Oil is making a resurgence in Montana. The number of applications for drilling permits is on the rise for 2011. That rise could mean jobs and money coming into the Montana for decades to come. In the first of a three-part series, NBC Montana went to eastern Montana to find out the future of oil production for the Treasure State.
On the plains of western North Dakota there is no recession. Jobs are plentiful and housing is in short supply. It's due to the Bakken oil play. By most accounts the largest reserve of oil in the country. Reserves that extend from western North Dakota, through northeastern Montana and into southern Canada.
Harold Hamm, head of one of the biggest oil companies developing the area, Continental Resources, says Montana's time has come.
Hamm says, "It's taken a lot of time to, number one, break the code and prove the commerciality of these formations. So it's happened a little slower than most fields would come into existence."
Originally, geologists estimated the Bakken to hold about 150 million barrels of oil. That all changed in 1999 when Billings geologist Dick Findley devised a way to make a 90-degree turn two miles below the earth's surface and fracture shale rock. The oil came pouring out.
David Galt heads up Montana's Petroleum Association. Galt says, "This whole idea of shale oil and shale gas has been a game changer for domestic oil production."
Montana saw a boom from those first wells, but then the bottom fell out. Galt adds, "Oil was at $140 a barrel in the national or global market and nobody thought that could fall and it fell. You know we were getting $27 a barrel out of the Williston Basin and nobody was investing."
But then there was good news from the U.S. Geological Survey. Geologists took another look and upped their Bakken estimates from the previous 150 million to more than four billion barrels of oil. At today's prices, $110 a barrel, that would be over $440 billion worth of oil.
Harold Hamm is even more optimistic than the USGS. He puts the number at 24 billion barrels. If Hamm is correct, his estimate would increase the value of the oil to a whopping $2.6 trillion.
"I think it will be measured in 30-40 years from now. We see as many as 48,000 wells needing to be drilled." Hamm said.
David Galt says, "Success breeds success and success breeds interest. So you're going to see a lot of interest in Montana."
That interest is already being seen in counties in the northeastern corner of the state. Gov. Brian Schweitzer says people can already see the difference. Schweitzer says, "You can't even walk into the courthouse because you would be stumbling over the dozens of land men that are pouring through the books to find out who owns the land. So now literally tens of thousands of new acres are being contracted in Montana. And once you get them contracted then you start drilling the wells."
Many of the new wells will be in Montana. The problem for Bakken oil producers is getting the crude to market. Major refineries are hundreds, even thousands of miles away, a long trip by truck and rail.
Schweitzer has made a bid to change all that. He refused access to a Canadian oil pipeline through Montana unless TransCanada agreed to take oil from the Bakken.
"I held up the Keystone project until they agreed to build a $100-million pumping station and contract oil from producers in Montana and North Dakota so we could get that oil moved." Schweitzer said. He added "We get $20, $30 and $40 less than market because we don't have pipeline capacity and they're forced to put crude oil on the train which costs a lot more money than shipping it in a pipeline. When the Keystone comes through, we'll have capacity for the next 30 years for all the oil we're going to produce in eastern Montana."
The Bakken is a huge resource. The pipeline would make it more valuable and marketable, a potential keystone for domestic production.
Harold Hamm says, "It had been predicted that we (the U.S.) would be at 70% imports. Well we're not. We turned that around and actually the imports are down to 47%. We're producing 53% of the crude oil we're producing in America."
Schweitzer says Montana production will double, triple, even quadruple, bringing money, jobs, energy independence and tax dollars to the state.
He's not the only one. Hamm's Continental Resources and several other companies are looking to strike black gold once again in the Treasure State.