Daily Reports

News From The Oil Patch 6/20/2016

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Baker Hughes reported a big jump in active rigs last week, 424 total, up ten, including an increase in nine rigs drilling for oil and one drilling for natural gas.  The count in Canada was 69 rigs, up four. Independent Oil & Gas Service reported five rigs east of Wichita last week, up one, and fourteen in western Kansas, also up one.  Two more rigs were stacked last week, leaving 169 total inactive rigs across Kansas.
 
There were 16 drilling permits issued across Kansas last week, 385 so far this year.  There were nine permits filed for drilling at new locations in eastern Kansas and seven west of Wichita.
 
Independent Oil & Gas Service reported 20 new well completions across the state last week, including three dry holes.  There were 14 newly-completed wells east of Wichita and six in western Kansas.
 
While many areas of the oil patch will see increases in drilling activity at $50 per barrel,  crude prices would need to rise to near $60 to spawn a spike in the Mississippian Lime play. which is largely being blamed for a spike in earthquakes in southern Kansas and northern Oklahoma.  The increased cost of finding alternative means of disposing of wastewater is blamed, according to new analysis from Reuters.  The managing partner at Ponderosa Advisors says that if the water-handling requires trucking it away, it would increase the break-evens by between $3 and $7. Bernadette Johnson tells Reuters that all depends on the size of the operator, the amount of water and the distance it needs to be shipped.
 
Data released by OPEC showed that Venezuela suffered its largest monthly oil-production decline in a decade last month. A decline of 120,000 barrels a day, to 2.37 million barrels a day.  The state-owned energy company has failed to maintain oil-industry investments.  According to the Wall Street Journal, the region’s largest petroleum exporter suffers from a debilitating cash crunch, widespread food shortages and civil unrest. 
 
North Dakota Wednesday reported the largest month-to-month oil production decline in the state's history, April's 1.04 million barrels per day was down more than 70 thousand barrels per day from March.  Department of Mineral Resources Director Lynn Helms says the all time high was in December of 2014 when North Dakota produced more than 1.22 million barrels per day.
 
The oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the slump in prices, leading to slower growth in production.  Consultant Wood Mackenzie says worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014. Bloomberg says the deepest cuts were in the U.S.  The consultant says another $300 billion will be eliminated from exploration spending and global production this year will be 3 percent lower than previously forecast.
 
That wildfire in Alberta, Canada will prove to be very expensive for oil-sands giant Suncor, but a company officials say the return to operations is "going as planned."  The Web site oil-price-dot-com quotes unnamed company employees placing the losses at one billion dollars or more, Canadian, which is about 760 million U.S. dollars. They're still counting costs attributed to worker transportation and lodging.  Energy companies Husky and Cenovus, which resumed operations last week, did not expect their wildfire losses to be substantial, but did not provide a dollar estimate.
 
The Brits are abuzz about Goodluck Jonathan, the former president of Nigeria, who bought a 12,000 square foot house in a posh English neighborhood, for upwards of 21 million US dollars.  The president in exile claims he's been at the forefront of the fight against his country's corrupt oil connections, but several of his top aides are now in jail awaiting trial, and groups of children are coming to the forefront, begging the  Niger Delta Avengers rebel group to stop its ongoing campaign of sabotage on oil operations.
 
The CEO at BP says that company will not be investing in the IPO of Saudi Aramco.  Chief Executive Bob Dudley also told reporters the global oil industry needs to readjust costs based on an oil price of around $50 per barrel.
 
Marathon Oil agreed to buy PayRock Energy Holdings, a portfolio company focusing on Oklahoma and Kansas.  The deal improves Marathon's already huge Oklahoma presence, adding about 9,000 net barrels of oil equivalent per day in Oklahoma's STACK play.
 
The Federal Reserve Bank in Dallas issued a report saying banks in Texas, Louisiana and New Mexico are setting aside more money to guard against loan losses, as energy companies struggle with low prices.  The regional Fed bank's president, Robert Kaplan, said in the report that loan growth slowed down "markedly" in 2015 , that the region’s banks remain profitable, but its bankers are setting aside more in provision expense to cover possible loan losses in the energy sector.
 
