HELENA - Companies and individuals are snatching up leases on state and private lands along the Rocky Mountain Front and in central Montana in anticipation of a new oil boom, which while bringing economic development to small communities, could also create societal headaches.
Those seeking the leases are betting that the underground Bakken shale formation, which straddles Montana and North Dakota and is believed to hold up to 4 billion barrels of recoverable oil, also stretches west to the Front. Three companies have either drilled or received permits to drill 37 exploration wells on the Blackfeet Indian Reservation in Glacier County since 2009, and in the past year at least 14 companies or individuals have spent millions of dollars to lease hundreds of parcels in Glacier, Teton, Toole, Pondera, Cascade and Lewis and Clark counties. Some maps show the Bakken formation stretching north into Canada and running south to Wolf Creek, north of Helena.
Since March, Cove Creek Resources Inc. has spent $1.4 million buying up leases in Teton and Toole counties. In March alone, Zone Exploration dropped $491,026 for leases in Pondera County, while Vecta Oil and Gas paid the state another $253,000 that month for leases in that same county.
Primary Petroleum holds about 200 leases on 290,000 acres in Pondera and Teton counties, according to company president Mike Marrandino. He estimated that in the past few years, between small companies like his and larger ones like Rosetta Resources and Anschutz Exploration Corporation, they've spent between $100 million to $200 million acquiring leases along the Front and conducting exploratory drilling.
Marrandino said his company has been interested in exploration along the Front since about 2005, but it was the results released in February 2010 from three wells drilled by Rosetta in 2009 that have spurred the latest rush on oil leases.
"They estimated there were 13 to 15 million barrels (of recoverable oil) per section," Marrandino said. "This area has a lot of similar characteristics to the Bakken in eastern Montana - it's like a baby brother. It's shallower, so it's more accessible and you don't have to compete with rigs in the western basin like in eastern Montana, so your costs are a lot less.
"The rate of return is still economical, and that's why we're seeing more activity here."
Companies also are drilling for oil north of Montana in Canada, but land was being leased there at close to $3,000 per acre. In the eastern Bakken formation, leased land was as high as $2,800 per acre. But along the Front, leases were as cheap as $1.50 per acre and up to only $390 per acre.
"That's still only about 10 percent of what you see in Alberta," Marrandino said.
The fact that anywhere from 93 to 100 percent of the state lands in eastern Montana already are leased for gas and oil exploration also is pushing interest toward the Front, he added. Better technology that allows not just vertical but also horizontal drilling also is making exploration and development more feasible on the Front, since most state and federal lands don't allow surface occupancy. Instead, companies can purchase leases and set up drilling rigs on private lands, go down a few thousand feet and then drill horizontally under the public lands.
Jim Jensen, executive director of the Montana Environmental Information Center, wasn't surprised to hear about the most recent exploration efforts. He noted that many people believed the Front - a dramatic landscape where the plains meet the Rocky Mountains and home to ranchers, outfitters, grizzly bears, elk, bighorn sheep and wolves - was put off-limits to gas and oil exploration when leases on federal lands were bought out during the past five years. Those leases can't be reissued.
However, those leases applied only to federal lands, and state and private property still can be leased and developed.
"I think the oil industry always thought there was a reasonable chance to find oil out there," Jensen said.
Teton County Commissioner Jim Hodgskiss said local residents are closely watching the drilling and wondering if the Front will experience the same boom that hit Williston, N.D. Most of his constituents welcome the economic boost the drillers provide to restaurants, hotels and other businesses. But they're also wary of the less appealing social impacts that have hit Williston - a jump in crime, a lack of housing that leads to people squatting in RV trailers or living in "man camps," overcrowded schools and overburdened roads.
"I think, for the most part, that people are looking forward to this," Hodgskiss said. "But undoubtedly there will be some ramifications that we haven't thought about. We've discussed having some meetings with our county planner and sanitarian to try to set up some guidelines, and we don't want unbridled growth.
"We're trying to stay ahead of the curve as much as we can, but it's hard to plan when you can't see what's coming down the pike."
Mary Sexton is the director of the state Department of Natural Resources and Conservation, which handles the leases for state trust lands. She said they have stipulations, or "stips," placed on gas and oil leasing along the Rocky Mountain Front, which include things like prohibiting surface occupation on state lands without special approval or an Environmental Impact Statement being created when there is more than one drill pad per 640 acres.
Another stipulation mandates that vehicles have to be power washed before they can enter state lands to battle the spread of noxious weeds. Sexton noted that a DNRC employee recently caught a dirty truck from North Dakota about to enter state lands, and the truck operator was told to wash off the mud - which reportedly contained leafy spurge seeds.
"We've been overseeing this very carefully," said Sexton, who also is a former Teton County commissioner and business owner. "We want to make sure the stips are adhered to."
Sexton said the renewed interest in oil exploration along the Front seems to occur every 20 years or so.
"I remember as a kid in the 1950s they put a well in right next to my house. Then in the '70s there was some seismic activity and in the '80s there was a lot of gas development," Sexton said. "As new geologists find new things or think they do, and as money become available, it's not surprising there's increased interest from time to time."
John Grassy, a DNRC spokesman, adds that it's not just along the Front where interest is growing. He noted that in Hill, Liberty and Chouteau counties in northcentral Montana also have seen increased drilling activity.
"Oil companies are always out there doing testing and speculation; it's a huge part of what they do," Grassy said. "We're also hearing is that the Bakken may be accessible from points further west than previously known, so that's fueling some of the exploration."
Glacier National Park officials also closely watching the drilling along the Front. Glacier Superintendent Chas Cartwright submitted written comments for an environmental assessment on two exploratory wells, saying he had some concerns about impacts to bull trout and grizzly bear habitat, air quality and the overall impacts to scenic vistas. He requested that an Environmental Impact Statement be put together to look at cumulative affects of all the wells, rather than on a well-by-well basis.
Jennifer Ferenstein, the Rocky Mountain Front organizer for The Wilderness Society, said her group and the Coalition to Protect the Rocky Mountain Front also are watching the exploration activity closely. She said they're not opposed to drilling on private property, and with today's technology that allows multi-directional underground drilling from one well, the impacts are much lighter on the landscape.
Still, they're concerned multiple wells could cut up the landscape, making it more difficult for wildlife to pass through the area, and they're also worried about the spread of noxious weeds.
"But there's been a lot of cooperation and work done with DNRC on Rocky Mountain Front stipulations and added protection," Ferenstein said. "There is a higher level of environmental review and they're watching where the parcels are and trying to make sure everyone is following the law."