Oil executive says frac drilling will solve oil issues
Despite its controversial reputation, oil executive Ken DeCubellis said using hydraulic fracturing technology to harvest crude oil from repositories once thought unreachable, is rapidly reducing America's dependence on foreign oil.
DeCubellis is chief executive officer of Minnetonka-based Black Ridge Oil & Gas, a firm that has grown in prominence because of oil drilling in North Dakota.
He spoke at the meeting of Hudson’s Thursday Noon Rotary Club.
“The U.S. has spent $8 trillion protecting the Middle East oil supply,” DeCubellis said.
He asserts protecting the country’s oil supply is the only reason the United States has become so involved in the Middle East. He is uncertain how it will impact the Middle East -- economically and politically -- as the U.S. reduces dependence on foreign oil.
Frac drilling has developed quickly in the past five or six years. The area in the United States seeing massive growth is the Williston area of North Dakota.
Oil is extracted from underground shale fields in the Williston Basin through the frac-drilling process. DeCubellis acknowledges that the process has created controversy, but is convinced -- if done properly -- is safe and offers many advantages to the country’s need for petroleum products.
The process can be used for both oil and natural gas.
The process is accomplished by vertically drilling deep into shale deposits. The drill bit is then turned horizontally to follow the shale deposit.
Fluids, primarily water, sand and chemicals, are injected under high pressure into the shale; small explosions create fissures that allow oil or natural gas to move freely from rock pores where it is trapped.
Typically, steel pipe known as surface casing is cemented into place for the purpose of protecting the groundwater. The casing and cementing, not only protect the ground water, but are also important to extracting oil or natural gas from hydrocarbon bearing zones.
Since fracking technology has proliferated, DeCubellis said the possibility of oil independence has increased.
“The gap widened for a number of years, but is now closing,” DeCubellis said. “By 2020 we will be importing only 22 percent of oil (it had neared 40 percent a few years ago). If we throw Canada and Mexico into the mix, oil independence is possible in the not-too-distant future.”
He said the biggest danger involving the oil fields is when the product comes out of the ground. Currently, most North Dakota oil is being shipped by rail and truck. He said the most efficient shipping would come with an oil pipeline and DeCubellis advocated the construction of the controversial Keystone Pipeline.
“Most oil problems come with the transportation of the product; it means more chances for human error -- be it trains, trucks or ships.” DeCubellis said. He cited the 1989 Exxon Valdez oil spill as an example of “human error.” He also said that “when the dust settles,” the BP explosion and spill in the Gulf of Mexico will have been caused by human error.
Some of the early frac mining problems were created when inexperienced drillers entered the field to try and “get rich quick.”
“The ‘wildcats’ didn’t follow the right procedures,” He said. “Now the reputable companies are in the business and we know what we are doing.”
Many have described the North Dakota oil fields as an “oil boom.” The North Dakota oil is being extracted from the Bakken formation that followed the discovery of Parshall Oil Field in 2006.
Today, North Dakota has the lowest unemployment rate in the country at just 2.7 percent -- almost a full point better than the state ranked second (Nebraska).
The boom has given North Dakota, a state with a 2013 population of about 725,000, a billion-dollar budget surplus. North Dakota, which ranked 38th in per capita gross domestic product (GDP) in 2001, rose steadily with the Bakken boom, and now has per capita GDP 29 percent above the national average. The state’s economy is growing five times the national average.
DeCubellis estimates that 50,000 new jobs have been created in North Dakota in the past few years. Each oil rig accounts for about 125 jobs. Some estimates claim the state could have 48,000 new wells in the next couple of decades.
Some North Dakota counties in the Williston area have doubled in population.
By 2012, income from oil royalties was reportedly paying many local mineral owners $50,000 to $60,000 per month, and some more than $100,000 per month.
One economist estimated that the boom was creating 2,000 millionaires per year in North Dakota. The average income in Mountrail County has more than doubled since the boom started, to $52,027 in 2010, putting it into the top 100 richest counties in the United States.
The Bakken boom has propelled North Dakota into the top ranks of oil-producing states. As recently as 2007, North Dakota ranked eighth among the states in oil production. In 2008 the state overtook Wyoming and New Mexico; in 2009 it out-produced Louisiana and Oklahoma.
North Dakota surpassed California in oil production in December 2011; in March 2012 the state overtook Alaska, to become the number two oil-producing state in the country, exceeded only by Texas.
DeCubellis said the United States is way ahead of the rest of the world in implementing frac drilling. One of the big reasons is because land owners in the United States own the mineral rights -- which means they can sell or lease to oil companies.
“In many countries around the world, the mineral rights are owned by the government,” DeCubellis said. “That slows the process considerably -- in some countries it is banned.”
Many nations are working hard to implement the new technology. Increased use of hydraulic fracturing is likely to be embraced around the world eventually.
With it, however, comes social problems. In North Dakota the boom has created a housing shortage, requiring the construction of camps for housing workers. As a result, law enforcement agencies report sharp increases in offenses, particularly violent crime, drug trafficking, gun crimes and prostitution.
Although there are no massive shale deposits in Wisconsin, the state does have an essential product used in fracking process -- sand.
Frac sand-mining is booming in western Wisconsin, and as close as Glenwood City. The hills of western Wisconsin contain the sand necessary to do fracking for natural gas and oil in other parts of the country.
In just the last five years, Wisconsin frac sand facilities have grown from less than a handful to nearly 125. With it also comes controversy. Members of the Glenwood City Council who supported the sand mining operation were subjected to a recall election last year. The mine supporters, however, were all re-elected.
DeCubellis said the introduction of frac mining in the United States has changed the dynamics of energy production. DeCubellis, who once worked for Exxon, said the company looked for ways to increase the importing of natural gas 10 or 15 years ago.
“Exxon spent millions of dollars to construct 20 processing ports in the United States to import liquefied natural gas,” DeCubellis said. “With frac mining in the United States, the world has flipped.”
He said those 20 ports are now being refitted to export natural gas.
DeCubellis said the United States does need better infrastructure, including pipelines and refineries.
Ken DeCubellis joined Black Ridge as Chief Executive Officer in November of 2011. The company currently controls over 10,000 acres in the Bakken formation.
He brought over 20 years of executive experience in a broad range of energy industries including 10 years at Exxon Mobil Corp and most recently as president and CEO of Altra Inc, a venture capital backed biofuels company.
DeCubellis also previously served as chairman of KD Global Energy, Belize Ltd., a firm that provides upstream technical and geological services to petroleum lease holders in Belize.
He received an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University in 1996 and a Bachelor of Science in mechanical engineering from Rensselaer Polytechnic Institute in 1990.
For more information, go to www.blackridgeoil.com.