N.D. oil production tops 1 million-barrels-a-day milestone

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: June 17, 2014 - 11:08 PM

Forever changed by the oil boom, North Dakota is transforming the nation and world as it passes

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Ray Gerrish repaired a drilling rig in 2013. Oil industry experts predict the North Dakota boom, aided by technology advances, will last a while.

North Dakota has joined the big leagues of crude oil production, surpassing 1 million barrels per day — an output second only to Texas in the U.S.

State officials said Tuesday that North Dakota yielded 1,001,149 barrels daily in April from a record 10,658 wells. Jubilant oil industry officials hailed the benchmark as another sign that the United States is freeing itself from the grip of foreign oil.

“People can step back and say, ‘We don’t care that much about what OPEC does anymore,’  ” said North Dakota Petroleum Council President Ron Ness, reflecting on past decades when the Organization of the Petroleum Exporting Countries controlled world oil supplies.

North Dakota’s oil bounty also has transformed the state economy, creating thousands of jobs and fueling a population surge that’s the fastest in the U.S. Formerly sleepy towns across the western part of the state are suddenly beset with traffic jams, housing shortages and sprawling man camps as workers from across the nation flood into the oil fields.

“It put so many people back to work coming out of a recession,” said Michael Reger, chief executive of Northern Oil & Gas of Wayzata.

Oil production contributes $50 million per day to North Dakota’s economy, with more than $11 million per day paid in state oil and gas taxes, according to the North Dakota Petroleum Council. Over the past two years, the state’s gross domestic product, a measure of economic muscle, soared 32 percent.

Reaching the 1-million-barrel-a-day threshold represents a 20-fold boost in North Dakota oil production in six years, coming largely from the use of horizontal drilling and hydraulic fracturing, or fracking technology, a controversial process that has raised environmental concerns in North Dakota and other states. The oil and natural gas extracted from shale layers known as the Bakken and Three Forks under North Dakota represent 12 percent of U.S. domestic production.

Texas is the only other state producing more than 1 million barrels daily. Federal leases in the Gulf of Mexico also exceed that level, as does the province of Alberta. Three other states — Alaska, California and Louisiana — once produced 1 million barrels per day but have dropped below that level.

A barrel equals 42 gallons.

North Dakota’s oil output is expected to climb to 1.5 million barrels per day by 2017, said Lynn Helms, director of the North Dakota Department of Mineral Resources. Production then could plateau as the inevitable decline in older wells’ output is balanced by new wells, he said.

Reger’s company, founded in 2006, acquires oil leases in North Dakota and finances the drilling of wells by other oil companies. Overall, Northern has participated in 20 percent of the wells drilled in the region, he said.

“Technology has been outpacing the estimates for 10 years,” he said in an interview Tuesday. “The field just keeps getting bigger, and the technologies around the Bakken just keep getting better.”

Reger said Northern has 25 years of “drilling inventory,” and he expects the boom to last a while.

The North Dakota oil boom and parallel shale-oil development in Texas, Wyoming and New Mexico come at a time of increasing conflicts in the Middle East — events that traditionally drive up the price of oil around the world.

While the nation’s benchmark East Coast and Midcontinent oil prices are above $100 per barrel, the Bakken price remained just below that on Tuesday.

“It takes the pressure off seaborne crude imports,” said Vincent Piazza, an energy analyst for Bloomberg Industries. “Given what we are seeing with geopolitical tensions and security challenges, it is a welcome sigh of relief.”

One major downside of North Dakota’s oil boom is that not enough oil and natural gas pipelines exist to carry the bounty. Instead, the rail industry, using trains with 100 or more tank cars, has emerged to carry oil to coastal refineries that once relied on ocean-delivered foreign oil.

Minnesota has become a crucial pathway for oil trains that have raised safety concerns. About six of them pass through Minneapolis and St. Paul daily, and two more travel through other parts of the state, according to the Minnesota Transportation Department.

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  • Men worked around the clock at Raven Rig No. 1 near Watford City. With the rise in oil production have come economic gains and population growth ranking the highest among U.S. states.

  • The million milestone

    States at that level: Texas, North Dakota

    States formerly at that level: Alaska, California, Louisiana

    Countries at that level: 19

    Cars it can fill up: 48,000

    A 42-gallon barrel of oil: Creates 19.4 gallons of gasoline

    13,000 millionaires: Now in N.D., and boom could create 2,000 more a year

    U.S. crude oil production: 12% from N.D.

    U.S. reliance on oil imports: Down 18.5% since 2006, when first Bakken well was drilled

    U.S. imports: 39.8% of its oil in 2012

    Joining the club: The Bakken is the 10th oil field in world history to reach 1 million barrels a day

    Job growth: Oil and gas industry directly employed 40,856 full time, or 9% of N.D.’s workforce in 2011

    Passing through: More than 800 rail cars of Bakken crude oil roll through Minnesota every day to refineries out East

    riding the boom

    Since 2008, oil has transformed many facets of life across North Dakota:

    Economics

    Oil pumps $50 million per day in the state economy and $11 million per day and taxes into state coffers. State government has a $1.6 billion surplus.

    Population

    The state grew by 3.1 percent in 2013, highest increase in the nation. In 2013, it was estimated at 723,000, up 7.6% since April 2010.

    CRIME

    Average number of inmates in the Williston jail

    2008: 20

    2013: 115

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