In west Texas, they call them the "Wink Sinks," and they're getting bigger.  Two giant sinkholes between the towns of Wink and Kermit, Texas have been around for quite a while, but scientists now say they're unstable and are likely to grow larger. SMU geophysicists say radar images of the sinkholes over the last seven years show they're still sinking, and areas near the Wink Sinks are also sinking, by about five inches per year.  The sinkholes are the after-affect of a lot of oil production there some 60 years ago, but the instability originally caused by oil drilling is now being compounded by changing groundwater levels.

News From The Oil Patch 6/13/2016

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Oil prices have retreated somewhat from last week's eight-month highs.  By mid-morning Monday (6/13) the Nymex near-month contract for light sweet crude was down another 29 cents to $48.78 per barrel.  London Brent was down 27 cents to $50.27.  Kansas Common Crude at CHS in McPherson starts the week at $39.25, the same price posted June 1.  The price of oil has nearly doubled since January, when it hit its lowest since late 2003.  Analysts credit unplanned outages and dropping U.S. production for the price increases since then.
 
Baker Hughes reported increases in both oil and gas drilling rigs on its weekly active list.  There 414 total active rigs in the US, up six ( a gain of three gas rigs and three oil rigs).  Canada reports 65 active drilling rigs, up 24 for the week. Independent Oil & Gas Service reported four active rigs in eastern Kansas last week, unchanged, and 13 west of Wichita, down one from the week before. They're drilling at one site in Barton County.  And they're moving in completion tools at one site in Barton County, one site in Ellis County, one site in Russell County and three sites in Stafford County.  
 
Independent Oil & Gas Service reported 23 new well completions across Kansas last week, or 588 so far this year.  There were two new completions in Barton County and one in Ellis County.  For the month of May, Independent reports 81 well completions, including five in Barton County, one in Ellis County, and two each in Russell and Stafford counties.
 
The monthly dry hole report includes eight dry holes across Kansas last month, out of 81 completions, just less than ten percent.  
 
There were just 24 new permits filed last week for drilling in new locations in Kansas, bringing the total so far this year to 369.  Two of those were in Ellis County. There were 72 permits filed during the month of May, two in Barton County, four in Ellis County, five in Russell County and three in Stafford County.
 
The Nomenclature Committee of the Geological Society recognized and named four new oil and gas fields in Kansas during its meeting June first, including one in Barton County (the Schneider SE field, on the Shirer lease in Barton County.  American Oil is the operator of record)  That's just 11 new fields recognized so far this year, down 75% from the 34 recorded last year at this time.  
 
Texas crude output was nearly 3.08 million barrels per day in March (3079 kb/d), about 29 thousand bpd higher than the 3.05 million barrels per day produced in February.  Kansas total production through February was 6.55 million barrels.  There are currently only 40,730 producing oil wells in Kansas, the lowest number in recent memory.
 
Work is underway in Iowa on an oil pipeline from North Dakota despite repeated attempts by landowners and environmental groups to stop it. The Iowa Utilities Board signed a final order last Wednesday allowing construction, and work began shortly after that, according to a spokeswoman for Dakota Access.  Iowa was the last state to approve construction on the pipeline, which will carry oil from the Bakken oil fields in North Dakota across South Dakota and Iowa before ending at a storage facility in Illinois. Work began last month in the other three states.  Opposition groups plan non-violent protests to stop the work as soon as next month.  The Corps of Engineers has not yet granted permits for river crossings and other federal land in Iowa, and the project still faces as least five lawsuits challenging the builder's use of eminent domain.
 
The timing of Oklahoma oil man Aubrey McClendon's death by car crash was suspicious, but it doesn't appear to be suicide.  Oklahoma City police had been investigating the deadly March 2 wreck that killed the founder and former CEO of Chesapeake Energy  just a day after he was indicted by a federal grand jury for allegedly trying to rig oil prices.  Police said they can't rule out suicide as a cause of the crash, but that they've found no evidence which would lead them to believe it was a suicide.
 
Russia's mostly state-owned oil giant Rosneft posted a whopping 75 percent drop in first-quarter net profit, raising questions over how much money the government will be able to glean from its crude producers as commodity prices remain low. Rosneft missed analyst forecasts, reporting 14 billion rubles ($216.8 million) in net profit, against Reuters consensus polls predicting 33 billion roubles in net income.
 
