North Dakota and fracking

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In May 2012, North Dakota passed Alaska to become the No. 2 oil-producing state in the country, which the Wall Street Journal attributed to the use of fracking. North Dakota's daily production of oil rose to 575,490 barrels, slightly above Alaska but still far below Texas, which pumped 1.7 million barrels a day.[1]

Introduction

North Dakota's total oil production has approximately tripled since 2005 due largely to development of the state's Bakken formation. Operators increased North Dakota’s production from 98,000 b/d in 2005 to over 307,000 b/d in 2010 and close to 400,000 in 2011, and some experts anticipate that the Bakken field could produce a million barrels daily by the end of 2020. According to US Geological Survey there are at least 4 billion barrels of recoverable oil in North Dakota; other estimates indicate 4-5 times more.[2]

The Bakken is a shale oil deposit. It is considered to be light-sweet crude oil that is 10,000 feet below the surface within shale rock. Bakken shale consists of three layers, an upper layer of shale rock, a middle layer of sandstone/dolomite, and a lower layer of shale rock. The middle sandstone layer is what is commonly drilled and fracked.[3]

As of 2011 there were 6,664 producing wells in North Dakota, and as of April 2012 there were 210 drilling rigs.[4] North Dakota's Gov. Jack Dalrymple has urged energy companies to see his administration as a "faithful and long-term partner."[5]

An industry report released in 2012 by Bentek Energy stated that the Williston Basin's production of natural gas is expected to grow nearly sixfold, to 3.1 billion cubic feet per day, by 2025.[6] As of October 2012 companies operating in North Dakota spent $2 billion a month on drilling operations.[7]

History

For the past 60 years North Dakota has been an oil producing state. However, in recent years the state has seen a boom in the state's Bakken region. As such, North Dakota has become the fourth largest oil producing state in the country and one of the largest onshore oil producing region in the United States. The Bakken shale formation extends beyond North Dakota into Eastern Montana and neighboring territories of Saskatchewan and Manitoba to the north in Canada. While its success has been largely attributed to advances in oil field technology, primarily horizontal drilling and hydraulic fracturing, it has been argued that a number of circumstances have come together to make the Bakken a successful oil play, including high oil prices, widespread and ready access to privately held prospects, and low natural gas prices.[2]

Horizontal drilling in North Dakota's area of the Bakken began in the 1980s, but was not widely used until the last decade. In the early 2000s Bakken developers began drilling horizontal laterals into the Middle Bakken formation, the sandstone layer between the two shale layers. Over the past several years fracking in the Bakken has increased dramatically. While this increases the cost of drilling, it also increases initial production rates and the ultimate recovery of oil from the well.[3]

The first commercial Bakken well at Elm Coulee, located in Richland County, Montana, was completed in 1981 by Coastal Oil and Gas. As of 2007 the total number of horizontal Bakken wells drilled in the Elm Coulee area was more than 500 and included more than 800 lateral drilled wells.[8]

Exploration of Bakken formation

Bakken producing zones are mainly present in Western North Dakota, Southern Saskatchewen, and Eastern Montana. The Bakken is one of the largest (possibly the largest) continuous oil accumulation in the world. It is an over pressured system; the high pressure in the formation suggests that the oil remains in place and is tightly contained throughout the geologic structure.[3]

Wells have been drilled along the Bakken formation in North Dakota and Montana. Industry experts say oil appears to extend from the Bakken formation of eastern Montana into Alberta, Canada, and south to the foot of the Rocky Mountains. Fracking will likely be used to extract the oil, if it is found. Land leases for fracking in the region have increased dramatically in recent years. In North Dakota, fracking is already underway in the state's section of the Bakken. Fracking in this area is extracting oil and not natural gas.

The Bakken Formation.

