SIMPLE WITH BELLS ON

Paper presented to The Chicago Literary Club

November 14, 2011

Florence D. McMillan

SIMPLE WITH BELLS ON

Simple is best. That axiom was coined before there were coins, and it’s as true in today’s technological wonderland as it ever was. “Simple is best” proves out not only in every age, but every day in our professions and processes.

If your appendix inflames, the doctor takes it out. Who needs it? It’s that simple.

When a banker contemplates a simple interest transaction, it’s a simple matter; however, a complex-compound rate is a horse of a different color, especially when Wall Street rides it.

The genius of Thomas Edison was his ability to focus his vision on simplicity. The story goes that when his scientific colleagues began to quibble and dither over the harnessing of light in a bulb, he cried, “damn it, I’m trying to INVENT something!”

What could be simpler than the proverbial mouse trap? A cheap guillotine loaded with a cow’s milk teaser.

Man’s quest for natural resources has always been marked by the simplest way to get at them:

1.The funneling of water through a trough of wood or

bamboo.

2. Power for our labor with the aid of a windmill.

3. Strip mining: What you see is what you get.

Inventions, even space ships, usually evolve from complicated to simple: The radio to the transistor, the IBM mainframe to the Apple laptop, the airwave to the Cloud.

The farmer’s combine, a harvesting machine, was so called because it combined an ingenious, but complicated set of fallible steps. As it moved, it lifted cut stalks of grain into rows of large spikes into a series of twelve galvanized tin sieves. Paddles beat on the grain stalks until the chaff fell through the sieves and out onto the ground. Kernels in the pans rose on a stack of metal plates into a huge box where a funnel dumped them into a moving truck. Not simple – with a lot of moving parts to break down. Spit and twine will only go so far.

To inspect a brand new $300,000 dollar combine today, you stick your head through a small door in this red behemoth and see nothing inside but one screw, a very large, very red augur with graduated holes on each flange. How simple can you get?

And then we put the bells on. The mousetrap morphs into a small hotel of a dazzling design in shocking pink, irresistible to the rodent. Apple has added “apps” to waste our time at work and play. The combine has added tinted glass, music in sensurround, and a microwave for snacks.

And the Hillbilly Clampett family have deserted the hills of Beverly, oil profits in hand, to lounge in their new CE – ment pond. The golden dinner bell rings from Beverly Hills to the Plains of North Dakota.

This is the story of the Bakken Field, a rich lode of crude oil in the larger Williston basin in western North Dakota. The Field is named after Mr. Bakken, a Norwegian immigrant grain farmer with 300 acres, who farmed the land at the turn of the century.

The oil has been there for as long as conceivable time. It was there as the Rockies were forming. It was there when the Northern Pacific Railway imported thousands of men from China to build track. It was there when I studied it in sixth grade in Casselton, North Dakota and learned that it was so deep in rock shale that it could never be recovered.

Its possibilities were largely ignored until 1953, when some exploratory drilling was done by Amerada Oil Company and given up as a lost cost. The company (like my mother) bought leasing rights to substantial acreage, which they held into the late 70’s – alas, not long enough.

After 50 years of minimal exploratory interest in this enormous pig in a poke, a technology to enable the recovery of crude oil from this rock formation, a kind of preCambrian sagging, is now in place. The greater Williston Basin began to develop almost two billion years ago. The oval shaped area comprises about 500 square miles, or 350,000 acres, more than three times the size of the King Ranch in Texas. Drilling is spread out, however, and so often economically feasible. Use of federal lands in Montana is prohibited by U.S. law.

The Bakken is a smaller, highly concentrated oil field, mostly in North Dakota. It is not an oil trap like the Elm Coulee basin in Montana, but a large area of subterranean oil which can be mined with today’s tools. Indeed, the appropriate analogy is to the strip mining of coal in West Virginia. In 2004 the U.S. geological Study estimated that the Bakken Field contained four billion barrels of crude oil. In 2008 they revised that figure to eleven barrels. In 2010 the estimate was 22 billion barrels. Harold Hamm, CEO of Continental Resources, the largest oil company presence in the Bakken, who estimated that the entire Bakken Field, fully developed, would yield 24 billion barrels turned out to be right. That number is now considered to represent ultimate recovery in the Bakken Field. Such a staggering amount of recoverable crude oil will change western North Dakota forever, not to mention consumption, distribution, and financial machinations in the entire country. As of this moment, November 2011, North Dakota is producing 450,000 barrels a day; Montana, 50,000. Montana has nine new rigs(wells) . North Dakota is currently opening 167 new wells a month . (This figure includes the initial drilling of 2000 “confidential wells” for which state permits have been issued. These wells are not recognized until six months after the first fracking. It is expected that by 2020, 700,000 barrels per day will be extracted from the Bakken and Montana, more than the daily production of Saudi Arabia’s largest field.

