Analyst in Energy Policy
Specialist in Energy and Defense Policy
Nicole T. Carter
Specialist in Natural Resources Policy
Specialist in Environmental Policy
The Bakken Formation is a large unconventional petroleum and natural gas resource underlying parts of North Dakota, Montana, and the Canadian provinces of Saskatchewan and Manitoba. The Bakken began attracting interest in the mid-1970s, but well drilling and completion techniques at the time made it uneconomic to develop. The key to its development lies now in technologically advanced horizontal drilling and hydraulic fracturing methods. This combination of drilling and completion technology substantially boosts a well’s production, improving its economic viability.
High oil prices and low natural gas prices have prompted shale gas producers to turn to shale oil. The Bakken Formation has emerged as a major shale oil resource “play.” The U.S. Geological Survey (USGS) estimated that the Bakken may contain 3.65 billion barrels (bbls) of undiscovered oil (or less than 3% of total U.S. estimates), 1.85 trillion cubic feet (tcf) associated/dissolved undiscovered natural gas (less than 1% of total U.S. estimates), and 148 million bbls of undiscovered natural gas liquids (NGLs) recoverable under current technology. USGS announced in July 2011 that it will reassess the Bakken resources.
The pace of oil production now places the north central region of the United States, particularly North Dakota, among the most significant new domestic energy resources. North Dakota’s current production rate of roughly 425,000 barrels per day (bpd) places it fourth nationally, or about 7.5% of total U.S. production. The prospect of increasing production, which is up over 30% year-on-year for the latest production data, to between 600,000 bpd to 700,000 bpd in the next several years would place it second to only Texas at current levels.
Full development of this resource faces a number of hurdles. A major constraint to more vigorous development of the Bakken is the lack of pipeline capacity to move more product to refineries. A proposed pipeline, the Keystone XL pipeline, would extend from Canada to the Gulf of Mexico, and could transport oil from the Bakken. The pipeline is awaiting a Presidential Permit from the Department of State. As part of the approval process, the State Department completed an Environmental Impact Statement, finding that the proposed pipeline would have “no significant impact” and recommending that it proceed. A final determination as to whether the pipeline is in the national interest is expected by the end of 2011.
A longer-term constraint concerns availability of and access to water, with much water needed to hydraulically fracture the oil wells. Extracting groundwater for fracking creates competition with agriculture and others for a limited resource. Access to a key water source, North Dakota’s Lake Sakakawea, is controlled by the Army Corps of Engineers, which is evaluating requests for water from the lake. The Corps has proposed to make surplus water in the reservoir available for a fee to the energy industry. This has renewed debate over federal control of Lake Sakakawea.
Another issue potentially affecting development of the Bakken is the need to make use of hydraulic fracturing. This technology is the subject of increasing regulatory scrutiny, along with public concern over its possible impact on water quality. The Environmental Protection Agency (EPA) is conducting a congressionally mandated study on the impact the technique may have on drinking water, and the Department of Energy (DOE) has undertaken a broader assessment of the potential environmental effects of this practice. Legislation pending in the House and the Senate would authorize EPA to regulate hydraulic fracturing used in oil and natural gas production. Currently, states broadly regulate oil and gas exploration and production on non-federal lands, and proposals to give EPA new authority in this area have been highly controversial.
Date of Report: September 28, 2011
Number of Pages: 33
Order Number: R42032
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