Oil Producers in the High Plains Ride Market Highs and Lows in the Bakken

Dec 1, 2017  | 6 min  | Ep4315

In 2011, the nation was still recovering from the Great Recession and unemployment teetered at nine percent -- except in North Dakota. At the time, there was a $1 billion dollar surplus in state coffers with unemployment at half the national average. Over the past decade, 50,000 jobs had been added to the workforce. Everything was booming in the Bakken according to Lynn Helms, director of the North Dakota Department of Mineral Resources.

Lynn Helms, Director, North Dakota Department of Mineral Resources, “And you know I really think we could get to a million barrels a day and eventually our population could reach a million in the state and everybody gasped.”

That prediction was made in 2008, when the Bakken Shale Formation was producing oil and population growth was running at a record pace. Communities struggled to keep up with the rapid expansion.

In Williston, North Dakota, the epicenter for shale oil production in the High Plains, the population more than doubled in a five-year period.

Howard Klug, Mayor, Williston, North Dakota: “Everything that we did in five short years, six short years, would take 20 or 25 years anywhere else. So we had to spend a lot of money. We had to do a lot of planning in a hurry.”

New roads, schools, and utilities were built to accommodate the growing, younger population. To help offset costs associated with the new improvements, Williston city leaders began negotiating a bigger take from a new tax revenue deal with state legislators and then Governor Jack Dalrymple.

Howard Klug, Mayor, Williston, North Dakota: “We went back and said okay let's flip this around. Let's go Sixty/Forty. Sixty percent comes back to the west. Forty percent goes to Bismarck to be split among the rest of the state. Because that's, you know this is where it’s being generated at and this is where the impact is. And we're this close, we were this close to getting that passed. The governor had it in his budget. They start their session in January…and oil tanks.”


After a meeting of OPEC member nations in early 2014, the price for a barrel of oil began to fall…and plummeted for almost two years. Uneasy economic relations with non-member nations and oversupply in the United States reduced the price from a high, north of $100, to a low hovering around $40 per barrel. Along the Bakken formation, also known as a “Play”, rig counts of more than 200 in 2012 fell to just 27 in the spring of 2016. 

Lynn Helms, Director, North Dakota Department of Mineral Resources: ”Obviously what happened with OPEC in 2014 and the and the ramp up in production really brought things to a halt in it in the Shale plays. And then the Iranian nuclear oil deal was the second hit on that and took oil prices extremely low. If OPEC were to ramp up production again, we'd see prices and and Rig Counts go back down.”


As the price of oil continued to fall, Williston residents kept a bullish outlook on the future of their town, and the oil and gas industry in North Dakota. Drilling technology advancements, like enhanced oil recovery and the construction of the Dakota Access Pipeline, helped shale oil producers place themselves in a more favorable position for the return of better prices.

Howard Klug, Mayor, Williston, North Dakota: “During the last boom, you punch a hole in the ground and you may find oil you may not find oil. This this go around, you put a, you go two miles down, two miles out ninety nine percent of the time you're going to have an oil well./ So the oils there, the technology is there/it's viable in North Dakota it's easier North Dakota and we have the capacity to get it to where it needs to be refined oil, should be good for the state of North Dakota for a lot of years.”


Ron Ness, Executive Director, North Dakota Petroleum Council: ”We've survived 3 years of a downturn in I think that's that's really pretty remarkable. And probably people in the Middle East didn't think that the American oil producer could survive a downturn like this for a year, let alone three. We've proven that we can, we can get that production above a million barrels a day.”

By the fall of 2016, low oil prices were taking their toll. OPEC member nations voted to cut production by almost 2 million barrels a day for six months in an effort to push prices higher to a more profitable level of $60 per barrel. The plan worked. Prices, along with production, began to climb in the High Plains. In September of 2017, according to the North Dakota Department of Mineral Resources, over 1.1 million barrels of oil were being pumped from the Bakken and Three Forks Plays every day. The number of producing wells reached 14,190, a new all-time record for the region.

Lynn Helms, Director, North Dakota Department of Mineral Resources: “That's the beauty of enhanced oil recovery is that you use the same well pad and many of the same well boards. You may have to add, a few but you don't increase your footprint. So the impact on the land and and on the roads and that sort of thing is very minimal for a big additional boost in oil recovery.”


All the opportunities rockin’ the Bakken, again, could be around for some time to come. Representatives of the 14 OPEC nations met in Vienna this week and voted to extend the current production cuts to the end of 2018.

Ron Ness, Executive Director, North Dakota Petroleum Council: ”After a decade of the Bakken we've shown that we can grow small town North Dakota./Billions of dollars of infrastructure being built across rural part of North Dakota. That is going to allow us to really fine-tune this oil play going forward.    “


For Market to Market, I’m John Torpy

Grinnell Mutual Insurance