County leaders in western North Dakota have once again delayed a decision on whether to approve an $850 million oil refinery.  Houston-based Meridian Energy Group Inc. said the delay could prevent construction from starting this summer.  On Tuesday, the Billings County Commission decided to wait until its July 6 meeting, to allow for a public meeting with refinery developers and state regulators.
 
The Wall Street Journal calls them vultures, investors hoping for a bargain, buying up oil and gas wells from cash-strapped operators in the North Dakota’s Bakken Shale.  The Journal cites state figures showing hundreds of wells changing or in the process of being sold.  The newspaper describes the buyers as fortune seekers ranging from industry experts to first-time wildcatters. They are picking up properties as more established producers scale back or shed assets to pay creditors.  Among the sellers cited in the Journal were Occidental Petroleum and Whiting Petroleum, which together account for the sale of nearly four hundred North Dakota wells.
 
Oklahoma oil and gas companies are asking a federal judge to dismiss a lawsuit filed by members of an environmental group that seeks to reduce production waste that could be fueling a spike in earthquakes.  In separate legal filings, Chesapeake Energy, Devon Energy and New Dominion said the Oklahoma Corporation Commission is already taking action to reduce the volumes of wastewater in disposal wells.  While the companies were responsible for about two-thirds of the wastewater injected in 2014, they said any injunction against them wouldn’t cover other operators who might also be contributing to induced seismicity.
 
The 40-year ban on exporting U.S. crude was lifted last December. Since then, there's been a sevenfold increase in America's oil exports to destinations other than Canada, which was excluded from the ban.  The frenzy of export activity, while still relatively small, is noteworthy given the depressed environment in the oil patch these days. Not only is the U.S. pumping less oil, but there remains a lingering glut of oil around that world that earlier this year caused crude to crash to 13-year lows.  U.S. oil exports hit an important milestone in March, the latest month that statistics are available for. For the first time since 2000, the majority of U.S. crude exports were to destinations other than Canada, according to JBC Energy.

News From The Oil Patch 6/6/6016

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Crude futures prices were significantly higher by mid-morning Monday.  July Nymex crude was up $1.10 to $49.72/bbl.  London Brent for August gained 92 cents to $50.56/bbl.  Kansas Common Crude at CHS in McPherson begins the week at $38.75/bbl after dropping 75 cents a barrel on Friday.  
 
There were just 12 permits filed for drilling in new locations in Kansas last week for a year-to-date total of 345.  Two of those were in eastern Kansas and ten were west of Wichita, including six in Ellis County and one in Stafford County.
 
Independent Oil & Gas Service reported eight newly-completed wells across the state last week, 565 so far this year.  There were two completions in eastern Kansas and six west of Wichita.
 
Out of eight total completions last week, six were dry holes including one dry hole completed in Ellis County.
 
The national oil rig count had its biggest jump in months, but the counts in Kansas were lower. Independent Oil & Gas Service reported a 21.7% drop in the US active rig count last week, but most of those that dropped off the active list are now noted as pending their next location assignment. The total number of INactive rigs was unchanged at 167.  There were just four active rigs east of Wichita, down two, and 14 in western Kansas, also down two.  They're moving in rotary tools to one site in Barton County after a weather delay, and drilling was about to begin at a site in Stafford County. They are moving in completion tools to a site in Ellis County, one in Russell County and three in Stafford County.  Baker Hughes reported 408 active drilling rigs nationwide, up four.  There was an increase of nine oil rigs last week.  Canada reports 41 active rigs, down two from the week before.
 
Operators filed just 75 intent-to-drill notices across Kansas in May, and that makes 444 for 2016 through the end of May.   That's down by more that half from last year at this time, and less than one fourth the total through May two years ago.
 
The world's biggest oil cleanup is getting bigger. Operations got underway Thursday in the Ogoni district of Nigeria in a gargantuan effort to remediate tens of millions of barrels of crude oil spilled over the last 50 years in the Niger Delta. The cost of the cleanup is expected to top $1 billion. Many of the initial spills were caused by mechanical failure or pipe corrosion, but sabotage emerged over the last ten years as a leading cause. Bloomberg reports the nation’s oil production is down to its lowest in 27 years after a recent surge in attacks on facilities.  The so-called Niger Delta Avengers militant group has claimed multiple new attacks on Nigeria's battered oil infrastructure, promising to drag production down to "zero".  
 
