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At the Core of Domestic Energy Discovery

October 1, 2012
p20 At the Core of Domestic Energy Discovery
Vast shale plays are now accessible through horizontal drilling and hydraulic fracturing. The U.S. Energy Information Administration says there are 481 trillion cubic feet of natural gas and 24 billion barrels of oil that have yet to be recovered.  
 
 

Imagine how the homesteaders felt when roads and rail started crisscrossing virgin prairie. Electricity brought another wave of adjustments. Today, it’s new drilling technology that’s taking the oil and natural gas industries to untapped frontiers. Agriculture and oil have long coexisted in Texas, but in North Dakota and portions of the Northeast, the Rocky Mountains and the Southern Plains, rigs are on the rise. While farmers have always made their living off the land, they must now decide if they’re willing to share and, if so, accept the good with the bad. The stories and faces of those who live and farm in the shadow of the drilling rigs make tangible the country’s quest to reach energy independence.

 

Deep below the vast, unassuming prairies of North Dakota swells promise: less dependence on foreign oil, job opportunities galore and a welcome financial lift to rural communities.

The crude reality of the current gold rush–style boom means an onslaught of new people pouring into the only state in the country that had more residents in 1930 than it does today. More people necessitates more houses and bigger schools. Hospitals are full and grocery store shelves are empty. The constant motion is taxing country roads. The very land that’s giving birth to the energy boom is also being put at risk.

BoomAs a geologist and farmer, Kathleen Neset has a front-row seat to the toil on the North Dakota oil fields and the commotion that ripples beyond. "Exploration of oil has its good and bad," she admits, "but the good outweighs the problems. There is a need for these fuels. It is a resource that ensures our national security—homegrown energy being developed by Americans."

The oil and natural gas boom stems from a new drilling technique that allows companies to tap unconventional crude resources from shale plays as far as two miles under U.S. soil. Hydraulic fracturing (fracking) works by injecting a pressurized mixture of water, sand and chemicals into a horizontally drilled well. The mixture cracks the shale and fills the cracks with sandy grit, allowing oil and natural gas to flow up the well.

In the first quarter of 2012, crude oil production in the U.S. surpassed 6 million barrels per day for the first time in 14 years, reports the U.S. Energy Information Administration. The strong growth is primarily due to higher output in the 200,000-square-mile Bakken Formation in North Dakota and the Eagle Ford Shale in Texas. Other hot spots for oil production include the Niobrara Shale in Colorado, Nebraska and Wyoming, and the Utica Shale in Ohio, says Steven Grape of EIA.

Since 2008, fracking, along with traditional drilling, has unlocked 3,400 trillion cubic feet of natural gas in North America, according to a recent study by IHS, a business and economic research firm in Colorado. Putting that in perspective, that output is enough to meet the current needs of U.S. consumers for 100 years.

Natural gas drilling is hot in the Barnett Shale in central Texas, the Haynesville-Bossier Shale on the Texas-Louisiana line, the Marcellus Shale that covers three states in the Northeast and the Woodford Shale in Oklahoma, Grape says.

For farmers, the primary lure of leasing their land for oil or natural gas exploration is financial gain. On the outskirts of the Eagle Ford Shale in Leming, Texas, Bill Slomchinski has been farming amid the hustle and bustle of the oil boom. In spite of the increase in truck traffic that makes it difficult to move equipment among his peanut, cotton and grain fields, he’s ready to sign a mineral lease for his property.

"You can’t stop progress, so you just have to adjust," he says. "I’d welcome the cash flow to make improvements around the farm for equipment, fencing and facilities."

Twenty miles from Slomchinski, rancher Randy Gates signed a mineral lease a few years ago. With drought conditions weighing heavy, the extra cash flow has been especially helpful to purchase hay and feed for his cattle.

p22 At the Core of Domestic Energy Discovery 3
Oil activity in the Eagle Ford Shale in Texas is red hot. Brett and Bill Slomchinski are eager to sign a lease to improve the cash flow of their farm.

Dollar signs. Lease contracts can range from $55 per acre for a three-year lease to $10,000 per acre for a 10-year lease. "Just how much a farmer reaps from an oil or natural gas lease depends on timing and location," says attorney Ronald Coyer of S.R. Law LLC, in Slippery Rock, Pa.

"There’s a big range [in price] because this boom-type industry that’s been created with shale-level gas is almost like the real estate market, where they say, ‘location, location, location,’" Coyer says. "I always say, ‘location and timing’ because everything has a window and a location in this gas process."

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FEATURED IN: Farm Journal - October 2012
RELATED TOPICS: Energy, Energy Boom

 
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