Part 1: Kern County's Oil Potential

Five years ago, western North Dakota was farm country, much like Kern County. Today, it's one of the richest oil producing regions in the world. A richness some say is in the central valley's future because the San Joaquin Valley has the potential to produce more oil than North Dakota. 17's Katey Rusch joins us with the first part of our week-long series.
Fred Evans has been a rancher and farmer in western North Dakota all his life.

"We're just enjoying a little bit of God's creation we're able to take care of here," he said.

It's his dream job but, for decades, he lived on credit. Three years ago, life got a bit easier.

Dozens of oil wells were drilled on the land he owns. "We lost track," laughed Evans. The New York Times now calls Evans the richest man in Mountrail County.

Evans' farm sits on top of the Bakken Shale. Experts have known for decades the Bakken was a huge oil resource, but no one knew how to get at the oil locked in the shale rocks.

"To me, those geologists were like a blind dog in a meat shop," Evans said. "They knew it was there, they could smell it, but they just couldn't get their teeth in it."

For years, explorer after explorer tried to unlock the Bakken's potential, including some investors from California.

"In the 70s and 80s, my company drilled the Bakken Shale and we walked away from it because it was uneconomic," said Dave Kilpatrick, director of Cheniere Energy.

Decades later, Kilpatrick would kick himself for the missed opportunity because, in 2005, industry cracked the code on the Bakken.

Now, companies drill as much as two miles down, then as much as two miles horizontally. Then, they hydraulically fracture or "frack" the well in numerous stages to create cracks, releasing oil packed tightly in dense rock of the Bakken.

"They say it's 98% success but really I think it is higher than that," said Ward Koeser, mayor of the oil boomtown Williston, N.D. "There are no dry holes. If they drill in the Bakken area, they get oil."

According to the Bureau of Labor Statistics and the North Dakota Petroleum Council, North Dakota is now the No. 2 oil producing state behind Texas, pumping more than 900,000 barrels of oil a day, dropping the unemployment rate to 3 percent, and raising the median annual income to $73,000.

"Look what it's done for our state," said Ron Ness of the North Dakota Petroleum Council. "We've become an economic powerhouse."

"Being in on this from the ground floor is pretty awesome," said Blaine Hoffman of Whiting Oil and Gas.

An awesome feeling some say is slated to hit the Central Valley. Like North Dakota, the Valley sits on a huge shale deposit – the Monterey Shale – believed by some to hold 15.4 billion barrels of oil, almost four times as much as North Dakota's Bakken.

"The oil is there," said Janice Gillespie, a geology professor at California State University, Bakersfield. "I have no doubt the oil is there."

Oil that a University of Southern California study estimates could create 2.2 million jobs by 2020 and generate nearly $25 billion of tax revenue annually.

"We absolutely believe that something like this could happen in the Central Valley of California," said Lynn Helms with the Department of Minerals.

But the Central Valley is decades behind North Dakota. That's partly because of the Monterey's complex geology. It's a thousand feet thick with hundreds of disjointed layers.

"It's made up of layers that are maybe a foot thick and each one fracks differently," said Gillespie, the CSUB professor.

The Bakken is just one sheet of rock, all at the same depth," said Kilpatrick, the Kern County oilman. "It's like a layer cake," said Kilpatrick.

"If you said the Bakken is 50 percent understood, the Monterey is probably five," said Gene Voiland with Bakersfield’s Orion International Oil and Gas.

While producers have extracted oil from the Monterey for years, now they're going after something different.

"We're actually going into where the oil is generated which is much deeper, higher pressure, higher temperature," said Dave Miner, Manager of Exploration and Land at Aera Energy.

Sometimes called the "play," or the "kitchen," the Monterey Shale deposit is thought to be between Interstate 5 and Highway 99 through Kern, Kings and Fresno counties.

"We're putting an awful lot of science into this," said Aera's Miner. "We have engineers and scientists all over the world working on these projects."

But the oil is inside the shale rock. Getting it out at a reasonable cost is the problem, said Kilpatrick.

"I've seen wells drilled in the Monterey Shale … there's so much oil coming out of the drilling pits and you're seeing oil flowing out of the well while you're drilling," he said.

"You're thinking this is it. Then you get the well cased, you put it on production and it's not enough production to be economic," said Kilpatrick.

That means if a $10-million Monterey well doesn't produce at least 200 to 300 barrels a day - 20 to 30 times an average California well - there's no profit.

"We're very early so I just think the jury is out," said Voiland.

And the entire valley is waiting for a verdict to see if this is the state's next biggest employer or California's pipe dream.

"If the price is right, they'll figure it out," said Gillespie, the CSUB professor.
 
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