N.D. oil production tops 1 million-barrels-a-day milestone

North Dakota has joined the big leagues of crude oil production, surpassing 1 million barrels per day — an output second only to Texas in the U.S.

State officials said Tuesday that North Dakota yielded 1,001,149 barrels daily in April from a record 10,658 wells. Jubilant oil industry officials hailed the benchmark as another sign that the United States is freeing itself from the grip of foreign oil.

"People can step back and say, 'We don't care that much about what OPEC does anymore,'  " said North Dakota Petroleum Council President Ron Ness, reflecting on past decades when the Organization of the Petroleum Exporting Countries controlled world oil supplies.

North Dakota's oil bounty also has transformed the state economy, creating thousands of jobs and fueling a population surge that's the fastest in the U.S. Formerly sleepy towns across the western part of the state are suddenly beset with traffic jams, housing shortages and sprawling man camps as workers from across the nation flood into the oil fields.

"It put so many people back to work coming out of a recession," said Michael Reger, chief executive of Northern Oil & Gas of Wayzata.

Oil production contributes $50 million per day to North Dakota's economy, with more than $11 million per day paid in state oil and gas taxes, according to the North Dakota Petroleum Council. Over the past two years, the state's gross domestic product, a measure of economic muscle, soared 32 percent.

Reaching the 1-million-barrel-a-day threshold represents a 20-fold boost in North Dakota oil production in six years, coming largely from the use of horizontal drilling and hydraulic fracturing, or fracking technology, a controversial process that has raised environmental concerns in North Dakota and other states. The oil and natural gas extracted from shale layers known as the Bakken and Three Forks under North Dakota represent 12 percent of U.S. domestic production.

Texas is the only other state producing more than 1 million barrels daily. Federal leases in the Gulf of Mexico also exceed that level, as does the province of Alberta. Three other states — Alaska, California and Louisiana — once produced 1 million barrels per day but have dropped below that level.

A barrel equals 42 gallons.

North Dakota's oil output is expected to climb to 1.5 million barrels per day by 2017, said Lynn Helms, director of the North Dakota Department of Mineral Resources. Production then could plateau as the inevitable decline in older wells' output is balanced by new wells, he said.

Reger's company, founded in 2006, acquires oil leases in North Dakota and finances the drilling of wells by other oil companies. Overall, Northern has participated in 20 percent of the wells drilled in the region, he said.

"Technology has been outpacing the estimates for 10 years," he said in an interview Tuesday. "The field just keeps getting bigger, and the technologies around the Bakken just keep getting better."

Reger said Northern has 25 years of "drilling inventory," and he expects the boom to last a while.

The North Dakota oil boom and parallel shale-oil development in Texas, Wyoming and New Mexico come at a time of increasing conflicts in the Middle East — events that traditionally drive up the price of oil around the world.

While the nation's benchmark East Coast and Midcontinent oil prices are above $100 per barrel, the Bakken price remained just below that on Tuesday.

"It takes the pressure off seaborne crude imports," said Vincent Piazza, an energy analyst for Bloomberg Industries. "Given what we are seeing with geopolitical tensions and security challenges, it is a welcome sigh of relief."

One major downside of North Dakota's oil boom is that not enough oil and natural gas pipelines exist to carry the bounty. Instead, the rail industry, using trains with 100 or more tank cars, has emerged to carry oil to coastal refineries that once relied on ocean-delivered foreign oil.

Minnesota has become a crucial pathway for oil trains that have raised safety concerns. About six of them pass through Minneapolis and St. Paul daily, and two more travel through other parts of the state, according to the Minnesota Transportation Department.

Piazza and others said the next challenge for North Dakota is building more infrastructure to ship oil and natural gas to market. North Dakota still flares — or burns off at the wells — nearly 30 percent of its gas, though new state regulations aim to reduce that.

Two new oil pipelines are expected to be completed soon, boosting deliveries to Cushing, Okla., a key oil terminal, said Justin Kringstad, director of the North Dakota Pipeline Authority. A $2.6 billion pipeline by Enbridge Energy is proposed from North Dakota to Wisconsin but is facing opposition because it cuts through northern Minnesota's environmentally sensitive lakes region.

In the meantime, 63 percent of North Dakota's oil was shipped by rail in April.

David Shaffer • 612-673-7090 @ShafferStrib