Oil boom: Lawmakers to make plans for the patch
Much of the clamor you're likely to hear coming out of Bismarck the next few months will be reverberation -- echoes of the continuing oil boom in western North Dakota as the 2011 Legislature tries to deal with ramifications.
Expect a spending gusher, or at least a gusher of spending proposals, aimed at ramping up the region's infrastructure to handle unprecedented energy development, which already has vaulted North Dakota into fourth place among the nation's oil-producing states.
"The Oil Patch will be one of the major issues, but I think overall spending levels and the sustainability of our budget will be uppermost in legislators' minds," said Sen. Ray Holmberg, R-Grand Forks, chairman of the Appropriations Committee.
"As the governor pointed out in his budget message, a number of the major infrastructure items are one-time-spending proposals," Holmberg said. "One-time spending on infrastructure will be much more favorably received by the Legislature than the creation of new ongoing programs."
When they start meeting on Jan. 4, lawmakers will be asked to come up with money to improve thousands of miles of roads, build thousands of housing units and devise systems to carry millions of gallons of water.
Officials predict new jobs stemming directly from oil and gas production could boost population in the eight core oil and gas counties by 20,000, even 25,000, by 2030. That doesn't count spinoff jobs.
"Those 20,000 new people need plumbers and electricians, people to cook their meals and serve them in restaurants," said Shane Goettle, North Dakota's commerce secretary, whose department has commissioned studies on transportation, housing and workforce needs.
Gov. Jack Dalrymple's proposed 2011-13 budget includes $958 million to invest in infrastructure, enough to make what he calls a major impact. "It probably has more meat than any budget we've ever seen," he said.
Beyond spending, lawmakers also will grapple with questions about oversight and regulation of the sprawling industry and its potential impact on land, water, air, wildlife -- and on farmers and ranchers who don't hold mineral rights yet must allow wells and other "encumbrances" on their property.
"It becomes an industrial site, and you have to struggle to get them to pay a decent price for that," said Roger Brenna, who farms and ranches west of New Town. "The roads, the dust -- it all affects your crops and your grazing and everything else. They need more inspectors to keep track of all this."
Housing looms as a critical need for the Oil Patch.
"We've got to get people out of tents and campers in the winter time," said Mike Anderson, executive director of the state Housing Finance Authority.
The need for new housing takes on added urgency in light of estimates that 10,000 to 11,000 units will be needed for permanent workers in the industry over the next 20 years.
"The numbers are stark," said Anderson, and they predict job growth and housing needs only for the eight most active of North Dakota's 17 oil- and gas-producing counties.
"We targeted the epicenter," he said. "We believe this will be a good proxy for the entire oil- and gas-impacted area."
The greatest housing challenge involves building more affordable accommodations for people working in support services, whose wages lag well below oilfield workers. "We're scratching our heads in terms of where we're going to get the funding," Anderson said, noting that federal support for housing programs has been stagnant.
A proposed $100 million oil and gas impact fund would help local governments with housing and water and sewer projects.
The state housing finance authority will focus on providing housing for permanent workers. Companies typically provide temporary housing, including so-called "man camps," such as a 158-bed portable housing complex -- once home to winter Olympics athletes -- to be moved to Williston, where city officials say 1,000 housing units are needed.
The infrastructure crunch is causing whiplash for state and local officials used to stagnant population growth -- who remember the early 1980's boom that came crashing down, leaving Williston, Dickinson and other cities struggling to pay for sewer and water expansions serving empty subdivisions.
As the year winds to a close, North Dakota's oil production approaches a record 350,000 barrels a day, or about 6 percent above the rate in August, when Forum Communications published an eight-day series, "Running with Oil," about the current boom. Production is almost certain to continue climbing as the number of wells jumps from the current 5,300, a record, to 20,000 expected over the next couple of decades.
This boom, industry representatives and state officials agree, appears sustainable.
"In the last two years," Dalrymple said, "I think there has been a sea change in the way folks are looking at the western situation."
Dalrymple's budget proposal includes $229 million for state highways and $142 million for county and township roads in the Oil Patch. Another $240 million in state and federal highway funds is forecast for the 2011-13 budget to help rebuild roads in oil country.
If approved, that level of funding would make a big down payment on what consultants say is $900 million needed to improve roads and bridges to handle all the trucks rumbling through the Oil Patch.
"I can't think of anything comparable" in terms of road building in North Dakota, said Alan Dybing, an economist at the Upper Great Plains Transportation Institute at North Dakota State University, and author of a study guiding the road revamping.
