How long will the Bakken oil boom last?
Tom Richmond, administrator of the Montana Board of Oil and Gas, has been asked that question many times. Sure enough, it came up again Tuesday at the tail end of his detailed presentation on the state of Montana's oil and gas industry.
"There are always cycles in this industry," Richmond said, mentioning that Montana's first oil wells began producing about a century ago. "The safest thing I can say is that I expect the industry to be around a whole lot longer. There are a lot of reserves in the Bakken and certainly there are a lot of reserves in Montana," that will receive attention in years to come, he said.
The Bakken, the focus of so much worldwide attention, is a formation that encompasses 200,000 square miles within the Williston Basin, in western North Dakota, Eastern Montana and into Canada.
During his presentation for the 2012 Economic Outlook seminar in Billings, Richmond painted a picture in which the oil and gas industry continues to be a bright spot that generates billions of dollars for the state's economy and employs more than 4,600 people.
Yellowstone County plays a unique role in the state's oil and gas industry. It has no producing oil wells, but is home to three oil refineries and a growing number of administrative and service jobs that support the industry.
Technological innovations such as horizontal drilling and hydraulic fracturing created a sharp spike in oil production and tax revenues in Montana between 2000 and 2008. As is typical in the industry, production began to tail off in 2009 and 2010, but began to rebound again last year. In one sign of a pickup, Montana had 12 drilling rigs operating this month, up from nine a month ago.
These days many people refer to the Bakken development as an energy renaissance or a revolution, Richmond said.
In fact, it represents a new era in oil exploration because it involves exploiting a "continuous resource play."
In traditional oil and gas exploration, geologists hunt for geologic formations with trapped oil and gas that migrates from source rocks like the Bakken.
"The concept that you can produce oil and gas from a source rock depends on horizontal drilling and hydraulic fracturing," Richmond said.
And in a modern continuous resource play, dry holes are quite rare, he said. Montana's Elm Coulee field near Sidney has about 750 wells producing from the Bakken. During the process of development, only two dry holes were drilled.
The Bakken isn't the only place where exploration is going on. The Health Shale is being explored in central Montana, but nobody is calling it a boom just yet.
Montanans often ask why hundreds of drilling rigs are operating in North Dakota and comparatively few are operating in Montana. Richmond said geology plays a large role in that equation. A shale layer known as the Upper Bakken extends well into Montana. But a deeper formation known as the Lower Bakken, and the Three Forks/Sanish Formation below that, are also being developed in North Dakota. But the two deeper formations thin out near the border between Montana and North Dakota.
"So if you had a great big sack of money, you might want to go to North Dakota first, where the Bakken is 120 feet thick and has a couple of extra pay zones," Richmond said.
But some of the drilling technologies developed in North Dakota are also being used to increase production in Montana. Already, newer wells are being drilled in the Elm Coulee field near Sidney, he said.
Richmond said Montana's tax climate isn't hindering exploration. More than a decade ago the Montana Legislature cut its taxes on oil and gas production as a way to spur development. Today, Montana's oil and gas taxes are lower than in North Dakota and Wyoming.
The oil and gas industry has a $9 billion economic impact on the state, and it supports 4,600 people involved in exploration, production and refining.