Oil Boom: North Dakota is the Next Hub of U.S. Energy

I am holding a rock that looks like a hockey puck, one so solid that a slap shot would result in a busted stick. It's 360 million years old. Long before dinosaurs roamed the earth, zooplankton, algae, and sand accumulated on the bottom of a Devonian sea. Heat and pressure transformed the sediments into a layer of shale, which is now buried 2 miles beneath the windswept prairies of the northern Great Plains. This stratigraphic layer is called the Bakken, and it is where the rock in my hand had rested, until very recently, in mute, stony peace. I'm standing inside one of the command posts for the Harvey, an oilwell in the North Dakota section of the Williston Basin, squeezed shoulder to shoulder with men in red jumpsuits. We're watching Jared Edvenson, who sits at a control panel, and waiting for him to trigger explosives.

These days, detonations of all kinds?social, economic, and pyrotechnic?are "Rockin' the Bakken," as a popular local T-shirt puts it. The Bakken has inspired thousands of fortune seekers to head north in a modern-day version of the Klondike Gold Rush. It is responsible for minting millionaires but also for costing people their homes and, occasionally, their lives in oil rig accidents. It has contributed to the fear in some quarters that an environmental apocalypse is nigh, and the hope in others that the Americas, not the Middle East, will one day be the epicenter of the global energy supply. "Five years ago, you tell people you are working in North Dakota, and they would be like, what are you talking about?" says LeeDon Wiseman, the Harvey well's lead consultant.

"Five years ago?" says a co-worker. "Last year even."

"Now we're on every world map there is," Wiseman continues. "Bakken. It's an explosion. Worldwide."

In 2001, North Dakota wells produced 31 million barrels of oil, less than 2 percent of which came from the Bakken. Last year the state generated a record 152 million barrels, and more than 80 percent of it was Bakken derived. For 2012, North Dakota's output is projected to surpass that of California (196 million barrels) and possibly even that of Alaska (209 million barrels) and to lag behind only Texas (533 million barrels). Estimates for the total amount of oil that could be recovered from the formation range wildly, from a few billion barrels or less to exponentially more. In an unpublished but nonetheless widely referenced paper from 2000, Leigh Price of the United States Geological Survey estimated that 200 billion barrels of oil could ultimately be extracted.

The Bakken crude is exceptional, light and sweet. But it's difficult to recover. The formation is broad, sprawling over 25,000 square miles beneath North Dakota, Montana, Saskatchewan, and Manitoba, and skinny, reaching a maximum thickness of only 160 feet. What's more, the rock is dense, averaging 5 percent or less porosity, which means that 95 percent or more of the rock consists of just that?solid rock, rather than open pores that can hold oil. (Conventional oilfields, like Saudi Arabia's Ghawar, have porosity of up to 35 percent.) Russell Rankin, a regional manager for Statoil, a multinational energy company and one of the owners of the Harvey, gestures toward my core sample. "You see that rock and say, 'It looks like concrete,'" he says. "'How do you get oil out of that?'"

Part one of the answer is to employ horizontal drilling, which oil companies began trying here in the late 1980s. A couple of weeks before I arrived at the Harvey, the workers started by drilling straight down, just as they would traditionally. But then, as the bit approached the 2-mile depth, the workers guided it on a graceful, 90-degree curve into the Bakken. From there they drilled horizontally for another 2 miles, maximizing the well bore's access to the thin geological layer.

Part two of the answer is hydraulic fracturing, another technological innovation. In the command-post truck, Edvenson stands by to initiate the first step in that process. A man's voice crackles over a two-way radio. "We're at 14,910 feet, you good?"

"I'm good," Edvenson replies from his seat in front of the control panel. He turns a dial to amp up the electrical charge he's about to unleash, lifts a red protective cover, and reaches for a toggle switch labeled SHOOT.

Oil Production is Up?So Why Did Gas Prices Stay High?

