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NORTH DAKOTA AND MONTANA: A TALE OF TWO ENERGY STATES

by William Perry Pendley

May 1, 2012

In response to President Obama’s claims regarding his role in the dramatic increase in oil and gas production across the country, experts, such as the Institute for Energy Research, demonstrate that leasing of federal lands let alone the production from them has plummeted under Obama and his anti-hydrocarbon administration. Instead, the increase—thanks to the technological creativity and the courageous tenacity of Americans who discover, develop, and deliver energy supplies—is the result of development of private and State-owned lands.

The state leading the way is North Dakota, which passed California and OPEC’s Ecuador as an oil producer. North Dakota’s remarkable oil production is coming, thanks to hydrological fracking, from the Bakken Shale Play, which lies within the Williston Basin—a petroleum rich geological structure, not a topographical depression—that was discovered in the 1920s and 1930s, but did not became a major oil province until the 1950s. In 1995, the U.S. Geological Survey estimated that the Bakken contained 151 million barrels of oil; today the estimate tops out at 24 billion barrels of recoverable oil, which dwarfs the estimated oil in the Arctic National Wildlife Refuge (ANWR) in Alaska, where drilling is banned.

The Williston Basin extends into southeastern Montana, where, in 1915, natural gas was discovered on a geological structure known as the Cedar Creek Anticline, which runs 120 miles from Glendive, southwest through Baker, Montana, and on into North Dakota. Located in the southwestern part of the Williston Basin, the Cedar Creek Anticline has been heavily developed. In fact, one company, Fidelity Exploration and Production Company from Denver, Colorado, operates more than 900 shallow gas wells on leases covering over 62,000 acres of state and private lands on the Cedar Creek Anticline; however, Fidelity’s operations are restricted to a strip of land but a few miles wide.

In August and November 2008, the Montana Board of Oil and Gas Conservation approved Fidelity’s plans to drill 23 infill natural gas wells, after completion of environmental assessments (EAs) pursuant to Montana’s Environmental Policy Act (MEPA), which is modeled after the National Environmental Policy Act (NEPA). Once the EAs were completed, however, the National Wildlife Federation and the Montana Wildlife Federation sued the Board, in Montana state court arguing that the Board failed to consider the impacts on the Greater Sage Grouse. The environmental groups did not just demand that new studies be prepared as to the gas wells being challenged, they demanded that a programmatic environmental impact statement be prepared to analyze all oil and gas development over the Cedar Creek Anticline.

In 2009, Fidelity and the Montana Petroleum Association joined the lawsuit; lengthy discovery, legal briefing, and hearings followed. In May 2010, arguments took place in Fallon County, Montana; then, in July 2011, the Montana district court upheld the Board’s decision, ruling that it was “neither arbitrary, capricious, unreasonable, nor unlawful under any standard” and constituted the requisite “hard look” required by MEPA. The environmental groups filed their appeal. Last month, the Montana Supreme Court heard the case.

During oral arguments, the Board’s attorney reported that all but three of the wells that might impact the Sage Grouse have been drilled and then declared, "The sage grouse is not endangered. It's not threatened. It's not on any list that has any requirements on behalf of the federal government or state government. There are only two things that concern the sage grouse in the State of Montana and that's a license to hunt them and a bag limit.” The environmental groups continued to demand a programmatic environmental impact statement. Such a ruling will be a disaster. Not only will the study take years, it will yield time-consuming litigation as environmental groups bemoan the “impact” on the Sage Grouse and “climate change.” Thus, the Montana Supreme Court will decide not only the case before it, but also whether Montana energy policy follows the federal example or that of North Dakota.