As for movements. layers, and shifting sediments, we still have a world to learn about the geological and graphical underpinnings of the Great Plains. Recovery figures from the Bakken Field and recent success of drilling efforts there reflect the guesstimates experts are making about formations that lie tens of thousands of feet below them. One thing we DO know – the oil is stuck in shale. The formations were created one to two billion years ago by continual receding and advancing seas, which produced shale layers of 1,000 up to 15,000 feet thick. The geological makeup of the Bakken Field is comprised of three members, or layers. The first layer, which sits under one mile of ordinary ground (as in ground water) is shale, so dense as to be nearly impenetrable. It is about a mile thick. The middle layer is composed of silty dolostone, a permeable mixture of gravel, sand, and silicate (ceramic). This layer contains crude oil. It is variously four to one thousand feet thick. The lower layer is again shale, which contains siltstone. The layers have been described as an Oreo cookie in which the “chocolate” layers compress the middle, “frosting” layer, which is composed of porous, malleable elements.

The vocabulary of the extraction endeavor is as rich and colorful as that of your favorite sports commentator. For example I give you:

CRUDE – crude is oil, never natural gas, which is found in the Marcellus in Pennsylvania and in Louisiana, Monterey, Alaska.

“THE PLAY” – an oil well coming into its own

“RIG” – a well. The rigs, above the ground, look like hundreds of small, roaming dinosaurs.

“LATERAL” – a horizontal drilling line. A short lateral is one mile,; a long lateral is two, and so on.

“PLUG AND PERF” – a complicated blasting method involving perforation

“SLIDING SLEEVE” – a blasting device like the tube which returned your change through pneumatic routing at Macy’s in the 1940’s. Current preferred method. Simple is best.

“HYDRAULIC FRACTURING” – blasting followed by the application of water pressure

“FRACKING” – slang for the above

“FRAC FLUID” – a mixture of water, sand, silicate (ceramic), gel, and trace chemicals

“STIMULATE’ – introduce frac fluid onto fractured middle layer to encourage the movement of oil. Term often used by the oil lobby

“HOSE OUT” – term used by oil workers for this process

“TAKE AWAY CAPACITY” – realistic estimate of barrels that can be brought up and distributed

“SHUT IN WELLS” – closed by outside influences which impede production

“CAP A WELL” – take a producing well out of production. Capping and recapping are illegal in North Dakota

“DRILLING OUT PLUG” – unplugging the well to release pressured oil. Also known as “Come to PaPa”

“IP” – initial production of oil in the first 24 hours of a new well

HOW DO THEY DO IT?

Like the folks at International Harvester who simplified from twelve sieves to one big, red screw, the R&D oil guys refined process in the simplest way imaginable. They thought about that Oreo cookie, and they started drilling NOT down, but sideways. It’s as simple as that – and much more important than a better mousetrap. When drilling a well vertically, oil monkeys must make 6000 holes through a mile or two of the densest shale. The simple way is to drill vertically ONCE, make an “L” turn with the bore and “lateral” horizontally right through the frosting layer. The first lateral, drilled in 1987, was one mile long. As I speak, a 60 mile lateral is being bored. To produce six wells, serial laterals, parallel laterals, even trilaterals are drilled over a field of 1280 acres ( a square mile – from the Cliff Dwellers north to Navy Pier then west to Halsted Street and South back to 200 South Michigan). in 30-60 stages or intervals every 15 feet until kingdom come. The sight of a well SITE is an awesome thing. There are several of those little dinosaur rigs. There are tinkers(about 50 men and the occasional woman), trailers, trucks, cranes, computers and cable. Lots of cable.

You take the oil out of the cookie by a blasting process known as “fracking”. Here is the cable: a roll of dental floss. Here is a plug, a capsule pill. Inside is explosive – the magic powder the doctor gives me. A specialized worker “perfs” the capsule, drilling holes. The capsules are threaded onto cable at measured intervals, like the pearls on Madam’s necklace, and lowered through the shorter vertical entry. The first capsule is guided by the most complex software and the steadiest hand on the throttle to make the “L” shaped turn and start its journey to the very end of the lateral, which could be three miles. Every 15 feet after that another capsule is “dropped off” from its skin. The precision required for these computerized placements is an impressive combination of focus, touch, and intellect.