BP agreed last week to pay $175 million to shareholders who brought a class-action lawsuit that accused the oil company of understating the severity of the Gulf oil spill.  BP said the claims will be paid during 2016-2017.  However, the company said in a statement this settlement does not resolve other securities-related litigation in connection with the spill.
 
The Three Affiliated Tribes are working to reclaim oil production on their North Dakota reservation by picking up new and expiring leaseholds.  Tribal-owned oil company MRR drilled four wells last year. It also has plans for three four-well projects yet this year, and a 32-well project next year. According to the Billings Gazette, the tribe benefits more by drilling its own oil, as 26 percent of the royalties are paid back to the tribe, compared to 18 percent when private companies do the drilling.
 
Oklahoma lawmakers are taking steps to survive the NEXT oil bust.  Gov. Mary Fallin signed into law legislation that banks boom-time tax revenues to cushion the state during energy downturns.  The Energy Revenues Stabilization Act siphons off above-average tax revenues levied on corporations and oil and gas production and saves it in an account that can be tapped during state funding emergencies.  Oklahoma’s new fund can only be withdrawn if state finance officials declare a revenue failure, as they did in February of this year.

News from the Oil Patch 5/31/2016

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West Texas Intermediate crude contracts on the Nymex are closing in on price parity with the international benchmark.  By mid-morning on Tuesday, May 31, just five cents separates the prices for the Nymex benchmark at $49.90/bbl, and London Brent at $49.95.  Kansas Common Crude closed out last week down a quarter to $39.50/bbl.
 
Independent reports 19 well completions last week including two dry holes statewide.  That's 557 total completions so far this year.  There were 11 east of Wichita and eight in western Kansas, including one in Stafford County.
 
There were just 22 drilling permits for new locations in Kansas filed last week, bringing the year-to-date total to 333.  There were five in eastern Kansas and 17 west of Wichita, including one each in Ellis and Russell counties.
 
Independent Oil & Gas Service reported seven active drilling rigs east of Wichita last week, down two, and 16 in western Kansas, up one.  Statewide the rig counts are down 4.2%.  There were 146 rigs listed as stacked and 21 shutdown awaiting drilling contracts for a total of 167 INactive rigs.  A year ago there were just 122 total inactive rigs.  Drilling was underway at one site in Barton County, and was about to begin at a site in Stafford County.  Baker Hughes reported 404 active rigs nationwide, which was unchanged.  There were 43 active drilling rigs in Canada, down one.
 
Officials at Shell Oil Co. say crews have repaired an underground pipeline after it broke and spilled up to 21,000 gallons of oil in rural Northern California. Company spokesman Ray Fisher said Tuesday that workers are running small amounts of oil through the pipeline to test it and are working on cleaning up the contaminated soil near Tracy, about an hour east of San Francisco.  
 
A Kansas man was indicted last week on charges of carrying out a $7.9 million oil fraud scheme. David K. Lawson, 70, of Hillsboro, is charged with one count of wire fraud. According to the indictment, Lawson made a deal for his company to sell 90 barrels a day of crude oil to Parnon Gathering, Inc., but instead allegedly delivered raw gas oil, which is a mixture of various refined petroleum products with a very low vapor pressure and a lesser commercial value.  If convicted, Lawson faces a penalty of up to 20 years in federal prison, a fine up to $250,000 and restitution. The FBI investigated. Assistant U.S. Attorney Alan Metzger is prosecuting.
 
North Dakota Gov. Jack Dalrymple says the state's unprecedented oil boom is far from going bust. Dalrymple told an audience of several hundred at the Williston Basin Petroleum Conference and Expo in Bismarck that the oil industry is "as solid as solid can be."  The state's Mineral Resources Director Lynn Helms says there are about 11,000 Bakken wells that have been drilled, and another 31,000 that are planned or permitted. Helms says a total of 65,000 wells are likely to come on line within the next 20 years.
 
