The U.S. Geological Survey has doubled its previous estimate of the amount of recoverable oil within the Williston Basin to 7.4 billion barrels. While the Bakken formation is still a star in the play, the potential of the Three Forks formation, as well as advancements in technology, have increased the estimate of the reserves.
According to the Bismarck Tribune, "Department of Mineral Resources Lynn Helms says the assessment is conservative and the Geological Survey's high end range of 11 billion barrels is more reasonable."
Previously, most estimates for lifetime recovery of oil per well were at 500,000 barrels. The industry is now using 600,000 barrels of oil per well as a general number. You can view the USGS report here.
Impact Beyond Oil and Gas Industry
The reserves estimates affect more than just the oil and gas industry in North Dakota. For example:
Individuals with estate plans who own mineral interests may wish to revise their plans based on the increased value of the royalty payments as well as the increased value of the mineral interest itself. These increased values can subject estates to estate tax that would otherwise have passed tax-free. Fortunately, the current exemptions from federal estate and gift tax offer numerous opportunities to leverage the transfer of mineral interests to children and grandchildren. In addition, a carefully structured estate plan can ensure that these mineral interests will remain in the family for future generations to enjoy.
Real Estate and Transportation
Commercial and residential real estate and the transportation industry can feel more long-term investment comfort knowing that the Williston Basin is judged to be profitable for years, with even more potential for profitability as technology enables more complete recovery of the reserves.
Commercial and industrial real estate development appears poised to escalate in order to serve the needs of the industry. Transportation facilities, including rail lines and associated facilities, will need to expand to move the product to market. Residential real estate will likely experience strong growth as the local population expands to meet the employment needs of the industry. Comprehensive municipal and regional planning and zoning will need to be re-examined as unprecedented growth shatters the boundaries of previous real estate growth models.
Industrial Services and Hospitality
Businesses from oilfield services to hotels to restaurants may wish to review whether now is the time to enter North Dakota to help provide services for all of the people it will take to continue the drilling and maintain the existing production.
The USGS estimate, while conservative, is likely to free up credit for investors in the Williston Basin. Commercial lenders and other capital sources have cited uncertainty of sustained activity as a barrier to more involvement in funding businesses serving the Bakken. The revised estimate should aid new and existing businesses, as well as lenders and investors, in risk assessment and long-term planning for growth and expansion.