Montana oil and gas leases hit new highs; production flat

Montana officials announce oil and gas leases are hitting record levels in the state.

But that does not mean more drilling is going on.

Montana Governor Brian Schweitzer was happy to discuss the statistics during a review of 2011 state leasing figures.

“During the last 6 months, there have been more leases in terms of acres and more dollars paid per lease than any time in history,” he said Tuesday.

The Montana Petrolium Association said leasing sales on both state and private land have been on an upward swing for several years now. But Executive Director Dave Galt said oil and gas production over that time has gone the other way.

“Our peak oil production was in 2006 and we’ve slid at a rate of about 9 percent per year since 2006,” Galt said.

Just because a company buys a lease on a plot of land doesn’t mean they are going to drill on it. But drilling technology has been changing at an incredible rate over the last 10 to 15 years. Galt uses the famous Bakken formation as an example. When he started in his position in 2005, the U.S. Geological Survey estimated the Bakken held about 800 million barrels of oil.

“2008, the USGS after extensive additional review estimated that oil reserve as recoverable barrels at 4 billion barrels of oil. There’s speculation now that that number is considerably higher,” he said.

The reason it increased so much during that time wasn’t necessarily because USGS estimates were wrong—new technology just opened up that much more.

Montana’s share of the Bakken is pretty limited. Governor Schweitzer compared it to the wading pool, while North Dakota is more like the deep end. If technology keeps at the same pace, though, new types of oil and gas formations could suddenly become economic to drill. A technique known as hydraulic fracturing, or fracking is where a lot of this technological advancement is being made. But it’s controversial and it makes Melville Rancher Paul Hawks nervous.

“So our main concern in our water and anything that could affect our ranching lifestyle,” Hawks said.

He was part of a group that sponsored a bill last legislative session that would require oil companies reveal the types of chemicals used in their new fracking processes. The companies said those chemical combinations are trade secrets. The legislature did not pass the bill. Hawks said he is not against the industry.

“As long as we move forward ensuring that our water resources are being protected and we have the resources in place to protect those resources and our interest in them then fracking and ranching can probably co-exist,” he said, adding the state still just needs to find a way to make sure that is happening.

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