Oil prices have to fall much further yet before they take off the shine from the black gold rush in America’s least visited state.
By Philip Sherwell in Killdeer, North DakotaLast Updated: 2:45PM BST 25 Aug 2008
Thanks to oil, Dakota is one of just three states with a budget in the black Photo: AFP/GETTY
Ted Kupper does not look like a man on the fast-track to millionaire status. The rancher still wears his favourite old baseball cap, pulled down low over his craggy sun-weathered features and grey walrus moustache, as checks on the horses he is rearing for the rodeo season.
Later, in the Buckskin Saloon in the tiny farming settlement of Killdeer, he chats with friends about hay prices, what a bull fetched at auction and the poor rains – staple bar talk on the rolling prairies of western North Dakota.
Mr Kupper, 55, and his wife Dawn, 46, long lived hand-to-mouth raising livestock on land first settled early last century by his grandfather, an ethnic German immigrant from Russia. But the dark days of debt and juggling bills are a thing of the past for the Kuppers. For like hundreds – and soon thousands – of other families in this remote and sparsely-populated region, America’s newest Black Gold Rush is making them millionaires.
Thanks to oil, America’s least-visited state is one of just three with a budget in the black – a surplus of $1 billion for its 635,000 residents.
And with its three bars, two motels, car dealership, pharmacy and post office, Killdeer is an implausible boom town.
“No Vacancy” signs hang permanently outside the motels; the bars are packed; fencing companies, welders, transport firms and truck drivers have more work than they can handle; and young people who would previously have been forced to move away from the economically-depressed region for work are now finding well-paid jobs.
Although oil prices have fallen back from the dizzying heights of nearly $150 a barrel earlier this summer, they are still making the owners of underground mineral rights here wealthy beyond their wildest dreams. “For the first time in my life, I’m not in debt. That’s a godsend for folks like us,” said Mr Kupper.
His ranch sits two miles above the 365 million-year-old Bakken shale formation that holds the largest contiguous onshore oil deposit ever surveyed in North America – a sticky black “sea” of up to 4.3 billion recoverable barrels stretching across 25,000 square miles.
The complicated geology meant that it was not viable to extract the oil until spiralling commodity prices and major advances in horizontal drilling technology combined during 2006. The first royalty payments started to roll in last year and some amazed beneficiaries even contacted the oil companies as they presumed their cheques had too many noughts.
Oil prices currently stand around $115 a barrel, well above the $60 cut-off below which the viability of Bakken extraction would come into question. And there are few complaints about roller-coasting prices from the Kuppers.
“I feel very blessed,” said Mrs Kupper. “I am just happy that it means our children are going to have an easier time than we did and that they will be able to do what they want to in life.
Her husband added: “The country, the scenery, the life, the people – everything we want is here. Now we can afford to live here too.”
Ostentatious displays of consumption are anathema to the reserved population of mainly north European and Scandinavian descent.
But Mrs Kupper does concede: “We haven’t had a vacation since our wedding at the national rodeo finals in Las Vegas 23 years ago.” she added. “It would be nice to go away together although I went to Fargo recently and couldn’t wait to come home.”
Mrs Kupper was referring to the state’s largest city, considered a bustling metropolis with its population of about 100,000, although to outsiders it is best known as the title of the Oscar-winning 1996 movie that made the region’s slow sing-song accent famous.
Her husband, whose impressive cowboy belt buckle testifies to his champion rodeo rope-steering skills, admits that the prospect of travel holds little appeal to him. But he does say that it will be nice to be able to go fishing with live bait.
It is a measure of the frenzy gripping this rural backwater that there are now some 77 exploratory rigs drilling in North Dakota – each worth $6 million and costing $75,000 a day to operate – and 4,000 wells already pumping oil.
The rhythmically nodding pump jacks – known as grasshoppers or horses’ heads by locals – dot a rolling pastoral landscape Sioux tribes and buffalo herds once roamed. They are now pins in the map of the new oil rich.
Excitement reached fever pitch in April when the US Geological Survey released a new estimate that there were between three and 4.3 billion barrels of recoverable oil in the Bakken. That was a 25-fold increase on the agency’s previous 1995 estimate of 151 million barrels.
The field was first discovered in the 1950s but as the oil was soaked into the rock in an extremely thin layer across a huge area traditional vertical driller operations were of little value.
But oil companies recently developed the technology to drill down 10,000 ft and then out horizontally for the same distance in just a month. The shelf of shale is then flooded with a million gallons of water and sand to fracture the rock and free paths for the crude to flow for extraction.
On the Kuppers’ land, three pumps run by oil giant Marathon are already extracting high-grade “sweet crude” and two more are due to come on line soon. The company confidently predicts that the wells will pump for the next 25 years.
A few miles away, inside the courthouse in the sleepy county town of Manning, “landmen” – specialists in the often arcane art of tracking down mineral rights – sift through fading paper records to see who has the claim to what lies beneath the surrounding prairies.
“The Bakken Formation is a great example of the ability of the oil and gas industry to use new technology to recover oil from formations deep below the earth’s surface that previously was impossible to produce,” said Ron Ness, president of the North Dakota petroleum council.
“All this oil activity has generated tremendous economic growth for our state. The oil industry anticipates over 12,000 new workers will be needed in North Dakota over the next four years to get the job done.”
Indeed, the state’s unofficial motto has long been ‘Forty below keeps the riff-raff out’, a reference to the bitter winters of the Upper Mid-West. But it is little wonder that a new slogan is now jostling for space on the bumpers pick-up trucks that are the preferred mode of transport in this part of the world. ‘Rockin’ the Bakken’ it proclaims proudly.