6 Questions About North Dakota's Oil Boom

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Oil Drilling Rig on Badlands; © Lowell Georgia/Corbis

Millions of Americans would do almost anything for a job right now. Our bloated deficit has become the central issue in our political discourse. Yet in a far-flung prairie town less than a hundred miles from the Canadian border, a revolution is happening. Unemployment is less than 2%. The state budget has a surplus of $1 billion. Job openings can’t be filled quickly enough, and for many the pay is above $50,000. Welcome to Williston, North Dakota. It’s the scene of a modern American oil boom.

1. Wait, an Oil Boom? How?

It all starts with the Bakken formation, a 25,000 square-mile hunk of rock under the surface of Montana, North Dakota, and Saskatchewan. Oil was discovered here in the early 1950s, but recovering it proved impractical for two reasons: First, the area within the rock formation that contains oil is long and flat. It’s rarely more than 150 feet thick (in some places less than fifty). This makes it distinctly unattractive for traditional vertical drilling. And second, the oil is trapped inside layers of rock called shale.

When this field was discovered, oil was cheap, easy, and in everyone’s backyard. Chasing a thin sliver of petroleum trapped inside rock layers two miles below the earth’s surface made little economic sense. But fast forward half a century. Oil is hovering around $100 a barrel and there are no new elephant fields (an industry term for giants like Saudi Arabia’s Ghawar). Tapping North Dakota's oil reservoir is now economically viable.

Two technologies helped make North Dakota’s black gold rush a reality. The first is a technique called horizontal drilling, which is exactly what it sounds like. In the past, drilling in any direction other than straight down wasn’t very practical. Within the past ten years, new monitoring equipment has been introduced that allows horizontal wells to be drilled in perfect arcs up to two miles. Instead of punching right through a reservoir like the Bakken, engineers can now travel through it.

The second is called hydraulic fracturing, or fracking for short. Those of you who saw the documentary Gasland are familiar with the controversial technique, which was pioneered by oil and gas giant Halliburton. It involves shooting water, sand, and chemicals at the rock structures that contain oil, then breaking them open like a treasure chest. Think of it as a really powerful water gun.

With these new technologies, an area that ten years ago had negligible production is now pumping out almost half a million barrels a day. And that growth should continue. In 2008 the U.S. Geological Survey estimated the amount of recoverable oil within the Bakken Formation was 3.0 to 4.3 billion barrels. That was before the discovery of a second, similar field nearby, called Three Forks. Harold Hamm, the billionaire founder of a company that holds more rights than anyone in the area, claims it will ultimately yield up to 24 billion barrels.

2. Is That a Lot?

How much oil is 24 billion barrels? Well, if Hamm is correct, this would easily qualify as one of the largest fields in the world. It could support the entirety of U.S. demand for almost four years by itself.

To make matters even more mind-boggling, this is all part of a larger movement towards the embrace of fracking and horizontal drilling in America. If oil in these harder-to-reach places is accounted for all across the nation, there may be as many as two trillion barrels of oil in the ground—twice the total of Middle East reserves, and enough to power U.S. demand for...you get the idea.

3. Where Do All These Oil Workers Live?

An employee at one of the oil firms talked with NPR about the complete transformation of Williston since the boom. In the last four years, the city has almost doubled in size. They used to build five new homes a year in Williston. This year they've built 2,000. Next year they’re planning to build twice as many. Homes can’t be built quickly enough to accommodate the invasion of oil workers.

In the meantime, where do they live? Many purchase RVs and make do while waiting for more permanent arrangements. Here's the rub: they pay upwards of $1,000 a month for parking spaces. Their other option is to live in “man camps” — prefabricated dorms that house up to 20,000 workers in the area. (The average wait time in line at Wal-Mart is half an hour.) Ultimately, the boom could bring 45,000 long-term jobs to the area, and that’s in a state with fewer than a million people.

4. How Does U.S. Oil Production Compare to the Rest of the World?

After seventeen years of consecutive decreases, American oil production has increased for three straight years. In 2008 we imported almost two-thirds of our oil — now, it’s less than half. The U.S. could be producing almost as much oil as Saudi Arabia within ten years. Within five, we’ll likely pass Russia as the world’s leading energy supplier. The power center of world oil production is slowly shifting from the eastern hemisphere to the west. This will have enormous and uncertain geopolitical implications.

5. What's the Downside?

No one will be surprised to hear there are significant environmental concerns. The list of possible consequences of fracking reads almost like the blurb of potential side-effects at the end of a pharmaceutical commercial. Fracking has a reputation for ruining the groundwater in nearby areas. When it’s used to recover natural gas, methane sometimes leaks into the air, which in some instances can cause explosions. It may also trigger earthquakes. Residents in places where gas leaks have been detected complain of various physical ailments, including headaches, diarrhea, nosebleeds, dizziness, and muscle spasms. This is all outside of general concerns about our continued dependence on fossil fuels and their effects on the environment.

6. What Other Industries Are Booming in Williston?

Strippers seem to be raking it in. According to a recent CNN Money article, exotic dancers at the town's two strip clubs are earning $2,000 a night. One club — Whispers — has received applications from Hawaii, Alaska, Germany and the Czech Republic.

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November 5, 2011 - 6:21pm
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