Last Christmas the oil monkeys got a simple gift. Someone thought of a “sliding sleeve”. No more “perfs”! When each capsule is dropped off, the computer slides it open, like moving the slide on a salt shaker. Simple is best.

When this necklace of perhaps 400 capsules is laid out in the frosting, one man at one console in one trailer pushes the button. The field is quiet as a tomb. Just over there, by the rig, a man hugs an iron pipe like a lover. When he feels a tremor, he shouts; and the blast three miles beneath is completed in utter silence.

At the site of each capsule the silty dolostone middle, porous level – and some shale as well – has been “fracked”, the fractures webbing out to release the flow of oil. Immediately, up above, the crew begins to pump a mixture of water, chemical gel, and sand, under pressure through the lateral. The oil, already viscous, thins and flows toward the location of the “drilled out plug”. The sand presses against the fracture to hold it open for continued oil flow. The “frac fluid” separates from the oil and is sluiced off near ground level. It’s so simple. I can get you a job in North Dakota!

COSTS AND TRADE OFFS

Money has been saved, and in huge quantities, through the now refined processes of horizontal drilling. The sliding sleeve alone has shortened the time needed for lateral placement from seven days to 24 hours, and cut the cost of Manual labor in half.

Harold Hamm, CEO of Continental Resources, the largest oil presence in the Bakken Field, estimates that vertical drilling over an area of one square mile would produce only 20% of what horizontal drilling can “take away”.

And HOW MUCH IS that, exactly? The life or “decline rate” of a well drilled in the Bakken to date is ten to fifteen years at current production, which is high. The total life of one of these wells is up to 40 years, aided by refracking and innovation. In its life a Bakken well could produce 300,000 (Volken- CEO/WLL) to 500,000 (Hamm- CEO/CR) barrels.

A word to the wise: Oil monkeys use terms like “sweet spot” and “crazy numbers” and “tell me” IPs (that first 24 hours). A self-reported initial production figure is seldom meaningful. An oil company’s published IP estimate is usually about half of the driller’s. The latest new well record, confirmed, is 7009 barrels on November 3, 2011.

COST CONSIDERATIONS

The completion and drilling of one well costs ten million dollars.

Ten million dollars buys a day’s heat for half a million homes.

Which is better for America? An oil well or a ten million dollar mansion in Easthampton?

You can ship oil to New York City more easily from North Dakota than from Kuwait. Or can you?

At the end of the 19^th century, when fortunes were in the ground, North Dakota was a simple, fertile, promising new state. There were no hills, one and a half lakes, some shelterbelt trees planted by CCC crews in the thirties.

There was oil, but you couldn’t get at it. It was secondary to the real cash crop: Wheat, barley, flax, corn. Secondary by far to the Northern Pacific, the Great Northern, the rails that carried America’s natural riches from West to East and back again. Oil for the engines. Wheat for hungry mouths. It was perfectly simple.

Today the challenges to North Dakota and its oil are infrastructure, distribution, and weather. There’s an old farmer’s saying: “The wet days will scare you to death, but the winters will freeze you to death.” Thirty-five to forty degree below zero is not an uncommon temperature in any part of North Dakota. A person who ventures outside will burn his lungs to a crisp. The Bakken Field is closed to drilling from November through March. This virtually extends the life of a confidential well permit to one year after fracking. Shut-in wells mean lost revenue for 25% of the year. Capped wells are illegal in North Dakota. They prevent production from exceeding take away capacity, which keeps the price of crude oil up; a solution the state does not consider viable.

The problems of distribution and delivery that plagued early cattlemen have come back to haunt the new cowboys, the Hess, Halliburton,CR gang. Pipelines will come…..but When? And How?

For the moment trucking is the most available and affordable method of delivery. The Interstate goes straight across North Dakota from border to border without a hill or curve. Rail is a better alternative; IF the tracks are serviceable, IF the roadbeds are somewhat functional, IF tank cars can drop off at refinery sidings or, better yet, onto Great Lakes barges. IF the federal government will subsidize to the tune of billions.

A barrel of Bakken crude sells for $93.11, but $12 less when oil produced exceeds capacity to ship. By May ,2012 three North Dakota towns will have constructed rail terminals which can ship 60,000 barrels daily in a train of one hundred tank cars. As a result many of the Bakken’s “confidential wells” have gone into play, increasing per diem production by 110,000 barrels.

