Montana, North Dakota: The Saudi Arabia of America?

The much awaited US Geological Survey (USGS) report has been released. The agency increased by 25 times its estimates of how much recoverable oil exists beneath the Northern Plains. The report stated that the Bakken Formation in Montana and North Dakota contains 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil, instead of the 151 million barrels the agency estimated in 1995. The crude oil is locked away in rocks that are buried miles underground, but recent technological advances have made it easier to get at. “Technically recoverable” oil resources are estimates of products that can be recovered using the technology and procedures that are currently available.

The estimate is larger than any other estimate for the lower 48 states and ranks as the largest oil discovery in the past 50 years.  A new black gold rush has already begun. So far Marathon Oil has acquired about 200,000 acres in the area and expects to spend $1.5 billion drilling about 300 oil wells within five years. According to Next Energy News, Marathon sees this as “one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938.

The Kiplinger Report states we are still a few years away from a large increase in drilling:

Figure on at least five years before the oil starts flowing in large volumes. A lot of work will need to be done first. In addition to installing drilling gear, firms must build supporting infrastructure, including roads, pipelines as well as new water, sewage and sanitation systems to meet the needs of workers and other area residents.

Still, the activity already underway is transforming the windy gold and slate landscape of MonDak, the area along the Montana and Dakota border. Zach Dundas sketched the story in an article for Good Magazine:

Sidney and its hinterlands are a hive of activity. Oil-tanker trucks patrol the narrow highways and gravel farm roads day and night. The cafs, casinos, and bars are full of guys wearing coveralls emblazoned with oil-company logos, most prominently those of “Team” Halliburton and that notorious company’s rival Schlumberger, the outfit BusinessWeek calls “the stealth oil giant.” Ubiquitous “help wanted” signs testify to the most open job market anyone around here can remember--if you can work, you’re working in oil. A genuine boom is in full swing.

I will be interested to see what people make of these sudden changes. Montana, of course, has long experience with boom and bust economics, which is a way of saying it’s always had a marginal economy. Modern economies are all boom and bust, but fortunate places mitigate the busts in one sector with new booms in other sectors.

In any case, boom and bust is better than bust and bust.