America’s only economic boom

By Cate Long
November 15, 2011

In an April 2008 study, the U.S. Geological Survey increased its estimates of the size of recoverable oil reserves in the Bakken Formation — an area stretching across Montana and North Dakota — by a factor of 25. The press release for the study said:

North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation. A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil.

The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest “continuous” oil accumulation ever assessed by the USGS. A “continuous” oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest “continuous” oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.

This find has given a substantial boost to America’s domestic oil resources and has created a big stream of revenues for oil companies drilling in the two states. It has also created an economic boom for communities near the oil fields. Looking at data from the Bureau of Economic Analysis (chart below), it seems as though oil companies were already ramping up drilling activity ahead of the USGS 2008 study. Oil companies generally don’t wait for governments to do extensive geologic investigation — after all, their business is to find oil.

Oil rig count and revenues are extremely sensitive to the price of oil, and 2008 saw a massive run-up in prices ahead of the financial crisis. After the economy collapsed you can see revenues plunging in 2009. We will see how oil and gas revenues change as more drilling comes online and the economy picks up.

Montana and North Dakota are currently producing about 380,000 barrels per day, or approximately 7 percent of U.S. domestic production, according to the Energy Information Administration. They join Alaska, California, Texas, Louisiana and Oklahoma as states with economies propelled by energy revenues. Energy production is fueling America’s only economic boom and I don’t expect it to slow down.

Charts source: Bureau of Economic Analysis and Energy Information Administration

5 comments

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It looks as though there is going to be yet more environmental destruction in one of the most beautiful parts of the country.

Posted by PAndrews | Report as abusive

Its totally ruined the area.

Posted by zebra69 | Report as abusive

If you haven’t been there, its like going back in time, to some 1800′s Boom. Like…. Primitive Destruction. Its unbelievable, and not all the people are happy. Its totally ruined the area for folks who liked a quiet way of life. But hey, they say thats “Progress”.

Posted by zebra69 | Report as abusive

Na, we’d rather die for oil, let others pollute worse than us, transfer our wealth to terrorist, we don’t need the jobs or debt reduction and we’ll bank on $50k electric cars with a 50 mile range that catch fire and need rare earth metals only China has! We’re too bright to drill our own! Nice try though! P Andrews-you are riding a bike to work aren’t you? No trips either or flying to see family, to go hiking, canoeing!

Posted by DrJJJJ | Report as abusive

I totally agree with DrJJJJ. Like any other industry, the oil & gas industry, if responsibly managed and properly regulated, can generate a whole lot of value with a minimum impact ecological impact. Just look at countries such as Norway that do it in a highly responsible and regulated way.

Posted by lfbensimon | Report as abusive