And now, the moment you’ve been waiting for –

SAFETY AND POLLUTION ISSUES

On maps, ironically, the icons representing oil wells drilled in the Bakken Field look like little green pine trees. Almost no major environmental organization has failed to show its interest in the development of the Bakken area. Public opinion and comment on the implications for pollution and harmful effects range from concern to paranoia. So let me try to make it simple – without the bells. Certain facts are apparent and confirmed: Fear that the oil will contaminate water supplies or rivers are unfounded because the oil is buried too deeply to affect water supply. The top of the cookie, the dense slate layer, which is itself one to two miles thick, has over time been sealed from a mile of layers ABOVE it, which we call “ground”, as in “ground water”.

The danger of water contamination resides in failure to appropriately contain the fracking fluid residue, which includes additive fluids and trace chemical elements. Reservoirs which hold these fluids are called “ponds” and can be very large. They must be lined effectively to “seal” the ponds in order to prevent contamination.

Jed Clampett didn’t have the cleanest “CE – ment pond” in Beverly Hills, and neither does the oil industry. Specific regulations regarding the containment of these ponds are sketchy and poorly described. At present environmental groups are left on their own to blow the whistle. Like the report of a three year old who says, “I’ve picked up my room,” the industry’s margin of error is high. And where IS Mother, anyway?

Methane, or natural gas, is a light, invisible, vaporous form of oil which comes from the layers above the Bakken shale. It is not connected to the fracking process. It is a contaminant only when produced in the layer of ground water. In the Powder River Basin in Wyoming, which contains a lot of methane vapor, if you order a whiskey and water in a bar, it will turn black.

Methane in the ground water is a byproduct of the more lucrative “sweet oil” in the Bakken Field. It is very difficult to stuff methane back into the ground. So the oil producers do the simple thing. They burn it off. The process is called “flaring” and is a legitimate target of environmentalists. Thirty percent of the natural gas which arises in the Bakken is flared off. The nightly sight makes a forest fire look like a campfire.

When one asks about the adverse effects of flaring on the environment, the silence is deafening. Put your ear to the ground and you’ll smell the gas before you’ll hear a sound. The Natural Gas lobby admits in the New York Times that “flaring is a problem.” The oil lobby refers repeatedly to a plea for “a conducive regularity environment”. The Governor of North Dakota says, “We’re watching flaring very carefully.”

The truth is that the wasted natural gas isn’t worth the trouble. The oil monkeys can’t even get the sweet oil out as fast as they’d like.

It would be simple of everything were the oil’s fault, but it is nonproductive to blame the source or the process. Farmer Bakken could have simply run those oil monkeys off with a shotgun, but he’s not in charge anymore. Who is? Environmentalists? Industry? Man? Who will regulate the combined, complex solutions required to keep water and air supplies clean?

The problems couldn’t be simpler: Recovery, Disposal, Transportation, Safeguards, BUT

When the going gets tough,

When the riches are uncovered,

When the stakes go up,

When we’re cold,

When we want to drive to the Mall,

When we go to the polls,

That’s where the buck stops.

After that, it gets complicated.

BIBLIOGRAPHY

Collins, Laura. “Desperately Seeking Dalrymple” New York Times,October 6, 2011.

Konisberg, Eric. “Kuwait on the Prairie,” The New Yorker, April 25, 2011

Moore,Stephen. “How North Dakota Became Saudi Arabia.” Wall Street Journal, October 1, 2011

United States Geological Surveys. Production estimates 2004-2008

Wikipedia: Production estimates, maps

This American Life. Podcast #444

Million Dollar Way (All Bakken All the Time): Blog, November 10, 2011

Kramer, Jim. The Street, broadcast CNBC, August 22,2011

Energy Policy Research Foundation, Inc.: Presentation at energy forum: New York City, May 19, 2011

EPRINC: “Bakken Shale Output – Supply Implications for North Dakota,” May, 2011

EPRINC: “The Bakken Boom”, August 3, 2011

Interview with Dr. Judith L. Hamilton, geologist, hydro engineer, consultant-FEMA. May 21,2011

Interviews with Ian R. Nathan, Senior Research Analyst, Energy Intelligence Research, Inc. July 6, 2011, September 14, 2011

Interview with William Kent, William Kent Associates, Hawley, Pennsylvania, October, 2009. For information concerning natural gas in the Marcellus Shale