The Bakken Shale| August 2020
Field Overview
Named after Henry Bakken, the farmer who owned the land where oil was originally discovered, the Bakken Shale is located in North Dakota, Montana, Manitoba, and Saskatchewan. The USGS estimated in 2013 that this basin has an expected ultimate recovery of 7.4 billion barrels. North Dakota Department of Natural Resources put the break even point at US$46/bbl (2020). The top formations within the region are the Three Forks and the Spanish formations.
State Drilling Statistics (End of August)
Total Rigs in North Dakota- 10
Total Rigs in United States- 254
Total U.S. Rigs down 73% YTD
Financial & Economic Updates
The First Figure
Just how much can North Dakota’s state owned minerals be worth? Well, the state Department of Trust Lands commissioned a local company, MineralTracker, to determine just how much the mineral royalties were worth for a $350,000 contract. The numbers are finally in and read at $1.45 billion. Now this number may seem low, but it was framed by variables such as projected future drilling, current oil prices, and declining productivity. Extrapolations from the company showed that the last well will be drilled on state-owned lands 30 years from now. If prices go up, that date could come sooner.
State Highlights
Minor Improvements for State Production
If you were to look at a graph of oil and gas production for the state of North Dakota, you would see a long line of steadily increasing production until the start of 2020. During August, the data for June was collected and organized showing that there is now a little hockey stick at the end of the graph, or more simply, production increased for the month. This makes sense as oil prices climbed into the $40 in June allowing production to be more economic for many producers. It takes a little bit of time to see these trends thanks to the delay of data collection and organization. Even so, director of the North Dakota Department of Mineral Resources, Lynn Helms, says prices for the region need to be in the $45 range in order to prevent another falloff like the one witnessed in the first half of the year. In addition to the looming threat of falling prices, there is the upcoming election. It is looking more and more likely that Biden will be elected. If this happens, drilling permits would be cut by 25% causing hundreds of thousands of barrels a day of production to be cut.
The Army Demands Thought for Precedence
The Dakota Access Pipeline served as a rather controversial topic for the month of August as district courts and environmental activists challenged the industry to a game of regulatory tug of war. Eventually the pipeline was allowed to operate while the Army Corps of Engineers kept on with its review. Even so, the Army Corp expressed its distaste with the entire process saying, “If not corrected, the district court’s decision will create a new, heightened standard of judicial review that will be impossible for agencies to meet as they consider vital infrastructure projects that excite opposition from some sector of society.” Unsurprisingly, the pipeline operator Energy Transfer LP made the a similar argument saying these policies and interventions would discourage infrastructure investment, waste government resources on “needless” reviews, and create economic and environmental harms that are, “far beyond the astronomically unlikely spill risk that Plaintiffs claim they seek to prevent.” They also speculated that billions of dollars would be lost between themselves, producers, and the state if this midstream project was to be shut down.
Refining
North Dakota Production
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