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Energy
3:00 pm
Sun September 25, 2011

New Boom Reshapes Oil World, Rocks North Dakota

Originally published on Mon September 26, 2011 10:57 am

A couple months ago, Jake Featheringill and his wife got robbed.

It wasn't serious. No one was home at the time, and no one got hurt. But for Featheringill, it was just the latest in a string of bad luck.

"We made a decision," he says. "We decided to pick up and move in about three days. Packed all our stuff up in storage. Drove 24 straight hours on I-29, and made it to Williston with no place to live."

That's Williston, ND. Population — until just a few years ago — 12,000. Jake was born there, but moved away when he was a kid. He hadn't been back since.

"We came in right through the stretch of where the Badlands is," he remembers. "And then you come into the town. So many trucks. Semi trucks and four-wheel-drive pickups — for a mile straight. You've never seen so many trucks in your life."

Those trucks were in North Dakota for one reason — the same reason Featheringill had decided to move his wife and three kids to a remote section of western North Dakota.

Oil.

A $1,200 Parking Space

Two years ago, America was importing about two thirds of its oil. Today, according to the Energy Information Administration, it imports less than half. And by 2017, investment bank Goldman Sachs predicts the US could be poised to pass Saudi Arabia and overtake Russia as the world's largest oil producer.

Places like Williston are the reason why.

"For many years, they knew that there was oil in that area, but the technology wasn't available to get it out," the town's mayor, Ward Koeser, tells weekends on All Things Considered host Guy Raz.

But in the last few years, advances in such technologies as "fracking" and horizontal drilling have made, by some estimates, as much as 11 billion barrels of oil available in the Bakken formation under North Dakota and Montana.

"There's oil companies coming from all over the country now." Koeser says.

Williston has skipped the recession entirely. Unemployment there is less than 2 percent. The population, the mayor estimates, has grown from 12,000 to 20,000 in the last four years.

"We actually have probably between 2,000 and 3,000 job openings in Williston right now," Koeser says.

Oil workers like Jake Featheringill are fueling Williston's population growth. He's working as a shophand for Baker Hughes, making enough to support his wife and three children. But with such a sudden population increase, Williston's infrastructure can't keep up.

"When we came up here, we were told housing was tough but not impossible," Featheringill says. He and his wife got lucky and borrowed an RV from a family friend. "We got lucky again and got to park the RV in a place where we were rent-free. Most of the RV spots around here run $1,000 to $1,200."

That's $1,000 a month, just for a parking space. "Is that not amazing?" Featheringill says. "And that's in a 70-mile radius. Just to park your RV."

'Boom-Town Syndrome'

"It's the old boom-town syndrome," says Charles Groat says, professor of energy and mineral resources at the University of Texas in Austin.

A small town like Williston, he says, can be burdened by a sudden oil boom.

"All the workers. And then you have roads and trucks and pipelines. And then you have all the community services that have to be provided — law enforcement, education. So it turns into a real bonanza in terms of income, but it becomes an environmental effect that people aren't used to experiencing."

In Williston, many workers forgo prices as high as $2,000 a month to rent a small apartment and instead live in "man camps," massive group-housing provided by their companies.

"Just a little room with a bed and a TV," Mayor Ward Koeser explains. "And then they have recreation areas."

The boom in Williston, Charles Groat says, is happening in spots across America. New drilling technology is also fueling boom towns in Texas, Louisiana, and Colorado. New drilling technologies mean companies can extract oil and natural gas from shale rock that was previously thought unreachable.

"Horizontal drilling — accessing a huge area of reservoir — and then the fracking process, which props opens those cracks, and allows the liquid or gas to flow to the well," Groat says. "That's what's made shale gas and shale oil such a viable resource."

But those techniques also raise environmental concerns that Groat is studying.

"There is a danger, here – the fact that we drill so many wells," he says. "If you look at the numbers of wells that have been drilled in North Dakota, just in recent times, the numbers of wells are huge, which increases the opportunity for bad things to happen environmentally or procedurally in developing the resource. We also are not dealing, of course, with the question of greenhouse gases and carbon dioxide as we continue our hydrocarbon dependence."

Global Implications

Amy Myers Jaffe of Rice University says in the next decade, new oil in the US, Canada and South America could change the center of gravity of the entire global energy supply.

"Some are now saying, in five or 10 years' time, we're a major oil-producing region, where our production is going up," she says.

The US, Jaffe says, could have 2 trillion barrels of oil waiting to be drilled. South America could hold another 2 trillion. And Canada? 2.4 trillion. That's compared to just 1.2 trillion in the Middle East and north Africa.

Jaffe says those new oil reserves, combined with growing turmoil in the Middle East, will "absolutely propel more and more investment into the energy resources in the Americas."

Russia is already feeling the growth of American energy, Jaffe says. As the U.S. produces more of its own natural gas, Europe is free to purchase liquefied natural gas the US is no longer buying.

"They're buying less natural gas from Russia," Jaffe says. "So Russia would only supply 10 percent of European natural gas demand by 2030. That means the Russians are no longer powerful."