It takes thousands of miles of roads -- 958 miles of paved and 11,834 miles of unpaved roads -- to carry oil from wells to pipelines or tank complexes. And those trucks are heavy, punishing roads built decades ago for lighter traffic. Loaded oil-service trucks weigh 40 or 50 tons, and trucks carrying drilling rigs weigh 80 tons or more.
One of the bigger road projects planned for the Oil Patch involves widening U.S. Highway 85 between Watford City and Williston, adding passing lanes to make traffic smoother and safer. The projects carry a $57.3 million price tag, including $10.9 million in state funds, according to the state Department of Transportation.
"This is going to be a big, big help for these folks out in the western part of the state and the rest of the state, too," said Dave Leftwich, interim deputy director of the department.
It takes water -- lots of water -- to recover oil from shale deep in the Bakken Formation, and the governor's budget proposes $25 million to help pay for a water system upgrade under consideration by a consortium of counties in the state's northwestern corner.
The project centers on expanding the water treatment plant in Williston and building a regional network of pipelines to deliver water to sites in Williams and McKenzie counties.
One big advantage of the project, estimated to cost between $127.5 million and $150 million: Williston already has a permit to draw water from the Missouri River.
"We have a lot of work to do before this is all formalized," including completion of a business plan, said Gene Veeder, McKenzie County's economic development director.
The heart of the project would be $47.9 million to expand and improve Williston's water treatment plant. Another large component that could be included would be a $20 million water pipeline to Watford City, Tioga and Stanley.
The project's local partners are asking for $30 million in state funds, and would have to borrow the rest. A crucial element in making the project viable would be to secure commitments from oil companies to buy water, Veeder said.
State government agencies also are playing catch-up.
The Industrial Commission's Department of Mineral Resources, which regulates the oil and gas industry, proposes adding at least a dozen positions, mostly field inspection staff, to keep up with drilling. Similarly, the state Health Department, responsible for environmental protection, is shuffling staff to add three positions to oversee oilfield activity.
Goettle's Department of Commerce proposes a new division to promote oil, gas and other energy industries, including coal and biofuels.
"We're overwhelmed with work," he said, a sentiment echoed by colleagues in health and mineral resources. "We already are involved with energy policy, infrastructure and promotion. We're just not keeping up with it all."
Landowners may ask lawmakers to require disclosure of detailed information on fracturing liquids used in drilling, but that is "more a national priority than a state priority right now," said Ashley Lauth, an organizer for the Dakota Resource Council.
"We would love to see disclosure legislation" come out of the 2011 session, she said. "But there are other issues -- surface owner rights, safeguarding of aquifers, infrastructure needs -- that are much more on the front burner for our members."
Hydraulic fracturing, or "fracking," is the process of creating fractures in shale rock formations through the high-pressure injection of water, sand and chemicals deep underground, allowing more oil and gas to flow out of the formation.
Engineers have used fracking to increase well production for more than 60 years, but it has become especially effective recently in combination with horizontal drilling and other technological developments. It has made drilling more profitable in the Bakken.
The Environmental Protection Agency concluded in a 2004 study that hydraulic fracturing poses no threat to groundwater, but under pressure from environmental groups the agency has embarked on a new, larger study. As part of that research, the EPA has asked major gas-drilling companies to disclose the chemicals they use.
Ron Ness, president of the North Dakota Petroleum Council, an association representing nearly 250 companies engaged in the oil and gas industry, noted recently that most of the concern about fracking has been focused on close-to-the-surface production of natural gas in the eastern United States. "In North Dakota, hydraulic fracturing goes on at a depth of two miles beneath the surface, and (critics) have yet to find any clear evidence of an issue concerning impact on groundwater," he said.
However, because oil development here "would be subject to any (restrictive) outcome of the discussion ... we certainly are going to engage it. The bottom line is there is no Bakken without hydraulic fracturing."
The state Industrial Commission's Oil and Gas Division also defends hydraulic fracturing as "a time-tested, safe process that helps us access more of our own reserves."
But in a report released earlier this month, the Dakota Resource Council said a 2006 saltwater spill and four well failures since involving "fracking" raise concerns "about the sufficiency of state regulations and enforcement."
The report, distributed to key legislators and agencies, included a renewed call for industry release of detailed information concerning chemical components of fracking fluids, without which "there is virtually no ability to enforce safe drinking water regulations."
Responding to the report, North Dakota Oil and Gas Division Director Lynn Helms said his office already imposes "strict requirements" on hydraulic fracturing but is reviewing what other states are doing and may consider amendments to some administrative rules. Because the division already has that authority, it would not need legislative approval for rules changes.
Chuck Haga writes for the Grand Forks Herald and Patrick Springer writes for The Forum, which are owned by Forum Communications Co.