The first commercial Bakken well at Elm Coulee, which is located in Richland County, Montana, was completed in 1981 by Coastal Oil and Gas. As of 2007 the total number of horizontal Bakken wells drilled in the Elm Coulee area was more than 500 and included more than 800 lateral drill locations.[9]

Oil production estimates

Interest in North Dakota developed in 2007 when EOG Resources of Houston, Texas reported that a single well it had drilled into shale below Parshall, North Dakota was anticipated to produce 700,000 barrels (110,000 m3) of oil.[10] This, combined with other factors, including an oil-drilling tax break enacted by the state of North Dakota in 2007,[11] shifted attention in the Bakken from Montana to the North Dakota side. The number of wells drilled in the North Dakota Bakken jumped from 300 in 2006[12] to 457 in 2007.[13] Those same sources show oil production in the North Dakota Bakken increasing 229%, from 2.2 million barrels (350,000 m3) in 2006 to 7.4 million barrels (1,180,000 m3) in 2007.

The state Industrial Commission said crude production in September 2011 totaled 464,122 barrels a day - 123,000 more barrels than September 2010. Ron Ness, president of the North Dakota Petroleum Council, said the state should end 2011 with about 150 million barrels of oil extracted.[14]

According to North Dakota government statistics, daily oil production per well seems to have peaked at 145 barrels in June 2010. Although the number of wells doubled between June 2010 and December 2011, oil production per well remained essentially unchanged. However, overall oil produced continues to increase, since more wells are continually brought online.[15]

Bakken land leases

Small and independent oil companies that made their start developing natural gas resources moved into the Bakken and accumulated acreage before the oil boom in the area. As such, the most sought after lands have already been leased for development. New Entrants into the Bakken must participate in joint ventures or buy out another company. This has not discouraged investment as several billion dollars were exchanged in mergers and acquisitions in the Bakken in the fourth quarter of 2010 alone.[3]

Public lands and drilling

In October 2011, it was reported that about 80 applications for oil and gas projects in North Dakota's national grasslands will be put on the fast-track through the federal review process. President Barack Obama announced that infrastructure projects in the Dakota Prairie and Little Missouri National Grasslands had been designated among 14 high priority projects nationwide, and would be expedited through permitting and environmental review processes so construction could begin as soon as possible. The Dakota Prairie Grasslands cover more than 1.2 million acres in southern and western North Dakota and northern South Dakota.[16]

Economic impact on North Dakota economy

Oil production in North Dakota accounts for six percent of domestic production in the state and is largely responsible for reversing two decades of declining oil production. Currently North Dakota is running a surplus economy. According to the North Dakota Petroleum Council, crude oil taxes on production and extraction averaged 10.3 percent in 2010, bringing in $749.5 million in state revenues. Additionally, the industry spent $1.49 billion in taxable sales and purchases. In 2010 natural gas brought in over $10.1 million in extraction taxes.[3]

On the downside, it has been reported that as a result of the oil boom in North Dakota that "inadequate housing and crime" are emerging concerns for the state.[17] In an investigative report on life in the town of Williston, the biggest Bakken boom down in North Dakota, journalist Mark Ebner writes:

"There’s not a motel room to be had in the city, housing prices are double what they were a year ago ($300,000 for a two-bedroom home), and the daily onslaught of new arrivals is reduced to living in their cars, RVs, sporadic tent cities or the rapidly proliferating “man camps” – clusters of trailers in an open field that pack in oil patch workers dormitory style, sometimes six to a room. Access to running water and simple sanitation is so rare that public businesses have had to lock their bathrooms to discourage makeshift sponge baths or the dumping of wastewater"[18]

In April 2012 a study conducted by Headwaters Economics concluded it would be beneficial if the state of North Dakota funneled more oil and natural gas tax revenues to communities in the pathway of Bakken and hints at increasing the state tax rate on oil and gas development, which could in turn help these growing communities pay for roads, schools and other infrastructure. Currently North Dakota does not have the policies in place to reap the full economic benefits of the Bakken oil boom.[19]

Wastewater

Oil companies in North Dakota reported more than 1,000 accidental releases of oil, drilling wastewater, or other fluids in 2011, about as many as in the previous two years combined, according to data obtained by ProPublica. Many more illicit releases went unreported when companies dumped truckloads of toxic fluid along the road or drained waste pits illegally, state regulators acknowledged.