The American energy boom, Jaffe says, could endanger many green-energy initiatives that have gained popularity in recent years. But royalties and revenue from U.S. production of oil and natural gas, she adds, could be used to invest in improving green technology.

"We don't have the commercial technology now," she says, noting the recent bankruptcy of American solar companies like Solyndra.

"The point is you can't force a technology that's not commercial. Rather than subsidize things that are not going to be competitive, we need to actually use that money to do R&D to create technologies — the same way that the industries created these technologies to produce natural gas and it turned out so commercially successful."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

GUY RAZ, host: From NPR News, this is WEEKENDS on ALL THINGS CONSIDERED. I'm Guy Raz.

A couple months ago, Jake Featheringill and his wife were robbed. They were living in Oklahoma at the time. Jake was managing a batting cage. His wife was looking after the kids. Now, no one was hurt in the robbery. But as for Jake, it was the last straw. He decided that that day, his bad luck was going to change.

JAKE FEATHERINGILL: We decided to pick up and move in about three days. We made a decision. We packed all our stuff up in storage and drove 24 straight hours on I-29, which was all flooded, and made it to Williston with no place to live. And...

RAZ: That's Williston, North Dakota, about 60 miles south of the Canadian border.

FEATHERINGILL: We came in right through the stretch of where the Badlands is, and the roads were pretty bad. And then you come into the town. So many trucks. Semi trucks and four-wheel-drive pickups - for a mile straight. You've never seen so many trucks in your life. There are no cars. Every vehicle is a truck.

(SOUNDBITE OF MUSIC)

RAZ: And those trucks? They're in North Dakota for one reason, the same reason Jake went there: oil. And over the past 40 years, Williston's population has almost doubled.

FEATHERINGILL: It's pretty crazy. When I got up here, I had probably three or four job offers within three days of being here. If you came here and drove here and got here tomorrow, you would get a job tomorrow.

RAZ: Our cover story today: the new American oil boom. In 2008, we imported almost two-thirds of our oil. This year, less than half of it came from abroad. And what happened? Well, the scientists figured out how to extract oil from rocks and sand. And it means that within a decade, the U.S. will be producing close to as much oil as Saudi Arabia. And within five years, America could pass Russia as the world's largest energy supplier.

(SOUNDBITE OF MUSIC)

RAZ: Now, the change in Williston, North Dakota, has been so dramatic in just the last three or four years because of something called the Bakken rock formation, and it's estimated that trapped within that rock is anywhere from 11 to 20 billion barrels of oil, enough oil to power the United States for four years.

WARD KOESER: For many years, they knew that there was oil in that area, but the technology wasn't available to get it out.

RAZ: That's Ward Koeser. He's been the part-time mayor of Williston for 17 years.

KOESER: There's oil companies coming from all over the country now.

RAZ: What is the unemployment rate in Williston?

KOESER: Well, it'd be somewhat less than 2 percent.

RAZ: Wow. That's incredible.

KOESER: Well, it's interesting because even though there is an unemployment level of something less than 2 percent, we actually have probably between two and 3,000 job openings in Williston right now.

RAZ: As a matter of fact, jobs are so plentiful in Williston, the town literally cannot build enough homes to meet demand, which brings us back to Jake Featheringill.

FEATHERINGILL: When we came up here, we were told housing was tough, but not impossible.

RAZ: Jake's 25. He works for oil giant Baker Hughes, and he makes enough to support his wife and their three kids. And even though he got that job in a matter of days, finding a place to live was a lot harder.

FEATHERINGILL: When we got up here, we immediately started looking for places to live. We got lucky, and one of my mom's friend let us use their RV. And we got lucky again and got to park the RV in a place that we were rent-free. Most of the RV spots here run 1,000 to $1,200.

RAZ: That's $1,000 a month for a parking space in North Dakota.

FEATHERINGILL: And that's in a 70-mile radius. That's just to park your RV.

RAZ: And most oil workers are living in what are known as man camps, huge temporary villages on the outskirts of town. Jake told us that the average wait time in line at Williston's Walmart is 30 minutes, sometimes an hour.

Mayor Koeser can't build road and sewage lines fast enough. Same thing, by the way, is happening in small towns in Colorado, Wyoming, Louisiana and Texas, and all that American oil could add up to two trillion barrels in reserve, close to twice as much as the Middle East. And all of this oil is now being extracted, thanks to relatively new technology known as hydraulic fracturing or fracking. And Charles Groat, a professor at the University of Texas, is studying the phenomenon.

CHARLES GROAT: What I think you're seeing is just the effect of a really rapid pace of development in the Barnett Shale in Texas and Haynesville, Louisiana. And the more people that are at it and the very innovative companies that are servicing these wells in this industry just find better ways literally every day. So the technology has provided the access and the resource base that we weren't even forecasting a couple of decades ago.

RAZ: OK. We've been hearing from folks in Williston, North Dakota, of course, and, say, you live there, right, and a neighbor or maybe you signed a deal with an oil company, and a rig goes up near your home. What would you want to know? What kind of questions should you be asking if you want to make sure that your drinking water is going to be safe and so on?

