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What is the opportunity for business in The Bakken?

Increasingly, for a wider array of businesses in Montana, that is becoming a serious question.

"Is it going to last?" is the most frequently asked question of Tom Rolfstad, a Williston, ND- native and the community's economic development executive director. Rolfstad was a guest speaker at the Big Sky Economic Development Corporation's annual meeting, last week. He was invited to specifically answer that question, for all kinds of Billings' business people and political leaders, who packed the meeting room at the Crowne Plaza.

Rolfstad essentially told the group, "Yes, it's going to last." He thinks it will last for at least 30 to 50 years. Nothing supports that more than the billion-dollar buyouts that are happening now as the bigger oil companies move in, he said.

"This isn't a boom, it's an industry," said Rolfstad, and he went on to explain the basic fundamentals that give it staying power – and it isn't just about North Dakota, "The Montana side is just as good as the North Dakota side," he said. "A lot of towns are seeing significant growth...A whole constellation of towns are being impacted to the extent that we are all overwhelmed."

Lacking the commercial infrastructure that the growing population needs, they turn to the major trade centers, and that includes Billings. "They shop here, dramatically," Rolfstad told his Billings audience.

Overwhelming the oil fields of the Williston Basin, is the unleashing of new technology that makes drilling for oil more like mining, as one industry expert recently described it. Technology has changed and will continue to change the whole dynamics of the industry. Whereas in the past there was a significant chance that a well could come up empty, such is not the case, today. Almost every well is a hit, and the drilling is being done in a systematic way that incorporates almost every square foot of The Bakken, which Rolfstad described as a basin about 300 miles across and three miles deep. The deepest part is at Williston, underlying an area that is the size of the 40th largest state.

Some 5,000 oil wells are producing an estimated 440,000 barrels of oil per day. Some predict that it will peak at 700,000 barrels a day – others triple that projection. According to Rolfstad, Raymond James Financial Services has predicted production could hit 1.2 million barrels per day.

One of the biggest players in The Bakken, Harold Hamm, owner of Continental Oil, has been quoted as saying it is "the hottest oil play in America today," and probably the hottest play in the history of the US.

Rolfstad points to the huge investments that the oil companies are making as evidence that they intend to stay. Norway's largest oil company, Statoil ASA, recently purchased Brigham Exploration for $4.4 billion. Hess Oil has announced it plans to invest $1 billion a year for the next five years.

Rolfstad compared those investments to the $1 billion in federal military spending on North Dakota's air force bases, over a 15 year period.

Billions of dollars of "investment" translates into billions of dollars in the purchase of goods and services and in job creation.

Showing a map of grids laid out within square townships, Rolfstad pointed to the dozens of intersecting roads, formerly gravel farm- to-market roads, that are now being used to access oil wells, which are located in sets of two, with each set about four miles apart.

North Dakota will probably drill 2100 wells this year.

It takes a thousand truck loads of material and equipment to develop and sustain each well. Sand, gravel, water and crude oil are primarily what the trucks that travel those roads now carry.

The trucks need drivers, but they also need maintenance and good roads, requiring mechanics and more construction workers and equipment. Building and maintaining roads requires as many trucks, drivers and materials as do the oil rigs. Rolfstad pointed out that it makes far more sense to lay pipelines to carry the water, natural gas and crude oil.

In the extraction of the oil, each well lays two miles of pipe. There will be 8400 miles of pipe used each year for the next 25 years, he said.

Every rig needs 23 railcars of materials. There will probably be a need to double the miles of railroad track in both North Dakota and Montana.

"We need fuels, lumber, hotels, power poles and 'farcing' sand," rattled off Rolfstad. (They are bringing in artificial sand – ceramic sand – from China, "because it works better.")

There are 350 oil service companies doing business in Williston. "And, they are all building 'mega yards' and 'super yards,'" said Rolfstad. Halliburton says that Williston is their largest facility.

Professionals are in high demand – from engineers and architects to accountants and lawyers. Local health care facilities were long-ago overwhelmed and health care providers were quite pleased, recently, when officials from St. Vincent Health Care in Billings, inquired about what they could do to help fill the growing gap between the demand and the availability of health care services.

