, representing the Nebraska Chamber of Commerce & Industry in support of the concept behind LB846, a measure that could raise the state’s fuel tax by at least three cents a gallon next year.

The State Chamber believes that improving roads improves the business climate of the state, said Gorup, pointing out that his company, Lyman-Richey Corp., uses about 1.75 million gallons of fuel a year. Yet he favors an increase in the gas tax envisioned in this bill in order to maintain a good road system. The State, Omaha and Lincoln Chambers of Commerce were among 13 groups supporting the fuel tax bill offered by Sen. Deb Fischer of Valentine. Only the Nebraska Petroleum Marketers & Convenience Store Association opposed the bill during the hearing.

Higher fuel taxes create a competitive disadvantage for those who sell fuel near states with lower taxes, said Tim Keigher, with the association. Sen. Fischer’s LB846 would impose a 5% excise tax on motor fuel based on the average wholesale price of gasoline, while lowering the current 10.5 cents per-gallon fixed portion of the state’s gas tax by 8 cents to 2.5 cents. The excise tax would go up as the price of fuel rose and is expected to raise the gas tax, now at 23 cents a gallon, by about 3.3 cents next year and 4.2 cents in 2011. It would bring in an estimated additional $38 million for roads during the first 12 months. The state needs to find new ways to pay for road maintenance and construction, Fischer said. The state cannot keep up with the escalating costs of road building material, which rose an average of 11% a year over the past three years. At the same time construction costs are rising, the state expects to lose about $80 million in federal funding per year, she pointed out. “This is a user fee,” she said.