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Newly unlocked oil reserves ‘a game-changer’ for U.S.

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In Triblive.com  By Mike Wereschagin

Published: Saturday, September 15, 2012, 11:54 p.m.
Updated: Sunday, September 16, 2012

WILLISTON, N.D. — In a booming economy, even oil and water can mix.

Chris Duell left his Detroit home at the age of 30 to start a water filtration business in this isolated town just north of the Missouri River.

It was 2008, and more than a mile below the quiet region near the Montana border, dozens of drill bits turned horizontally to burrow into the Bakken shale formation.

The horizontal drilling and hydraulic fracturing technology that ignited the Marcellus shale natural gas boom cracked open one of the largest oil fields in the United States. By this spring, barely four years after Williston’s boom began in earnest, North Dakota produced more oil than Alaska.

For Duell, a $100,000 investment grew into three businesses worth an estimated $2 million.

“It’s an entrepreneur’s dream,” said Duell, 33.

Surging domestic oil production occurs at an unsettled time for the country’s energy landscape. The nuclear industry is restarting a revival stalled by the recession, and renewable energy has undergone swift but highly subsidized growth. Taken together, these developments are changing where, how and at what cost the world’s largest economy gets its power.

“This could be a game-changer,” Norm Augustine, former CEO of Lockheed Corp., said of the increase in recoverable domestic oil and gas. It could have an economic effect on par with “the invention of the semi-conductor. ... It’s a big deal.”

Proven domestic crude oil reserves rose to their highest level since 1992. A deposit of oil shale — which can be turned into crude through extensive, expensive processing — lies under Colorado, Wyoming and Utah.

It could contain as much recoverable oil as the rest of the world’s proven reserves combined, according to a federal report.

“We no longer have a gun to our head,” Augustine said. Newly unlocked reserves provide “time to invest in research to come up with new, clean, sustainable, affordable forms of energy.”

‘Green’ growth

Federal subsidies for renewable energy spiked to $14.7 billion in 2010, in part because of $6.2 billion from the stimulus bill, according to the Energy Information Agency. That compares with subsidies of $2.8 billion for natural gas and petroleum, $2.5 billion for nuclear, and $1.4 billion for coal that year. In 2007, renewable energy subsidies totaled just more than $5 billion.

The money helped double the amount of electricity that wind and solar generate, and that production cut the cost of wind turbines and solar arrays in half over the past two years, said Dave Danielson, the Department of Energy’s assistant secretary for energy efficiency and renewable energy.

Danielson estimated solar and wind energy will compete with fossil and nuclear power without federal subsidies in five or 10 years.

Republican presidential nominee Mitt Romney criticized those subsidies as taxpayer giveaways to private companies. Romney’s energy policy says solar and wind “remain sharply uncompetitive on their own” and would end the subsidies.

Industry analysts predict foreign governments will continue spending on renewable energy technology.

“The United States can either step up, invest in this now, take advantage of our competitive advantage in innovation and entrepreneurship, and come out in the next five to 10 years as the leader ... or we can stand on the sidelines and cede global leadership to other countries like China and India and Germany,” Danielson said.

Japan plans to spend $487 billion on renewable energy over the next 20 years as it phases out nuclear power by 2040, according to an energy policy announced Friday by Prime Minister Yoshihiko Noda. The energy policy is Japan’s first since the Fukushima Daiichi nuclear plant meltdown in 2011, which prompted Germany to abandon nuclear power as well. China and India are investing in renewable power to meet the demand created as swaths of the two most-populous countries move into the middle class.

Nuclear option

“The Germans decided after Fukushima, ‘we’re done,’” said Joe Zwetolitz, president of Westinghouse Americas at Westinghouse Electric Co. in Cranberry. “They’re the outliers. The speed with which they made that decision says to me that that was already in their minds before Fukushima.”

The nuclear accident, the worst since Chernobyl in 1986, occurred after an earthquake-spawned tsunami knocked out the plant’s backup generators and cut circulation of coolant to reactors. The disaster offered a selling point for Westinghouse’s AP1000 reactor, which has a passive cooling system that uses gravity to run coolant, Zwetolitz said.

Despite Germany’s decision, “Fukushima for the United States did not delay the renaissance” in nuclear energy, Zwetolitz said. Westinghouse is constructing the first four U.S. reactors in 30 years — two at a South Carolina power plant, and two at a Georgia plant. China has 20 reactors under construction and 40 planned, Zwetolitz said.

History repeats

The last time Americans endured a downturn as bad as this — the Great Depression of the 1930s — the discovery of an enormous oil field, nicknamed the Black Giant, brought a rush of people and tumultuous prosperity to a rural corner of East Texas.

In the dusty fields and low, rough-hewn hills of Western North Dakota, history is repeating.

Herb Nolan drove to Williston from Spokane, Wash., in early August, hoping to find work on a drilling rig. Pulling into town, he stopped at a gas station to fill up, and someone approached to ask if he needed a job.

“I was here, like, five minutes,” said Nolan, 51. The man offered $750 a week to help erect grain bins on farms surrounding Williston. “I first told him no, but then I realized I was short on cash, so I said yes.”

Eleven counties in the country had unemployment rates lower than 2.1 percent in July; 10 of them are in western North Dakota.

The census estimated Williston’s population at 16,000 in 2011, up from less than 15,000 a year before. Add those who live in Williston but don’t call it home — oil field roughnecks, temporary laborers and new arrivals looking for work — and there could be as many as 30,000 people in an area built for half that number.

Lines of semi trailers rumble to and from the town along congested Highway 2, against the backdrop of prairie. Miles of light-blue pipe lie in segments alongside roadways. Bare electrical towers crisscross fields, awaiting power cables.

“Right now, if you come into town, you can find a job very easily, but finding housing is very hard. Because supply and demand are nowhere near each other, if you can find an apartment — and I’m talking a studio or one-bedroom apartment — it could cost you $1,500 to $2,000,” said Marci Seamples, director of the Williston Area Chamber of Commerce. She moved to the area in May from Naples, Fla.

“It’s busting at the seams.”

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