Of the 1,073 releases reported in 2011, about 60 percent involved oil and one-third spread brine. In about two-thirds of the cases, material was not contained to the accident site and leaked into the ground or waterways.

According to ProPublica: "State officials say most of the releases are small. But in several cases, spills turned out to be far larger than initially thought, totaling millions of gallons. Releases of brine, which is often laced with carcinogenic chemicals and heavy metals, have wiped out aquatic life in streams and wetlands and sterilized farmland. The effects on land can last for years, or even decades."

Under North Dakota regulations, agencies that oversee drilling and water safety can sanction companies that dump or spill waste. Yet state data obtained by ProPublica suggests they seldom do: from 2009 to 2012, they issued fewer than 50 disciplinary actions for all types of drilling violations, including spills. State officials say they rely on companies to clean up spills voluntarily, and that in most cases, they do.

The Health Department took just one action against an oil company from 2009-2011, citing Continental Resources for toxic oil and brine spills into two streams. The department initially fined Continental $328,500, plus about $14,000 for agency costs. Ultimately, however, the state settled and Continental paid just $35,000 in fines.[20]

Gas flaring

"Over 35 percent of North Dakota's natural gas production so far in 2011 has been flared or otherwise not marketed," the Energy Information Administration reported in November 2011, "due to insufficient natural gas pipeline capacity and processing facilities in the Bakken shale region." There are also few penalties for the practice: in North Dakota, producers can flare natural gas for one year without paying taxes or royalties on it - and ask for an extension due to economic hardship associated with connecting the well to a natural gas pipeline.

In the US, gas flaring has increased from 78 billion cubic feet (bcf) in 2007 to 251 bcf in 2011 - a 223 percent increase, according to the World Bank. That makes it the fifth largest gas flarer in the world, up from fourteenth in 2007. Most of the US increase is due to North Dakota, where the percentage of flared gas is far higher than the national average. North Dakota officials say the state's flaring is responsible for about a quarter of the US total. (Less than 1 percent of natural gas produced in the US overall was vented or flared in 2009, the EIA found.)

Flaring produces carbon dioxide emissions and is therefore less harmful than venting natural gas (methane) directly to the atmosphere. But it still releases GHGs. In 2011 about 5 trillion cubic feet of natural gas were flared or vented without burning worldwide - roughly equal to a quarter of all natural gas consumed in the US annually, according to the the World Bank. Flaring also released 360 million tons of greenhouse gases into the atmosphere in 2011, equal to the exhaust of 70 million cars.[21]

Air pollution

Silica

In July 2012, two federal agencies released research highlighting dangerous levels of exposure to silica sand at oil and gas well sites in five states: Colorado, Texas, North Dakota, Arkansas, and Pennsylvania. Silica is a key component used in fracking. High exposure to silica can lead to silicosis, a potentially fatal lung disease linked to cancer. Nearly 80 percent of all air samples taken by the National Institute of Occupational Safety and Health showed exposure rates above federal recommendations. Nearly a third of all samples surpassed the recommended limits by 10 times or more. The results triggered a worker safety hazard alert by the Occupational Safety and Health Administration.[22]

Citizen activism

Legislative issues

In January 2012, North Dakota regulators approved new rules to reduce the number of open pits used to dump oil drilling wastes. The rules also require oil companies to disclose the makeup of fluid that is used in hydraulic fracturing, requiring that the chemicals used in "frack" fluids be posted on a website two months after a well is completed.

