WESTERN NORTH DAKOTA ENERGY PROJECT

SHALE PROJECTION WEBINAR SERIES

Stark County, North Dakota

An Initiative of the

Strom Center for Entrepreneurship & Innovationat Dickinson State University

ACKNOWLEDGMENTSOur Analysts:

1. Lynn Helms, ND Dept of Mineral Resources

2. Dean Bangsund & Dr. Nancy Hodur, NDSU

Our Funders:� Bush Foundation

� Vision West ND

� US Dept. of HUD Regional Sustainability Planning Grant

Our Moderators:� Dr. Dick Gardner

� Don MackeSenior Fellow and Co-Director, RUPRI Center for Rural Entrepreneurship

Our Local Host & Coordinator: � Deb Nelson, DLN Consulting

ROLE OF KEY PLAYERS

1. ND Dept of Mineral Resources

� Describe scale, duration & pacing of Bakken development consistent with geologic resource

� Identify dynamic variables, i.e. deal changers

2. NDSU Dept of Agribusiness & Applied Economics

� Create socio-economic models that build on Helms

� Distribute regional impacts among counties

3. Center for Rural Entrepreneurship

� Concerned with community implications & policy, e.g. maximizing benefits, crowding out effects

� Decision aids for local leaders

600 East Boulevard Ave. - Dept 405

Bismarck, ND 58505-0840

(701) 328-8020 (701) 328-8000

North Dakota Department of Mineral Resources

http://www.state.nd.us/ndgshttp://www.oilgas.nd.gov

NORTH DAKOTA COUNTY OIL PRODUCTION,

1952-2009200920092009

1952 1957 1962 1967 1973 1978 1983 1988 1993 1998 2003 20090

10

20

30

40

50

60

70

80

90

(millions of barrels)

All Others StarkBottineau BowmanWilliams BillingsMcKenzie

WESTERN NORTH DAKOTA WELL PROJECTIONS

1,800 to 3,000 wells/year = 2,000 expected

� 150-250 rigs = 12,000 – 30,000 jobs

� Another 10,000-15,000 jobs building infrastructure

� 200 rigs can drill the wells needed to secure leases in 1 year

� 200 rigs can drill the wells needed to develop spacing units in 18 years

� 35,000-40,000 more new wells

Helms’ Bakken Development Scenarios

Proven

Probable

Possible

The future looks promising for

sustained Bakken/Three Forks

development

Draft BLM Hydraulic

Fracturing rule could

double federal drilling

permit approval time or

worse.

Draft EPA guidance on

diesel fuel in hydraulic

fracturing could triple

drilling permit approval

time or worse.

Current administration

budget contains tax

changes that could

reduce drilling capital

35-50%

World and U.S. economies

continue to struggle. If

China joins the downward

spiral oil price could fall

enough to make some

areas uneconomic

Wild Cards…

0

70

140

210

280

350

420

490

560

630

700

0

150,000

300,000

450,000

600,000

750,000

900,000

1,050,000

1,200,000

1,350,000

1,500,000

1977 1991 2004

MONTHLY OIL PRODUCTION FOR STARK COUNTY

STARK wells

0

300

600

900

1200

1500

1800

2100

2400

2700

3000

0

3

6

9

12

15

18

21

24

27

30

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Stark County Rigs and Wells

Rigs Wells

0

400

800

1200

1600

2000

2400

2800

3200

3600

4000

0

4

8

12

16

20

24

28

32

36

40

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Tyler Formation Rigs and Wells

Rigs Wells

INDUSTRY ESTIMATES OF

EMPLOYEES PER WELL

New Bakken wells currently 3.5

EOR 1.5

120.0 jobs per drilling rig

3.0 wells per gathering contruction job

100.0 jobs per frac spread

40.0 wells per frac spread per year

1.0 total jobs to support one producing well

12.0 wells per rig per year

0.85 ratio of phase 2 rigs to phase 1 rigs

0.8 ratio of phase 2 well construction jobs to phase 1

2.5 secondary jobs per industry job

Direct Indirect Indirect Production2.0 Company Rep. 1.4 Construction 0.8 Mud Engineers 0.09 pumper

