ENERGY: S.D. prepares for potential oil boomBlack Hills Bakken Conference spells out oil play — good and bad
By: Alan Van Ormer, Prairie Business Magazine
SPEARFISH, S.D. — Bierschbach Equipment & Supply is looking to double its sales in either its Fargo, N.D., store or its Rapid City, S.D., store. The company plans to do this by doing business in the Bakken oil play in western North Dakota while waiting for possible oil opportunities in South Dakota.
Bierschbach supplies erosion control material such as geo-textiles to improve road bases, and leases and services construction equipment.
“What excites me is that we can expand our four locations to either five or six,” says Mark Hasvold, vice president of Bierschbach in Rapid City. Along with its Fargo and Rapid City locations, Bierschbach also has facilities in Sioux City, Iowa, and Sioux Falls, S.D.
A two-day Black Hills Bakken Conference was held in May 2 and 3 to educate businesses and others interested in learning more about the oil play including its challenges and opportunities, focusing on discussions about the potential for oil flowing in South Dakota.
The state is focusing on three potential oil-bearing rock formations — Minnelusa, Three Forks Shale and Red River — and the South Dakota Legislature plans to study oil and gas development.
Derric Iles, South Dakota state geologist, for the Geological Survey Program and Department of Environment and Natural Resources, says that in 2011 northern Harding County produced oil in the Red River formation just south of the North Dakota border.
Dennis Lindahl, city councilman from Stanley, N.D., told the audience that the Bakken has created an intense situation fraught with housing shortages, traffic congestion and a rising crime rate.
“Hopefully, if oil comes south you will be able to plan better,” Lindahl says, adding that North Dakota is managing the growth the best it can.
Shane Goettle, former commissioner of the North Dakota Department of Commerce, says it is possible for South Dakota companies to become active in western North Dakota. “There is potential in South Dakota approaching what the Bakken has,” says Goettle, who is currently the public affairs director for Odney, a marketing and public relations firm in Bismarck, N.D.
According to Goldman Sachs, the United States will be the No. 1 oil producer in five years, and according to the Institute of Energy Research, the U.S. has a 200-year supply of oil and 120-year supply of natural gas, Goettle noted during his keynote address. In addition, Goettle says there are 1.44 trillion barrels of recoverable oil deposits in the country.
In 1995, the U.S. Geological Survey estimated that Bakken shale could produce 151 million barrels of oil, Goettle says. USGS officials have raised their expectations to 4.3 billion barrels and some analysts believe there is 20 billion barrels of oil. Another study is underway.
Iles discussed the three formations in South Dakota with possible oil production during a presentation on the second day of the conference, saying that the state is underdeveloped and unexplored for true oil and gas potential.
Oil has been found in Harding County in the Red River formation since 1954. Oil companies have tested other parts of the formation that cover most of the northern half of western South Dakota and at least 10 counties across the Missouri River in eastern South Dakota.
The Minnelusa formation covers two-thirds of the state and more than 900 test holes or wells have been drilled. There is oil production occurring in the southwest corner of the state in Custer and Fall River counties.
More than 400 wells or test wells have been drilled in the Three Forks Shale formation, which covers most of northwestern South Dakota. At this point, no oil production has been seen in this formation.
You don’t have to rely on the geological survey’s research to see if there are any signs of oil in South Dakota, said Iles in an interview with Prairie Business before his presentation on May 3.
Iles thinks there will be increased exploration, which will translate into increased development in South Dakota. There has been some exploratory activity in Harding, Perkins and Corson counties, as well as interest in counties further south in the state, he adds.
Along with the summer study on oil and gas development, the state is preparing for an oil boom using two approaches. First, the legislature and the Department of Environment and Natural Resources are making sure that South Dakota has a business-friendly climate, Iles says, adding this includes streamlining regulations to make them understandable, shortening the permitting time and setting taxation levels for extracting resources from the ground.
The state is also developing a user-friendly online component that provides all geological information in South Dakota tailored to meet industry needs.
While waiting for a possible oil boom in South Dakota, companies such as Bierschbach are finding ways to be part of the current boom in North Dakota.
The Rapid City location has done business in Dickinson, N.D., and the Fargo store has provided services in Bismarck and Minot, N.D.
“We like to learn as much as we can about what is going on there,” Hasvold says. “We’re faced with the same challenges other businesses face.” Bierschbach has been able to bring its erosion control material into North Dakota from its current location but the company would need a location near the oilfields to offer its equipment leasing and service.
Hasvold says the conference helped his company learn more about what’s going on in the Bakken and to get advice on how to get involved.
Black Hills Vision, a regional economic development organization committed to creating economic development opportunities in the Black Hills region, is also looking at opportunities in western North Dakota. Black Hills Vision consists of seven cities, four counties, more than 80 Black Hills business leaders, nine economic development and chamber organizations, nine financial institutions and six utilities, as well as support from the state of South Dakota.
Jim Aberle, executive director of Black Hills Vision, says the tourism industry was the first to capitalize on the oil industry. Various Black Hills communities are sending buses to gather people from western North Dakota for weekend trips in the Black Hills. Aberle says he is already seeing opportunities in maintenance, support services and real estate.
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