Anatomy of the shale oil rush in ND
North Dakota’s Bakken shale oil play is roughly the size of West Virginia. Perpetual projections of its total recoverable reserves have proven to be grossly underestimated, as new drilling uncovers more and more crude.
With current estimates topped at 7.4 billion barrels, North Dakota sits behind Texas as the #2 producing oil-giant in the States. But unlike other formidably energy-rich states, little discussion is had about the regulatory atmosphere of the fracking industry in North Dakota. Where swathes of news articles cover regulatory debates in Pennsylvania, Texas, New York, and California, a mere sentence or two concerns North Dakota; indeed, it takes some digging to find anything. While there is indication that the Department of Mineral Resources has updated its Administrative Code for oil & gas to include specifications for fracking, issues related to natural gas emissions, burn-offs, and flares on frack sites receive little oversight or mention. Methane emissions of scale set North Dakota apart in terms of fracking hazards. On the other hand, Earthworks reported that ND has the best inspector-to-well ratio in the U.S, boasting 1 inspector for every 368 wells. So what does the state’s Oil & Gas Code include and what concerns are most prevalent among North Dakotans living amidst the boom?
The hush about regulation is likely due to the fact that North Dakota now accounts for 10% of U.S energy output. Its oil frenzy was preceded by booms in the 1950s and the 1980s. But today’s unconventional shale boom receives much enthusiasm for the 40,000 jobs it has brought to western North Dakota between 2008-2012, reducing the unemployment rate to the lowest in the nation – somewhere between 1 and 3.5%. Much of the job creation lies in transport – trucking fluids and water to and from sites.
Oil geologists have known about the Bakken shale since 1953. Immersion didn’t begin until 2004, when Continental Resources began operating North Dakota’s first commercially viable fracking well. Things sped up exponentially in 2006. Across four counties along the Missouri River (Williams, Mountrail, McKenzie, and Dunn), there are now over 15o companies fracking 8,500 wells. The expectation is that the number of producing wells will increase to 6 times the current number.
Since early 2006, production from the Bakken formation has increased nearly 150-fold, to more than 660,000 barrels a day, moving North Dakota into second place among domestic suppliers, behind Texas and ahead of Alaska. (National Geographic)
Perks for a previously cash-strapped state government are self-evident: North Dakota received $3.4 billion in oil taxes between 2011 and 2013 and $2.24 billion in 2011 alone. To prove that revenue would trickle back to residents and landowners, Governor Dalrymple signed a bill in May 2013 to distribute over $1 billion back to affected counties – paying for social infrastructure, road improvements, affordable housing, health care facilities, and newly trained law enforcement officers. The boom could incite anywhere from 20 to 100 years of employment, but some are worried that if the wells dry up sooner than expected, benefits for North Dakotans may not be so long-lasting.
Fracking concerns & regulations
The oil and gas industry in North Dakota is regulated by the Department of Mineral Resources’ Oil & Gas Commission. In a resolution called HCR 2008, the state legislature urged the federal government to give full regulatory power over the industry to states and has repeatedly expressed displeasure regarding forthcoming nationwide fracking regulations proposed by the EPA. Compelled by issues wrought from worker population explosions in the towns near fracking operations, the Commission has updated its Administrative Code and will devote oil taxes & revenues to address grievances. As of 2012, the DMR also requires that companies disclose fracking fluid chemicals via FracFocus – as well as the date of stimulation, vertical depth, and total water volume used in each treatment. This information must be disclosed within 60 days after well stimulation treatments.
Reports from affected counties state that “traffic has increased, along with air pollution, job-site accidents, highways accidents, sexual assaults, bar fights, prostitution, and drunken driving.” In early 2012, oil extraction and production taxes increased in part to address these issues. Homeowners and ranchers opposed to fracking because the accompanying and unwelcome woes in their counties are met by company claims to “eminent domain”, or the deeply contentious process by which ranchers’ property is reallocated in the name of a national or public cause. We’ve seen this in other states west of the Mississippi. Recall that North Dakota has a “split estate” property right system, meaning any number of possible, faraway mineral rights owners have privileged rights over the surface owner. Petroleum companies interested in accumulating mineral rights in the region need only to persuade 51% of mineral rights owners to agree before it can drill on a parcel of land. Other concerns and corresponding regulations are listed below.
1. Fluid overflow
Uniquely, the Bakken shale oil deposits are deeper than other shale plays, so drilling induces little risk for groundwater contamination. However, North Dakota has only recently (as of April 2012) encouraged companies to use injection wells for fracking fluid wastewater. A lot of it still sits in open, lined pits, which often overflow and leak during the rainy season. On one farm, a fluid overflow killed off 80 olive trees. Authorities stipulate that operators must clean up spills and “respond with appropriate resources”, but there is nothing in the code about disciplinary action or violation fees. Of 3,300 spills recorded in North Dakota’s shale oil rush, state agencies only issued 45 citations. Likewise, the code requires proper surface facilities to be constructed for the disposal of brine, saltwater, or brackish water to avoid pollution of freshwater supplies – but these don’t necessarily exclude pits.