Harold Hamm of Continental Resources lost $16 billion during just seventeen months of plummeting oil prices.  He's gained back about $6.5 billion since oil bottomed out in January.  He lost more money in the oil bust than anyone else, but remains Oklahoma's richest person, according to Forbes magazine.
 

News From The Oil Patch 5/23/2016

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Kansas Common Crude closed the week Friday (5/20) at $38/bbl at CHS in McPherson.  That's up $1.50 from a week earlier and up $1.75 from the first of the month.
 
Independent Oil & Gas Service reported drilling underway at one site in Stafford County and drilling ahead at another.  The total active rig count for Kansas was up 9.1% on the week, 14.5% higher than a month ago but still 50% lower than a year ago.  There were nine active rigs east of Wichita, up three, and fifteen in western Kansas, down one. Baker Hughes reported 404 active drilling rigs nationwide, down two.  The count in Canada was up one to 44 active drilling rigs.
 
There were just 18 drilling permits filed for new locations across Kansas last week, bringing the total so far this year to 311.  There were 14 permits filed in eastern Kansas and four west of Wichita.
 
Independent Oil and Gas Service reported 19 new well completions last week across the state, seven in eastern Kansas and 12 west of Wichita including two in Russell County and one in Stafford County. So far this year there have been just 538 wells completed across Kansas, of those, 74, or 13.7% have been dry holes.
 
There were just 80 new intent-to-drill notices filed with the Kansas Corporation Commission last month.  That's up from the 66 intents filed in March, but much less than the 263 intents filed in April of last year.  There were three intents filed last month in Barton County, three in Ellis County, one new intent filed in Russell County.
 
A new study argues that as many as nine in ten of the earthquakes in the past 40 years in Texas were manmade.  But Ryan Sitton of the Texas Railroad Commission says the study relies on what he called "very aggressive assumptions" that he says you would not normally accept in a scientific study. University of Texas researcher Cliff Frohlich, the lead author of Wednesday's study, said Texas regulators have been too slow to acknowledge a link.  Studies like Frohlich's have been criticized by the Railroad Commission and industry groups for relying too heavily on correlations between the spacing and timing of earthquakes and disposal wells and not enough on subsurface pressure data.
 
Counties in Kansas received significant revenue last year from the so-called  Oil Depletion Trust Fund, which was repealed one year after it was created.  Steve Stotts of the Department of Revenue tells us that fund was intended to protect counties from a downturn in production, which in fact went up.  "The counties got about 12.5% of severance tax money that went back to an oil depletion trust fund," Stotts said in an interview,  "so that the counties would have some money there when the oil production starts to tail off and they start to lose that property tax money.  This was there to bridge that gap."  But the package was repealed after just one year in operation.  Barton County received more than $165-thousand dollars from the fund. Ellis County received 247-thousand.  Russell count received $118 thousand and Stafford County received $113-thousand. 
 
The Oklahoma Senate voted to eliminate a controversial program of tax credits for at-risk oil wells altogether, but the House of Representatives pushed through an amendment that would put a cap of $25 million on the program.  In the past, the rebates cost the state about ten million per year. But with prices plummeting, lawmakers were faced with the possibility next year of $130 million in tax rebates for oil wells that were no longer profitable.
 
The biggest oil producer in Kansas, and the biggest disposer of the wastewater believed to be causing earthquakes along our southern border, is now seeking bankruptcy protection.  SandRidge Energy filed bankruptcy Monday, saying it hopes to convert $3.7 billion of long-term debt into equity while allowing the company to keep its operations going. SandRidge officials said the company has the support of creditors who hold more than two-thirds of its $4.1 billion in total debt. The company asked the court for permission to continue day-to-day operations, and to continue paying wages, royalties and interest as well as vendor obligations without interruption.
 
TransCanada plans to dig up and replace sections of its Keystone pipeline found to not meet federal strength standards so the company can begin pumping oil at higher pressure.  The work, slated to begin this month and extend through 2017, will happen in Nebraska, South Dakota, Kansas, Illinois and Missouri. The 30-inch pipeline first went into operation in June 2010.
 
