James MacPherson, Associated Press, Published July 19 2012
South Dakota oil potential dampened by North Dakota's record bonanzaBUFFALO, S.D. – South Dakota has the four famed faces of Mount Rushmore, a few more pheasants than North Dakota and the world’s only corn palace.
But when it comes to crude oil, its neighbor to the north is king.
The Dakotas have been locked in geographic sibling rivalry since 1889, when they were split from a single territory and became states on the same day. The divide has intensified in past decade with North Dakota’s unprecedented oil boom that has propelled it to the nation’s No. 2 oil producer behind Texas.
“Sure, there is some jealousy,” said Derric Iles, South Dakota’s state geologist. “We want a piece of the economic pie North Dakota has, plain and simple.”
Despite speculation, widespread hope and some worry that North Dakota’s oil rush may balloon across the border, experts say it’s doubtful South Dakota will experience anything remotely close.
Case in point: South Dakota has produced about 1.6 million barrels of oil annually for the past four years, an official with the Department of Environment and Natural Resources said. North Dakota pumps that amount in just more than two days.
On Thursday, North Dakota had 210 rigs drilling. South Dakota had a single rig piercing the prairie.
Geology is the difference. The rich Bakken shale formation, where oil-producing rock is sandwiched between layers of shale nearly two miles underground in western North Dakota, is not present in South Dakota.
The Three Forks formation below the Bakken in North Dakota does reach into South Dakota, but has gone largely unexplored. Geologists and oil companies are split over whether it’s a separate oil-producing reservoir or if it simply catches oil leaking from the Bakken above.
For drillers in North Dakota’s Bakken region, dry holes are a rarity. State and industry officials say 99 percent of drill rigs hit oil and nine out of 10 wells make money. Since drillers are virtually assured of a profitable well there, they have little time to bother with unknown prospects across the border, said Derric Iles, South Dakota’s state geologist.
“Why in the world would you uproot drilling rigs and move them to South Dakota when the success rate is 99 percent in North Dakota?” Iles said.
Still, he believes South Dakota may hold untapped reserves that could be exploited using know-how gained from the Bakken.
“We have precious few drill holes,” Iles said. “There have not been enough tests using today’s technology to rule in or rule out the great potential for oil in South Dakota.”
Iles conceded that “the picture is not super-rosy.”
“The silver lining is we aren’t seeing a large influx of interest so we have time to prepare as a state if it does happen,” he said.
Oil producers first tapped into the Dakotas in the 1950s. North Dakota’s first well began production in 1951 in Williams County, in the northwest part of the state. Three years later, South Dakota joined in with a well in Harding County, in the northwest tip of the state.
Currently, Harding County produces the bulk of the state’s oil and gas, using mostly traditional vertical wells.
Dave Tilus, who ranches in Harding County, said there are eight oil wells on his ranch, which has been in his family for more than a century. He said his family has made more revenue from oil royalties in the past 50 years than raising cows on their ranch near Buffalo.
Harding County, which bills itself as “Beef Country,” will likely remain that way, he said.
“I don’t think we’ll ever be a North Dakota,” Tilus said. “We may expand a little but I don’t think will ever explode like North Dakota.”
There has, however, been a recent uptick in leasing activity tied to South Dakota’s Minnelusa formation. North Dakota state geologist Ed Murphy said the formation – known as Tyler in North Dakota – extends from the western part of North Dakota into northwest South Dakota and may share some of the same characteristics of the Bakken.
Billionaire oilman Harold Hamm says, however, the Minnelusa is no Bakken and may be overhyped.
“But that certainly does not rule out everything,” said Hamm, the chairman and chief executive officer of Oklahoma City-based Continental Resources Inc. His company is one the oldest and biggest operators in North Dakota, drilling there for more than two decades. It was among the first to tap a Bakken well in 2004 using horizontal drilling technology.
Hamm is no stranger to South Dakota – his company has been there since 1996 and, along with Denver-based Luff Exploration Co., accounts for the bulk of the state’s oil.
He said production in South Dakota has remained steady over the past 16 years.
“We’ve done well with it,” Hamm said. “We’re certainly not giving up on South Dakota. We’re going to drill wells and keep looking.”
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