2.0 Tool Pusher 0.3 Surveyors 0.8 Bit Sales 0.06 company professionals

4.0 Wellsite Geologist 0.4 Crane services 30.4 Water haulers 0.04 workover crews

8.0 Directional Drillers 2.0 Rig hauling 1.2 Fuel Haulers 0.02 roustabouts

4.0 Drillers 4.1 Other trucking 1.6 Mud Haulers 0.28 water disposal

4.0 Derick Hands 0.3 Well logging 3.3 Casing Crew 0.35 oil transportation

12.0 Floor Hands 0.1 DST services 0.8 Cementing 0.01 supply sales

8.0 Mud & cuttings 3.9 Completion Rig 0.8 regulatory 0.11 gas processing

1.1 Perforating 0.2 Biology & Botany 0.01 regulatory

6.6 Frac tank hauling 0.2 Archeology

0.9 Reclamation 8.3 Equip Mfg

1.8 Flowback testing 4.6 Roustabouts

44.0 22.8 53.3

120.0 Total Well Construction Jobs per rig 1.0 Total Producing Jobs per well

Note: 25% of jobs are trucking water

Total trucking jobs = 36.6%

Recent industry estimates of 60 by year end 2013

Crowding out effect – Housing – Day care – Variable – currently 0.7

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Jo

bs

Year

Stark County Oil Industry Jobs

Prod jobs Gathering jobs Fracing jobs Drilling jobs

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Jo

bs

Year

Tyler Formation Oil Industry Jobs

Prod jobs Gathering jobs Fracing jobs Drilling jobs

Year Drilling

jobs

Gathering

jobs

Fracing

jobs

Prod

jobs

Rigs Wells

2005 120 24 3 71 1 72

2006 120 24 72 1 73

2007 120 24 71 1 72

2008 240 23 69 2 70

2009 240 22 8 66 2 67

2010 240 23 38 69 2 70

2011 1080 28 175 83 9 85

2012 840 52 275 152 7 155

2013 840 88 275 260 11 265

2014 1320 125 275 368 11 375

2015 1320 162 275 476 11 485

2016 1320 198 275 583 11 595

2017 1320 235 275 691 11 705

2018 1320 272 275 799 11 815

2019 1320 308 275 907 11 925

2020 1320 345 275 1015 11 1035

2021 1320 350 275 1123 11 1145

2022 1320 150 234 1231 11 1255

2023 1012 100 234 1322 9.35 1349

2024 860 50 234 1414 9.35 1442

2025 860 40 234 1506 9.35 1536

2026 860 30 234 1597 9.35 1629

2027 860 30 234 1689 9.35 1723

2028 860 30 234 1781 9.35 1816

2029 860 30 234 1872 9.35 1910

2030 860 30 234 1964 9.35 2003

Year Drilling

jobs

Gathering

jobs

Fracing

jobs

Prod

jobs

Rigs Wells

2031 860 30 234 2056 9.35 2097

2032 860 30 234 2148 9.35 2190

2033 860 30 234 2239 9.35 2284

2034 860 30 234 2331 9.35 2377

2035 860 30 0 2423 9.35 2471

2036 860 30 0 2423 1.25 2471

2037 115 30 0 2423 1.25 2471

2038 115 30 0 2423 1.25 2471

2039 115 30 0 2423 1.25 2471

2040 115 30 0 2423 1.25 2471

2041 115 30 0 2423 1.25 2471

2042 115 30 0 2423 1.25 2471

2043 115 30 0 2423 1.25 2471

2044 115 30 0 2423 1.25 2471

2045 115 30 0 2423 1.25 2471

2046 115 30 0 2423 1.25 2471

2047 115 30 0 2423 1.25 2471

2048 115 30 0 2423 1.25 2471

2049 115 30 0 2423 1.25 2471

