LegiStorm

Summary:

The Bakken Formation is a large unconventional petroleum and natural gas resource underlying parts of North Dakota, Montana, and the Canadian provinces of Saskatchewan and Manitoba. Bakken oil production is now viable because of advanced horizontal drilling and hydraulic fracturing methods. Growth in production is rapidly changing. High oil prices and low natural gas prices have prompted shale gas producers to turn to shale oil or tight oil. The Bakken Formation has emerged as a major tight oil resource "play." The U.S. Geological Survey (USGS) estimated that the Bakken may contain 3.65 billion barrels (bbls) of undiscovered oil (or less than 3% of total U.S. estimates), 1.85 trillion cubic feet (tcf) associated/dissolved undiscovered natural gas (less than 1% of total U.S. estimates), and 148 million bbls of undiscovered natural gas liquids (NGLs) recoverable under current technology. USGS announced in July 2011 that it will reassess the Bakken resources. Full development of this resource faces a number of hurdles. A major constraint to more vigorous development of the Bakken is the lack of pipeline capacity to move more crude oil to refineries. A proposed pipeline, the Keystone XL pipeline, would extend from Canada to Nebraska, where it would connect to another TransCanada pipeline for transport to Gulf Coast refineries, and could transport oil from the Bakken. The original proposed Keystone XL pipeline did not receive a necessary Presidential Permit; however, TransCanada, the company that proposed the pipeline resubmitted its application to the State Department on May 4, 2012, with a different configuration. Flaring of natural gas in association with Bakken oil production has also attracted a lot of interest. If producers are forced to decrease flaring it would also likely result in oil production being curtailed. Another issue potentially affecting development of the Bakken is the need to make use of hydraulic fracturing. This technology is the subject of increasing regulatory scrutiny, along with public concern over its possible impact on water quality. The Environmental Protection Agency (EPA) is conducting a congressionally mandated study on the impact the technique may have on drinking water, and the Department of Energy (DOE) has undertaken a broader assessment of the potential environmental effects of this practice. Legislation pending in the House and the Senate would authorize EPA to regulate hydraulic fracturing used in oil and natural gas production. Currently, states broadly regulate oil and gas exploration and production on non-federal lands, and proposals to give EPA new authority in this area have been highly controversial. A longer-term constraint may be water availability and access, as the industry's cumulative water demand for fracturing and other well development activities expands. Groundwater tables in the Bakken region have been falling as water extractions for municipal, agricultural, industrial and other purposes have exceeded aquifer recharge. The Army Corps of Engineers announced in May 2012 that it is moving forward with processing requests from oil development interests for access to a key surface water source, Lake Sakakawea on the Missouri River in North Dakota. Initially the Corps will not assess a fee for the withdrawn water, while it undertakes a pricing policy rulemaking. Uncertainty over charges related to water withdrawn from the lake has ignited concerns among those withdrawing water for other purposes (e.g., municipal and agricultural uses) and the state's authority over surface waters within its borders.