Electricity is also in huge demand, and future demand will probably require rebuilding the electrical grid. The small rural electric cooperative that was built years ago to serve an agriculture community has been pushed beyond all expectations. Three years ago the Mountrail-Williams Electric Cooperative had a service load of 30 megawatts. In 2011 that has grown to 110 megawatts. And, a consultant recently informed the board of directors that by 2025 they will need 1.2 gigawatts. The board scaled that estimate back to 950 megawatts, and that is what they are aiming to provide with the building of a new natural gas powered generation plant, said Rolfstad, who added, "We need two of those."

There is talk of building more power plants and of building more natural gas plants and perhaps oil refineries, further in the future. Nearby, Tioga, North Dakota, has had a natural gas plant for 50 years, but now two more plants are in the process of being built, to produce natural gas liquids for which "there is more of a premium."

The prospect of building all such plants and facilities will help make The Bakken "a long-term investment."

For all these projects, people are coming from all over the country to snatch up jobs, and they need all the things that any people need to live and work – most especially a place to live. The construction industry is booming in the area, as they race to build motels and hotels, man camps, and homes. This past year Williston has had ten times the number of building permits as Fargo, North Dakota's largest city.

Food, clothing and all the service industries – in all the towns scattered throughout the basin — are in dire need of help as they compete for labor with the oil fields.

Once drilled, the wells pay for themselves in about two years – after that it becomes a matter of "just collecting the checks," said Rolfstad, in explaining the incentive behind the development of The Bakken. Once into production each well requires only one person to manage it, but there will be an estimated 60,000 wells, when all is said and done, said Rolfstad. That's long-term employment for 60,000 people.

Rolfstad further pointed out that North Dakota is a good place in which to do business. Largely because of oil, the budget for the State of North Dakota is "sound." With an 11.5 percent tax on every barrel of oil, the state has accumulated a billion dollar surplus.

It has the lowest workers compensation rates in the nation and it's a "right to work" state, he underscored.

"We are making history," said Rolfstad. Formerly, North Dakota was ranked as the ninth largest oil producing state in the nation; it is now the fourth and headed to becoming the second largest, exceeded in production only by Texas.

At the current rate of production at 440,000 barrels a day, North Dakota's production is increasing to the extent that it is eclipsing that of Prudhoe Bay, whose production is declining.

The New Yorker Magazine recently equated The Bakken to being "Kuwait on the Prairie."

And, all of this is just the beginning of the industry. There is a lot of shale in the US, said Rolfstad, and other areas of the country are developing new oil and natural gas plays using the new technology. Wyoming has its own exploration and development going on and there's more in Texas. But, The Bakken is the first and the biggest, with considerable potential yet to explore, including two other formations which may yield as much as The Bakken.

Rolfstad explained that the early stages of development have involved small companies getting the leases and blocking them together. As that is nearing completion, now comes the very expensive endeavor of drilling the wells. Continued drilling requires deep pockets that can only come from the larger oil companies, and that is what is happening now —the larger companies are stepping in to purchase the smaller ones.

All of the ten largest oil companies in the US have a presence in The Bakken, said Rolfstad.

Most of the claims have been staked out in North Dakota, said Rolfstad, which means that they are now moving into eastern Montana. "Landmen" are reported to be packing the court houses of Montana's eastern counties as they research records to locate landowners.

"The technology made a major change," said Rolfstad, who has no doubt that the technology, will get even better. Three to five years ago, he said, they were getting two to three percent of the oil out, and now they are getting six to eight percent."

Rolfstad pointed out how rapidly technology has already advanced, evolving from the initial development of horizontal drilling, to the incorporation of "fracing," which was followed by more improvements of the fracing process. Fracing is a process that places water and sand under high pressure to fracture the rock allowing the oil in it to seep into the fissures and drain into the wells.

Rapid technological advancements over the past couple of years have reduced the cost of developing an oil well from $10 million to $7 million.

Pointing out the difference that technology can make, Rolfstad reminded that it wasn't that long ago that experts were predicting that the US would need to import natural gas and they began building natural gas terminals on the coast to handle the imports. Those terminals are now being used to export natural gas, because the US is producing so much of it, from the production in shale formations using the same horizontal drilling process. 'We now say we have a hundred years of natural gas," said Rolfstad.