GROAT: If I'm getting my water out of a shallow ground water well, I would want to make sure that the oil or gas well is cased adequately, that the cement job is sound, that the handling of the fluids that are being put in the ground to do the fracking is done in a careful way, and that the flowback waters that are handled when the well begins to produce are put in secure places.

This is where the environmental issues have occurred, not at seven or 8,000 feet. So I'd want some assurance from the operating company that all of these things have been looked at and that they were handling them well.

RAZ: OK. So we know that fracking is, basically speaking, a combination of sort of pushing pressurized water, chemicals and sand into rocks to break it up, to release the oil. There's also something called horizontal drilling. That is another technology that is fueling the oil boom. Can you talk a little bit about the difference and what that's about?

GROAT: Well, in past technology days, you drill the vertical well and you completed it and you produced what you could from a conventional reservoir. Now the ability to drill down several thousand feet and then to turn literally the drill bit around and go sideways and go horizontally for thousands of feet gives us the opportunity to sweep or to penetrate a reservoir in a horizontal direction, not just a vertical direction. So that's what's made shale gas and shale oil such a viable resource, the combination of horizontal drilling, accessing a huge area of reservoir, and then the fracking process, which itself props open those cracks and allows the liquid or the gas to flow to the well.

RAZ: From an environmental perspective, I wonder if there's a downside here too. I mean, it seems to send a signal that we shouldn't worry about consumption and about conservation and those kinds of things.

GROAT: Well, I think there is a danger here - the fact that we drill so many wells. If you look at the number of wells that have been drilled in North Dakota, just in recent times - or in Louisiana or the Barnett - the numbers of wells are huge, which increases the opportunity for bad things to happen environmentally and procedurally in developing the resource. We also are not dealing, of course, with the question of greenhouse gases and carbon dioxide as we continue our hydrocarbon dependence.

We are certainly boosting the economy. We're providing a resource that we know how to use and love to use, and so that aspect of it is going to be extremely good for the world economy. But the environmental side needs to be paid attention to and certainly can be handled, I think.

(SOUNDBITE OF MUSIC)

RAZ: Charles Groat from the University of Texas. Now, since the 1960s, the center of gravity for the world's energy supply has been the Middle East. But many oil experts, including Amy Myers Jaffe of Rice University now believe that power center will soon shift to North and South America and fast.

AMY MYERS JAFFE: That in, you know, five or 10 years' time, we're a major oil-producing region, where our production is going up, you know, dramatically, not by, you know, 10 percent, but by considerable volumes.

RAZ: Let's talk about the geopolitics of all this for a moment, because if the center of gravity is shifting to North America and South America, what does that mean for the Middle East in the next five, 10, 15, 20 years?

JAFFE: So it's going to be a turbulent time in the Middle East that's going to absolutely propel more and more investment into the energy resources in the Americas, and I do think you're going to really have a shift in the geopolitics. We are already seeing an impact on Russia. Just from the fact that we have so much natural gas here in the United States, we're not importing liquefied natural gas, LNG.

What that means is that LNG that we might have bought, that natural gas is being diverted to Europe. And because the Europeans can buy LNG, they're buying less natural gas from Russia. So Russia would only supply 10 percent of European natural gas demand by, say, 2030. Well, that means the Russians are no longer powerful.

RAZ: If oil and gas equal power, then your argument is that the power of the United States will actually increase and the power of countries like Russia and Middle Eastern states will decrease.

JAFFE: So I wouldn't say that oil is power, per se. It's really more my vulnerability. If you could cut off my oil, and that's going to harm my economy, then that's a vulnerability I have. The United States is going to be much less vulnerable to those kinds of shocks or events. And then the leverage that a Russia or an Iran might have over Europe or over the United States is lessening, and so therefore the power structure changes.

RAZ: Amy, for the past 10 years, there's - we've been talking about alternatives to oil, options like nuclear energy and wind power and solar power, but it seems to me that if the United States has this potential and this capacity, then all of those arguments and all of those hopes will also be diminished.

JAFFE: Well, I think the way we need to look at it is that if we're going to produce domestic oil and natural gas, and we're going to get extra royalties and revenues from that extra oil and natural gas, then we should be investing that extra income in R&D for solar, for better, safer nuclear. And the reason that that's a forward-looking thing is that we don't have the commercial technology now.

The administration put a lot of money into subsidizing existing companies with existing technologies, and we've just had three solar panel companies, you know, go bankrupt. So the point is you can't force a technology that's not commercial. So the money that we're spending, rather than subsidize things that are not going to be competitive, we need to actually use that money to do R&D to create technologies. The same way that the industry created these technologies to produce national gas, and it turned out so commercially successful.

(SOUNDBITE OF MUSIC)

RAZ: Amy Myers Jaffe from Rice University. Domestic production of oil, by the way, is increasing so fast that according to the U.S. government, in just three years, production will be growing faster than the rate of demand. Transcript provided by NPR, Copyright NPR.