The oil industry has known for decades that there was oil in North Dakota's Bakken Formation. But until recently, few thought it was worth chasing.
The Bakken, an immense blanket of rock that covers about 200,000 square miles, stretching from Saskatchewan to straddle western North Dakota and eastern Montana, has long frustrated efforts to extract its oil.
The oil was two miles down and trapped in tightly packed horizontal layers of shale that were easy to miss with conventional drilling.
By 1999, when oil prices were low, the industry had largely given up on North Dakota, recalls Ron Ness, president of the North Dakota Petroleum Council: For the first time since the discovery of its oil in 1951, no oil rigs were drilling new wells anywhere in the state. "It was devastating," he said.
Fast forward to 2007. On the day before Thanksgiving, Ness counted 54 rigs in the field, almost half of them clustered around Parshall, a farming community of about 1,000 people 60 miles southwest of Minot.
The turnabout is due to a combination of factors: new discoveries, new technology that puts previously unattainable oil within reach and high oil prices that make the search for oil economically worthwhile.
The new curiosity about North Dakota oil was sparked last year, when an oil exploration company, Houston-based EOG Resources, revealed that a well it had drilled into an oil-rich layer of shale below Parshall is expected to produce 700,000 barrels of oil.
Now rigs are arriving almost weekly, and farmers with the right pieces of land can become millionaires just by selling their mineral rights and collecting royalties. A year from now, if a study by the U.S. Geological Survey pans out, the state could see even more activity. Intrigued by the drilling around Parshall, the USGS is going to try next year to recalculate the oil potential of a geological formation called the Williston Basin, which includes the Bakken Formation below it.
The USGS wants to check out an estimate by the late Denver-based USGS geochemist Leigh Price, who wrote in 1999 that the Bakken's shale potentially contained 413 billion barrels of oil. By comparison, Alaska's North Slope, the nation's largest oil resource, holds between 50 billion and 70 billion barrels of oil.
Price died before the paper could be reviewed by fellow scientists and published, but his estimate has created quite a buzz in the industry.
"It's mind-boggling," said Lynn Helms, director of the North Dakota Department of Mineral Resources.
The Bakken's oil would appear to dwarf that of Alaska, but Alaskan oil is much easier to get out of the ground. Federal geologists estimate that about 30 percent to 50 percent of the Alaskan oil is recoverable, or a mean of about 26 billion barrels.
The Bakken's shale is so tight that only 1 percent to 3 percent of it may be recoverable using present-day technology, Helms said. That would come to about 4.1 billion to 12.3 billion barrels.
By comparison, ANWR, the Alaska National Wildlife Reserve, holds about 10.4 billion barrels of technically recoverable crude, according to USGS estimates.
"The Bakken is one of the worst rock (formations) on the planet," Helms said.
Still, with North Dakota crude fetching $78 a barrel lately, there could be serious money to be made.
It's that potential that is driving the renewed interest in North Dakota, with Parshall at its center. "This is probably one of the top two or three oil plays in the U.S. today," said Ness.
Wayzata-based Northern Oil and Gas is just one of several oil exploration companies hoping to cash in on Parshall's potential. The startup says it is one of the largest holders of mineral rights in the area, after EOG. In a joint venture with Austin, Texas-based Brigham Exploration, Northern Oil drilled its first well in Parshall last month.
Michael Reger, Northern Oil's CEO, grew up in an oil-industry family in Billings, Mont. By this time next year, he predicts, the wheat and grazing land around Parshall will have a well every few miles. Each well needs a whole 640-acre section because the pipe has to extend nearly a mile or more from the starting hole to make it efficient.
Horizontal drilling technology has made it possible to recover oil from the tight shale of the Bakken Formation, which has been estimated to contain 413 billion barrels of oil. By comparison, Alaska's North Slope, the nation s largest oil resource, holds between 50 billion and 70 billion barrels. (JOHN DOMAN, Pioneer Press)drilling, introduced about a dozen years ago, has given the oil industry a way to finally extract oil from the Bakken's shale and other places where it was once almost impossible.
As the drill reaches the sedimentary rock roughly 9,000 feet below the surface, it begins a gradual 90-degree turn into the layer for another mile, exposing more pipe to the shale for greater collection.
In the last few years, drillers added fracture technology to horizontal drilling. In fracture technology, mud is forced into the drilled hole under immense pressures to "frack" or break up the shale further. The deeper cracks allow more oil to flow to the pipe.
The advent of horizontal technology made drilling the Bakken practical, but it was the rise in crude oil prices that made it attractive. When North Dakota's oil industry tanked back in the 1990s, prices for its native crude fell to as low as $3 a barrel.
This year, honey-colored North Dakota crude hit an all-time high of $88.68 a barrel on Nov. 23, the day after Thanksgiving, Helms said.
"The technology and the high commodity prices met at the right time," Ness said.
In 2005, before the Parshall wells had even been drilled, the state's $4 billion oil industry was contributing $280 million in taxes and throwing off another $280 million in royalties and lease payments, according to the petroleum association.
The association expects that the increased activity in the state will spur the oil industry to hire 12,000 more people, from roughnecks to geologists to truck drivers, over the next four years.
Annual salaries for the industry average about $60,000, about double the state's average, Ness said.
And although North Dakotans tend to avoid displays of extravagance, anecdotes of sudden oil wealth are starting to trickle in. "In Mountrail County, you're making millionaires out of farmers and ranchers there on a monthly basis," Ness said. "It's going to change the economy of the area for a significant time ahead."
Of course, not every county is a Mountrail and not every farmer a millionaire. The results from Dunn and Divide counties, where similar exploration efforts are underway, so far aren't as rosy as in Mountrail, he said.
And because the Bakken oil isn't easy to reach, it will take decades to realize the full potential of the formation.
"Getting it out is a problem - we've just barely figured out how to do that, so recovery is going to be very, very slow," said Helms of the state's mineral resources department.
The bustle of activity has piqued the interest of Mountrail County residents.
John O'Neill, 52, is the rig manager for Nabors Building, which is drilling a well for Northern Oil and Gas and Brigham Exploration. He is from Williston, but said his wife grew up three miles from the site and her family owns 14 quarter-acres nearby.
"So I'm really curious what this is going to do," he said, nodding to the drilling rig.
Maybe his in-laws are sitting on valuable mineral rights, he said. If so, he joked, maybe his wife won't need him anymore. He gives a hearty laugh.
"Everybody's pretty excited," O'Neill said. "But a lot of them don't know what to think."