2050 115 30 0 2423 1.25 2471

STARK COUNTY

PROJECTED EMPLOYMENT

Year Drilling

jobs

Gathering

jobs

Fracing

jobs

Prod

jobs

Rigs Wells

2005 0 2 0 5 0 5

2006 0 2 0 5 0 5

2007 0 2 0 5 0 5

2008 0 2 0 5 0 5

2009 0 2 0 5 0 5

2010 0 2 0 5 0 5

2011 0 2 25 5 0 5

2012 120 5 25 15 1 15

2013 120 8 50 25 1 25

2014 120 15 50 44 2 45

2015 240 22 375 64 2 65

2016 240 72 375 211 15 215

2017 1801 122 500 358 15 365

2018 1380 188 319 554 20 565

2019 1841 231 319 679 12.75 693

2020 1173 273 319 804 12.75 820

2021 1173 316 319 929 12.75 948

2022 1173 358 319 1054 12.75 1075

2023 1173 250 319 1179 12.75 1203

2024 1173 100 319 1304 12.75 1330

2025 1173 50 319 1429 12.75 1458

2026 1173 25 319 1554 12.75 1585

2027 1173 10 319 1679 12.75 1713

2028 1173 10 319 1804 12.75 1840

2029 1173 10 319 1929 12.75 1968

2030 1173 10 319 2054 12.75 2095

Year Drilling

jobs

Gathering

jobs

Fracing

jobs

Prod

jobs

Rigs Wells

2031 1173 10 319 2179 12.75 2223

2032 1173 10 319 2304 12.75 2350

2033 1173 10 319 2429 12.75 2478

2034 1173 10 319 2554 12.75 2605

2035 1173 10 319 2679 12.75 2733

2036 1173 10 0 2805 12.75 2860

2037 1173 10 0 2805 0 2860

2038 0 10 0 2805 0 2860

2039 0 10 0 2805 0 2860

2040 0 10 0 2805 0 2860

2041 0 10 0 2805 0 2860

2042 0 10 0 2805 0 2860

2043 0 10 0 2805 0 2860

2044 0 10 0 2805 0 2860

2045 0 10 0 2805 0 2860

2046 0 10 0 2805 0 2860

2047 0 10 0 2805 0 2860

2048 0 10 0 2805 0 2860

2049 0 10 0 2805 0 2860

2050 0 10 0 2805 0 2860

TYLER FORMATION PROJECTED EMPLOYMENT

HELMS’ LIST OF DYNAMIC VARIABLES

� 3 Expected Ultimate Recovery of oil scenarios

� 3 Scenarios of secondary employment

Additional Factors Not Modeled:

� Technology Change (Wells/pad; wells/rig/year; fracs/crew/year)

� Oil collection & water distribution pipelines

� Increased use & share of natural gas

� Oil price dynamics

� Shift towards permanent residents

� Crowding out of other economic sectors

Hundreds of possible scenariosC

NDSU EMPLOYMENT, HOUSING

& POPULATION PROJECTIONS

Department of Agribusiness and Applied Economics

North Dakota State University

Dean Bangsund Dr. Nancy HodurResearch Scientist Research Assistant Professor

Ph: 701-231-7471 Ph: 701-231-7357d.bangsund@ndsu.edu Nancy.Hodur@ndsu.edu

NORTH DAKOTA STATE UNIVERSITY MODEL

� Consistent with and builds upon Helms’ model

� Rapidly changing technology & other variables led NDSU away from trad I/O models and into uncharted territory

� Projects to 2036 instead of Helms’ 2050

� Consensus, pessimistic, & optimistic scenarios

� Splits jobs into permanent vs transient

� Is more accurate at regional level

� Communities can affect the local distribution of opportunities, impacts, risks, and growth.