Plains All American Pipeline company and one of its employees now face a federal indictment listing 46 criminal counts after a pipeline ruptured last year, spilling about 140,000 gallons of crude oil along the California coastline near Santa Barbara. Four of the counts are felonies, including one charge of knowingly discharging a pollutant into state waters.  Santa Barbara County District Attorney Joyce Dudley identified the employee who was charged as environmental and regulatory compliance specialist James Buchanan. Buchanan was not named in any of the four felony charges and faces up to three years in the county jail.  The company is likely facing fines of "over $1 million," according to Ms Dudley, who added that Plains was "not cooperative." 

News From The Oil Patch 5/16/2016

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The active drilling rig count from Kansas last week was down 12% according to Independent Oil & Gas Service, with six active Rigs in eastern Kansas, down one, and 16 west of Wichita, down two. Baker Hughes reported the number of rigs nationwide drilling for oil fell by ten rigs.  That total for oil and gas was 406 active rigs last week.  Canada reported 43, a gain of seven rigs.  
 
Independent oil and gas service reports 519 well completions in Kansas so far this year, 16 last week, all of them west of Wichita, including one new comletion in Ellis County.
 
A dry hole in Ellis County completed last week was one of three across Kansas, 74 so far this year statewide, out of 519 completions in 2016
 
Kansas is heading for the lowest 2nd quarter permit total in a long time.  There were 14 new drilling permits filed for new locations across Kansas last week, five east of Wichita and nine in western Kansas.  Barton and Stafford counties each reported a new drilling permit last week.  Across Kansas we've had just 293 drilling permits filed so far this year.  
 
By way of comparison, there were 928 new permits filed a year ago at this time and more than 27-hundred by mid-May of 2014, before the price downturn began. 
 
Independent Oil & Gas Service is offering a 30% discount for new subscriptions to the weekly or monthly Red Top Reports through the end of May. In the Red Top News dated May 20, Independent noted that the offer is a response to the nearly 30% drop in crude prices since this time last year.  Visit them as we do at IOGSI dot com.
 
The U.S. government won't appeal recent court rulings that stripped the lesser prairie chicken of federal protection under the Endangered Species Act. The Justice Department filed a motion Tuesday to dismiss its appeal of the rulings in Texas.  The rulings found the feds failed to make a proper evaluation of a multi-state conservation plan when it listed the lesser prairie chicken as threatened.  Oil and gas groups, including several in Kansas and Oklahoma, opposed the threatened listing, saying it would cost them millions. 
 
Opponents of a proposed oil pipeline slated to run through four Midwestern states have pressed Iowa regulators to keep a Texas-based petroleum company from starting construction before all federal permits are approved.  Developers hoped to begin construction by now on the 1,150-mile Dakota Access pipeline that's designed to carry a half-million barrels of oil a day from the Bakken oil fields in northwest North Dakota to a pipeline and refinery cluster in southwest Illinois.  The company told the Iowa Utilities Board it must begin laying pipe in the state by Tuesday to finish before winter. Iowa requires Dakota Access to obtain all required permits before beginning and the U.S. Army Corps of Engineers hasn't issued its river crossing permits yet.
 
It will cost the oil and gas industry about $530 million over the next ten years, and will only account for a sliver of so-called greenhouse gas emissions, but the Obama Administration says a new rule will bring benefits totalling more than $690 million.  On Thursday, the EPA issued a new rule requiring producers to find and repair leaks at new or modified oil and gas wells, and capture the methane gas that escapes from wells.  The rule is the major element of an administration goal to reduce methane emissions from oil and gas drilling by up to 45 percent by 2025. 
 
The number of oil and natural gas drilling permits issued by Texas regulators in April was down 20% compared to a year earlier.  The Texas Railroad Commission said it issued 683 original drilling permits in April, compared with 848 from the same month one year ago. Most of the permits were for oil-related activities.  In February, the last full month for which state data are available, Texas produced 79.6 million barrels of oil, a figure that was lower year-on-year by around 17 percent.
 
A new study will not play well in the oil patch of North Dakota.  A Duke University study published in Environmental Science and Technology revealed what is described as significant contamination of soil and water the state from radioactive materials, heavy metals and corrosive salts as a result of oil and gas wastewater spills.  The study implications for humans and wildlife from some 3,900 reported brine spills in the region since the rise of shale drilling in 2007.  Some 9,700 wells have been drilled in North Dakota's Bakken shale and Bottineu oilfield region in the last 10 years, Truthout reports.