News

Oil production in Bottineau County could seize soon

By Scott Wagar

11/25/2014

With current oil prices below profit making for oil companies in Bottineau County, it appears that oil production in the county could completely shut down in the very near future. 

“Bottineau County gets pricing for Medium Sour oil. Today the posted price is $54.58, which is below the break even mark of $61,” said Allison Ritter, public information officer for the North Dakota Department of Mineral Resources on Nov. 20, who added that at the beginning of November there were five rigs in Bottineau County drilling oil, but only two rigs drilling now. 

“So, why are there still two rigs there today? It’s all about rig contracts and when they expire. Most likely those two rigs are on contract and will continue to drill until that contract expires. 

“If price rebounds most likely those rigs will get picked up again,” Ritter added. “Oil prices are expected to stay soft, and it’s a difficult thing to predict.”

According to Bottineau native, Leland Severson, a trader in market futures, he has been predicting for a long time that drilling oil in Bottineau County would decrease greatly, or stop all together.  

“I trade crude oil futures and have been very worried that Bottineau’s government and school officials are making commitments on rosy projections that are going to saddle us with huge costs for unnecessary projects,” Severson said. “There is too much oil to support $100 crude, and $61 locally is making drilling unprofitable in our area.

“Add on top of that corn and wheat surpluses and the cap on those prices for years,” Severson added. “Some farmers aren’t profitable under these conditions.”

Although Severson is concerned about the dropping prices in oil and grains, he is more apprehensive about fiscal promises that city and county leaderships are planning at the present moment, especially in Bottineau.

“What has me concerned is that people are making major financial and taxation commitments on market prices, that will last a couple years, were temporary and are now history,” Severson said. “There are no longer good reasons for crude to be at $100 a barrel or wheat to be at $7.50 a bushel. Those are not natural price levels, but levels that were inflated to draw out more supply. They worked. There is more supply and now the prices are over.

“And, don’t think of $75 as cheap oil. It isn’t. One hundred dollars was expensive, which was held up there by an anti oil and anti carbon president with a democrat Senate,” Severson stated.

“Republicans now control congress and the markets saw this coming. Crude is at $75 (worldwide) and it can spend decades there, or lower as it did to around $18 a barrel in the 80s and 90s. Who remembers the 1980s oil glut?”

Severson also warned leadership about thinking that oil supplies are scarce for the long term.

“Total reserves and recoverable reserves have increased and increased. There is no shortage,” Severson said. “The supply of crude is out of balance. We have too much pumping now chasing too little demand in spite of Obama.  

“The prices are going to go low enough that significant drilling is stopped. If $75 doesn’t accomplish that then it will go lower. The areas that will be forced to stop drilling are the lower return areas, areas like Bottineau. At $75 futures our local prices are closer to $62 a barrel,” Severson said. 

“The high cost of these new fracking type wells with the environmental restrictions and costs makes drilling in Bottineau a poor risk reward situation.   

“Even the Williston Basin is going to have drilling pull back by large percentages, because there is no need for drilling at any price,” Severson added. “The market doesn’t need it. That is done.” 

With the decrease in oil and crop prices when it comes to Bottineau, Severson stated that Bottineau leadership in city government and its school district need to careful how they are handling taxpayers’ money.

“We need to recognize and be conservative so as to not get our long term costs set on what was a temporary situation,” he said. “The ones left holding the bag will be the long time residents that haven’t seen big jumps in income. And, thinking you can just stick the farmers with the bill because they had high grain prices isn’t fair. Sorry, they are not gushers of cash.”

With crude prices below break even for the oil companies in Bottineau County, and grain prices on the decline, the predictions of oil boom activity in the cities of Bottineau County increasing, and the development which will be needed to contain it, seems to be fading with the drop in market futures. With the decline in market futures, the economic direction for the county appears uncertain at this time.