DYNAMIC ELEMENTS – ANNUAL CHANGES OVER 2012-36

� Drilling efficiency in ND - 10/wells/rig/yr to 12 by 2032

� Employment /drilling rig - 120 FTE/rig to 100 by 2016

� Oil field service – 20% job reduction, trucks to pipelines

� Temp vs Permanent employee ratio� Secondary employment from permanent

employees – more than doubles from 0.5 jobs per employee

� Base Employment – constrained in Williston & Dickinson regions to show some crowding out effect

� Housing Mix – change in type over time, more apts

� County Housing Share – changes in some counties with trends

0

10,000

20,000

30,000

40,000

50,000

60,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

North Dakota Total Direct Employment

Petroleum Sector Consensus Scenario

Temporary Direct

Permanent Direct

0

10,000

20,000

30,000

40,000

50,000

60,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

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20

14

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20

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20

21

20

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23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

ND Petroleum Sector EmploymentConsensus Scenario

Drilling & Fracing

Oil Field Service

Gathering

Total

ADAMS

BILLINGS

BOTTINEAU

BOWMAN

BURKE

DIVIDE

DUNN

HETTINGER

MCHENRY

MCKENZIE

MOUNTRAIL

PIERCE

RENVILLE

SLOPE

STARK

WARD

WILLIAMS

VALLEY

GOLDEN

Region 2

StatePlanningRegion 2

State

Region 1

StatePlanning

Region 8

StatePlanning

Williston Region

Minot Region

Dickinson Region

Major trade centers

0

0.1

0.2

0.3

0.4

0.5

0.6

Petroleum Employment as % of Total Employment

Dickinson Region

Williston Region

Minot Region

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

Dickinson RegionComposition of Employment

Consensus Scenario

Secondary Added

Total Direct Petroleum

Other Employment

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Dickinson RegionPermanent Housing Units

Pessimstic

Consensus

Optimistic

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

Dickinson RegionConsensus Scenario

Demand: Housing Units

Total (service) Housing Units

Permanent (census) Housing Units

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Dickinson RegionPermanent (Census) Population

Pessimstic

Consensus

Optimistic

0

5,000

10,000

15,000

20,000

25,000

30,0002010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

Stark County

Permanent Housing

Pessimstic

Consensus

Optimistic

0

5,000

10,000

15,000

20,000

25,000

Stark County

Consensus Scenario

Service

Permanent

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Stark County

Permanent Population

Pessimstic

Consensus

Optimistic

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Stark County

Consensus Scenario

ServicePopulation

PermanentPopulation

STARK COUNTY PROJECTIONS (CONSENSUS)

2012 2020 2036

Permanent

Housing11,203 16,283 21,125

% Ave Annual

Growth

2012-2020

4.6%

2012-2020

1.6%

Permanent

Population23,253 31,549 40,930

% Ave Annual

Growth

2012-2020

3.8%

2020-2036

1.6%

CONCLUSIONS� Not last word; instead first comprehensive projection of employment, housing, and pop

� Best available data & best local experts

� Scenario of likely future; not precise prediction

�Our job to give you input

� This boom is much longer-lived than 80s boom

� You have the ability to affect the amount of growth that comes to your community.

� You decide about your community’s vision for itself, and make decisions on that basis.

WHAT IF YOU ARE WRONG?

If you are too cautious:� Your community will under-invest in public infrastructure and private development,

� You will fall short of maximizing the number of workers, new residents, and economic activity.

� A cautious region will have short-term crowding out of secondary spending

� Long-term w/o enough temp housing, oil workers may crowd out others and other sectors will lose

If you are too aggressive :� Over-investment in public infrastructure and private investments >> bankruptcy and higher taxes for residents left holding the bag

HOW CAN A COMMUNITY GET ITS SHARE?

� Agree on community vision & goals

� Conduct infrastructure planning & implement

� Use land use planning to encourage, condition, and site housing & community development

� Plan/require amenities that improve quality of life, e.g. parks, trails, rec facilities, comm. ctr.

� Regardless of vision, plan for increased traffic flows, truck by-passes, etc.

THOUGHTS? WHAT ELSE?

We’ve outlined a likely scenario, and flanked it with optimistic and pessimistic alternatives to offer you a plausible range of outcomes in an uncertain &

dynamic world.

1. What other questions need to be answered?

2. Are there scenarios you’d like to see?3. Are there other subjects or

community impacts for a webinar of lessons learned in other boomtowns?