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To Frack or Not To Frack: N. Dakota's Dilemma

Monday, 6 Feb 2012 | 12:10 PM ET

The oil rush in North Dakota has it all. Billions of dollars. Thousands of jobs. "Grapes of Wrath"-like journeys from all across America as people leave desperate situations, hoping for a fresh start. Big business shoe-horning itself into small-town America.

On the positive side, many who have made the trip to places like Williston, N.D., have come away with a job and renewed optimism for the future.

On the negative side, the incredible growth is not without its pains — inadequate housing and crime, to name two emerging concerns. But from public officials to oil executives, there is a tremendous effort to manage it all.

AP

However, two things would be unmanageable and have the potential to make the boom go bust almost immediately.

The first, oil prices, is simple. The second, hydraulic fracturing, or fracking, is less so.

Right now, oil needs to be right around $60 a barrel to make the process profitable in the huge rock formation called the Bakken.

There is a huge operating cost to drill down two miles and then two more miles laterally. In addition to the trucking, employment and infrastructure costs, the process of fracking is both costly and controversial.

Here's how it works:

After drilling, workers will do what they call "perforating." Thousands of small fissures are blasted into the rock surrounding the hole that's been drilled. Then, a mixture of water, sand and chemicals is pushed into the fissures at tremendous pressure. The sand (sometimes, ceramics are used) wedges itself into the tiny fissures, propping them open and allowing the oil to flow out of the rock.

"There is a well out here that is 500 feet away from us. They completed it in 2005, and then our water went bad." -Resident, Pavillion, Wyo., Louis Meeks

The chemicals make up only 1 percent of the fracking "water," but several companies involved in the process refuse to disclose what goes into the ground.

There are two water issues: What happens to the water used in the fracking process and what happens to water near the drilled area.

Some residents in places like Pavillion, Wyo., are convinced their drinking water is toxic — and that fracking is to blame.

"There is a well out here that is 500 feet away from us," said resident Louis Meeks. "They completed it in 2005, and then our water went bad."

Meeks now uses bottled water for almost everything. He won't even give tap water to his chickens.

The Environmental Protection Agency is testing the water in Pavillion, but stories like Meeks' have sparked an emerging environmental movement against fracking.

In a statement, the EPA wrote that the tested water did contain "compounds likely associated with gas production practices, including hydraulic fracturing."

Encana , which has drilled near the test locations, responded strongly, stating, "We are concerned that the EPA has jumped to some conclusions that we do not think are supported by science. "We think that a third party review would be great."

Roger Anderson, who works in the Department of Earth and Environmental Sciences at Columbia University, cautions against a rash judgment on fracking.

"It's been done for 100 years around the world," he says, adding that it becomes an issue when it happens in people's backyard.

"No one (in the general public) actually knows what is going on down there in the earth," he said. "I think it probably scares them a little."

America's Oil Rush: Boom or Bust
Billions of dollars worth of black gold buried deep underground changes a small town forever. CNBC's Brian Shactman takes you inside a modern day oil rush in Williston, North Dakota.

The scientific and regulatory communities are trying to determine if the fear is justified.
Meanwhile, it's become a political issue. If that spreads nationwide it could have a tremendous impact on what's going on in North Dakota.

Yes, it is true that the Bakken fracking is for oil and not for natural gas. And yes, there have been no major fracking controversies in North Dakota so far.

But if there were to be a nationwide moratorium on fracking — which has been discussed — the job and oil boom in North Dakota would go away virtually overnight.

Put simply, there is no other way to profitably get the oil out of the ground.

"That (a moratorium) would shut it down," said Williston Mayor Ward Koeser, pausing and then adding: "Overnight."

Follow Brian Shactman on Twitter: @bshactman

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  • Shactman joined CNBC in 2007 as a general assignment reporter and fill-in anchor for CNBC's business day programming.