Numbers tell the story of oil in Bakken

2013-02-25T10:44:00Z Numbers tell the story of oil in BakkenBy LAUREN DONOVAN | Bismarck Tribune Bismarck Tribune

Raw numbers tell the dramatic story of North Dakota’s oil and gas development like nothing else.

Development of the Bakken and associated oil formations has changed the state forever, and, with few exceptions, every month’s production of oil and gas is greater than the last.

This escalating trend started with the first successful hydraulic fracturing of wells in 2004 and has continued with only minor hiccups every month since.

For years, the state’s total oil output was fairly stable at roughly 30 million barrels per year. Today, that much oil is produced in less than six weeks.

After languishing near the bottom of oil producing states for much of its oil history, North Dakota is now second in the country and within sight of overtaking top-ranked Texas.

With all that oil comes an enormous financial gain, and same as production, raw numbers tell the story of that dramatic fiscal growth equally well.

First the oil

Near the close of 2012, the state was producing 733,000 barrels of oil every day. For a variety of reasons — weather, for one — that number was down slightly from the month before and slightly off the all-time high in October.

Production saw substantial gains for the year, compared to the close of the previous year in 2011, when 509,000 barrels were produced daily. That year, incidentally, saw double the daily production of year-end 2010.

Measured in thousand cubic feet, or mcf, instead of barrels, natural gas production tracks similarly to oil. Some 782,000 mcf of natural gas was being produced daily at year’s end and about 34 percent was being flared.

The number of producing oil wells exceeded 8,100 at the end of 2012, another all-time high. That record will be surpassed every month as long as already-drilled wells keep pumping and new ones are drilled.

The number of rigs drilling is 187, off the all-time high of 218 set last May.

Department of Mineral Resources Director Lynn Helms said there were 410 wells drilled but not hydraulically fractured as of January, some 100 more than were idle at the same time last year. He said the higher number was due partly to companies running up against high costs and capital budgets at the end of the year.

Helms’ monthly remarks in January included comments on the state of federal Environmental Protection Agency rules for hydraulic fracturing using diesel products, a chemical component in all fracturing in North Dakota.

The EPA is pondering final rules, which could affect a moratorium on new drilling permits while the state rewrites its rules to stay in sync. Helms said his office is permitting enough wells to create an “inventory” so that drilling continues while any new rules are being drafted, subject to public comment periods.

The Fort Berthold Indian Reservation continues to be a big player in the state’s oil production picture. There are 28 rigs drilling and 793 wells producing 135,000 barrels of oil per day. The reservation could see another 1,500 wells.

Then the money

Revenue from oil and gas production comes to North Dakota from two primary directions — the first is production and extraction taxes and the second is income from wells on state-owned land.

Income from wells on state-owned land exceeded $317 million for fiscal year 2012, said state Land Commissioner Lance Gaebe. Roughly two-thirds of that was generated from royalty payments on actual production and the other roughly one-third was from leases.

That’s higher than any year in history, with the exception of 2010, when leasing income alone was $294 million.

Because the state’s fiscal year ends in July, data for the current year is already half collected.

Gaebe said royalties are already nearly 60 percent higher than they were a year ago at this time as more leased wells go into production. Royalty income for the fiscal year to date is $122 million and bonus revenue so far is $30 million, he said.

Income from oil production activity on state-owned land goes into permanent trusts for education.

Taxes on oil production have become a major piece of the state’s revenue stream.

The state Tax Department forecasts that oil tax revenue for the 2013-15 biennium will exceed $5.1 billion, compared to an estimated $3.8 billion for the current biennium, which ends in July.

The state’s relatively new Legacy Fund for saving oil tax revenue will collect $1.1 billion this biennium and nearly $1.5 billion next biennium.

The 2013-15 forecast is based on average oil prices of $75 to $80 a barrel and daily production of between 830,000 and 850,000 barrels a day.

Reach reporter Lauren Donovan at 701-220-5511 or lauren@westriv.com.

Copyright 2015 Bismarck Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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