The code requires that lined pits with fluids, oil, or water must be drained (or removed) after operations cease, and that all equipment and debris be removed from the site when drilling is finished. In the case of spills, some damage is irreparable. In 2011, 2 million gallons of brine spilled from a lined pit and “sterilized” 24 acres of land.
2. Worker safety and methane emissions
Portions of the Bakken formation contain hydrogen sulfide, a lethal gas that is hazardous for workers if an over-pressured well bursts and the oil ignites at the surface. North Dakota ranks last on a national survey that compares working conditions and safety across states. The EPA is still investigating a massive blowout of a fracking well near Killdeer; the incident occurred in 2011. Another hazard, both to workers and to families living nearby, are flares that result from the natural gas extracted along with the oil. 1/3 of the natural gas that wells up in the Bakken Shale is wasted, as operators find the oil more valuable or pipelines and processing plants too costly to capture the gas. But if the gas were captured instead of burned off, it would have generated $110 million in 2011. Instead, wasted natural gas increases emissions in the area and there are no air quality monitors or protections for families who often see gas flares erupt sometimes only 700 feet from their doorsteps. Wells and valves also leak methane constantly.
“Because the natural gas can’t be trucked out, or transported by rail like the oil can, and because the region lack sufficient infrastructure to collect, process, and move the gas – flaring – is really the only viable option at the time.” (TRC)
However, the EPA is set to release new nationwide regulations to require flare recovery and containment equipment for operators as well as emissions monitoring. The details of how companies will better contain gas leaks and emissions remain unclear.
3. Well integrity & Fracking-specific rules
Stringent requirements for oil & gas drilling wells apply to fracking, but there are no mandated or additional testing regulations for wastewater or well integrity specific to fracking treatments. However, operators must submit an application to drill, which requires well depth estimates, a casing program plan, casing string depth, and the amount of cement to be used. There are also well spacing rules: well sites can’t be located “hazardously near” bodies of water and cannot block natural drainages. Moreover, no well can be drilled less than 500 feet from a residential dwelling – or only 150 yards away – a relatively short distance but a distance nonetheless. Thus, the Code for oil & gas is commendable for its fairly strict casing, tubing, and cementing requirements – and mandating new or reconditioned pipe that is pressure-tested prior to fracking.
New rules for fracking insist upon the use of cement evaluation tools to verify adequate cementation of a well (avoiding gas and fluid leaks) and wall thickness tests of the casing shell. The depth of the fracking operation must be specified, and the casing string must be monitored throughout the treatment. The subsurface pressure must also be controlled during the entire duration of drilling and fracking operations. After operations conclude, operators must submit a comprehensive report detailing the well’s production within 30 days of its completion.
4. Surface damage requirements
As far back as the 1940s, oil, coal, and gas operators offered to purchase the mineral rights from North Dakotan families; operators in the new rush for oil can acquire leases for up to 3 years, and leases are easily renewable. “Common law” dictates that mineral rights prevail over surface rights, and the state does not yet require homeowners & operators to reach a surface use agreement. Drillers can begin operations at any time, without consent. However, compensation fees for surface land loss or damage for ranches runs at about $45 per acre per year, though farmers must still pay taxes on that land – even if it is unusable. There are also issues of dust pollution, which disrupts cattle ranching. Now, a written contract between mineral and surface owners must be negotiated for payment of surface damages caused during drilling, and courts often award triple damage payments if an operator begins drilling before a damage agreement was made. Complaints of violations can be submitted to the director of the Department of Mineral Resources, particularly if the site of a well, access road, and associated facilities aren’t properly reclaimed to prior conditions. Additionally, the surface owner must be notified of reclamation plans.
5. Water battles
The last issue to materialize with the fracking boom in North Dakota is competition between groups to sell water to fracking operators. Co-ops and small business/ranching confederatoins have competed to sell water at lower prices. This isn’t necessarily a bad thing, as prices for water will likely go down and hence the cost of trucking 650 or more truckloads of water for each operating oil well will decrease too. North Dakotan regulators are considering legislation to better even the market for competing groups and to monitor the water supply.
ND fracking regulations compared
Controls and oversight over the oil & gas industry in North Dakota seem sufficient in terms of well integrity, spacing, reporting fluid composition, and ensuring that revenue generated from taxes goes back to affected communities. But there are insufficient controls on methane emissions, and little effort to force compliance among operators to air quality standards and emissions reporting. Permitting requirements regarding emissions do not appear to have been updated since the 1990s. Some companies have plans for constructing pipelines and facilities for the extracted gas, but forthcoming EPA regulations for emissions may be the push needed to reduce flares and capture natural gas, a leading concern for North Dakotans living near fracking operations.