The new rules took effect April 1, 2012.[23]

Citizen groups

Industry groups

Companies operating in Bakken

Reports

Road damage

A 2012 study estimated that it will cost North Dakota $7 billion over the next two decades to maintain county and township roads, in large part due to heavy truck traffic from increased drilling and fracking. The state will need to pay $834 million over the next two years alone to maintain county and township roads, two-thirds of that amount in western North Dakota, where oil production is booming.

The study was presented to the state Legislature's budget committee. The state said it has an oil-driven budget surplus, expected to reach $1.6 billion by June 2013, and incumbent Republican Gov. Jack Dalrymple has previously recommended increasing state spending on roads.

Institute Director Denver Tolliver said the 28 percent increase in the group's spending recommendation was due to rising construction costs and an 80 percent increase in the number of wells that regulators expect companies to drill in the state.[24]

Resources

References

  1. "North Dakota Tops Alaska in Oil Output," Wall Street Journal, May 15, 2012.
  2. 2.0 2.1 "US Shale Gas to North Dakota – Is it the beginning of a New Era for US Oil?" Fuel Fix, Dr. Salman Ghouri, December 16, 2011.
  3. 3.0 3.1 3.2 3.3 3.4 "The Bakken Boom, An Introduction to North Dakota's Shale Oil" Energy Policy Research Foundation Inc., August 3, 2011.
  4. "Active Drilling Rig List" North Dakota State Government, Current Active Drilling Rig List, accessed August 24, 2012.
  5. Nicholas Kusnetz, "North Dakota Turns Blind Eye to Dumping of Fracking Waste in Waterways and Farmland: Releases of drilling and fracking waste, which is often laced with carcinogenic chemicals, have wiped out aquatic life in streams and wetlands," ProPublica, June 8, 2012.
  6. "North Dakota predicts big boost in natural gas" David Shaffer, Star-Tribune, July 26, 2012.
  7. "Could Bakken Oil Boom Go Bust After Election?" Brian A. Shactman, CNBC, October 17, 2012.
  8. http://www.epmag.com/archives/features/756.htm "Analysis optimizes well results"] Brian Wright, E&P, January 3, 2008.
  9. http://www.epmag.com/archives/features/756.htm "Analysis optimizes well results"] Brian Wright, E&P, January 3, 2008.
  10. 2009 Magnolia Petroleum Current activities.
  11. Measure offers oil tax rate cut.
  12. 2006 North Dakota Oil Production by Formation.
  13. 2007 North Dakota Oil Production by Formation.
  14. Bakken helps North Dakota surpass oil production record [1].
  15. "ND Monthly Bakken* Oil Production Statistics" Department of Mineral Resources, April 10, 2012.
  16. "North Dakota grasslands oil and gas projects expedited," AP, October 11, 2011.
  17. "To frack or not to frack: North Dakota's dilemma" Brian A. Shactman, CNBC.com, February 10, 2012.
  18. "FRACKED UP!: Hollywood,Interrupted Visits America’s New Boomtown" Mark Ebner, Hollywood Interrupted, April 24, 2012.
  19. "N.D. must prepare now for the end of the Bakken boom -- study" Scott Streater, E&E News, April 25, 2012.
  20. Nicholas Kusnetz, "North Dakota Turns Blind Eye to Dumping of Fracking Waste in Waterways and Farmland: Releases of drilling and fracking waste, which is often laced with carcinogenic chemicals, have wiped out aquatic life in streams and wetlands," ProPublica, June 8, 2012.
  21. Mark Clayton, "Thanks to North Dakota, US waste of natural gas grows rapidly," The Christian Science Monitor, July 13, 2012.
  22. Adam Voge, "Fracking dust alert not shocking in Wyoming," Wyoming Star Tribune, July 30, 2012.
  23. "Rules approved to cut North Dakota oil waste pits," The Associated Press, January 23, 2012.
  24. "Study: $7B bill for ND road upkeep over 20 years," AP, September 21, 2012.

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