The Bakken Boom is the biggest in North Dakota history, but it isn't the first. Just ask Kathleen Neset. A New Jersey? bred, Brown University? educated geologist, Neset arrived at the height of the 1979 gas crisis. Prices were soaring and oil companies were thirsty for North Dakota crude, even though it was costly to extract. Neset met her future husband, Roy, while they were working on a rig near Bismarck, and the couple launched a drilling and geological consultancy to help drillers locate the most oil-rich rock. But then the gas crisis ended, oil prices crashed, and "the state went from 146 active drilling rigs in 1981 to basically zero," Neset says.

In the wake of the bust, Roy, Kathleen, and their two sons sup ported themselves mostly by working on their family farm, which had been homesteaded a century earlier by Roy's Norwegian ancestors. But then, in the late 1990s, their oilfield business began climbing again, and since 2008, it has skyrocketed. Today, the Neset Consulting Service has crews working on nearly half of the state's 200-plus active drilling rigs, and Kathleen Neset is one of the best-known women in the state's oil industry.

On a cold, clear day in February, Neset takes me to visit the farm, just outside the town of Tioga. After driving between golden fields of durum wheat, we reach a small hilltop, where a windbreak of ponderosa pines opens to reveal a white farmhouse. Oil was first discovered in North Dakota only a dozen miles from here, in 1951, and behind the Neset farmhouse is a well that was drilled a few years later. Long since abandoned, the rusty artifact is a reminder that people have been trying to suck oil out of North Dakota for six decades, and its presence raises an obvious question: Why has it taken until now for production to kick into overdrive? "Well, we always knew the oil was here," Neset says. "But to get it out of the ground, we had to wait for the technology to catch up."

It was the chance to see the new technologies in action that had brought me to the Harvey well, about 50 miles southwest of Neset's farm. As I look on, Edvenson's fingertips find the shoot switch and flip it, triggering explosive charges 2 miles down in the Bakken layer. They blast a series of cracks that extend outward from the well bore and into the surrounding rock. This step?called perforating, or perfing?doesn't release much oil; the cracks are only a few feet long and finger width. Rankin says perfing creates zones of weakness, and the next step is to attack them.

Rankin and I walk a few dozen yards to the frack van for another well, the Kari, which has already been perfed. Inside, well-site consultant Scott Bell shows me a sample tub of fracking solution, a beige goo consisting mostly of water and sand as well as chemicals that inhibit bacterial growth and enhance viscosity. Thousands of gallons of the stuff are being pumped through hoses and deep into the well. The fracking solution then surges into the perforations, driving the cracks several hundred feet outward from the bore. Bell and Rankin monitor the assault on a computer screen, watching as the pressure climbs to 6500 psi. "She likes it, she likes it," Rankin says.

At this point, if Bell simply shut off the pumps, the cracks would snap shut again. Instead, his team changes the mixture of the fracking solution so that it carries tiny ceramic beads, called proppant. The proppant gets packed into the fractures and stays there, holding them open so that oil can flow freely to the bore.

Until a few years ago, wells were perfed, then fracked, in a single pass. Rankin calls this the Hail Mary approach. Now well pipes are subdivided into 40 segments or more, each of which is perfed and fracked in isolation, maximizing the effectiveness of the hydraulic onslaught. "Multistage fracking has revolutionized the Bakken," Rankin says.

The new techniques have given rise to the current Bakken boom, but there are no guarantees that it, too, won't go bust like those of the past. Even when coaxed with the latest techniques, the formation is stingy about releasing hydrocarbons; for example, while production from a new well in a conventional oilfield declines about 5 to 8 percent per year, the output from Bakken wells declines 65 percent after the first year. Ultimately, even if the most wildly optimistic estimate of Bakken oil reserves is correct?around 200 billion barrels?the amount of oil that can actually be recovered may still be only 10 billion barrels or less.

The other uncertainty is the price of oil. Rankin says that drilling, which is more costly in the Bakken than it is in conventional fields, will be profitable even if prices drop to $60 a barrel. The Bakken play may thus sound like a safe bet, with prices currently topping $100 a barrel. But as inflation-adjusted data from energy analyst James Williams of WTRG Economics indicate, oil prices have remained below $60 a barrel for most of the years since World War II. If prices tumble back down toward their long-term historic norms, Neset may need to return to her crops once again.

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