Fracking in Montana
Energy policy • Fracking policy • Public education • School choice • Public pensions • State budget • Ballot measures • Ballot access
|Fracking in Montana|
|Regulatory agency||Department of Natural Resources and Conservation; Board of Oil and Gas|
|Fossil fuels present||Oil, natural gas and coal|
|Number of producing wells||48,870 in 2012|
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- 1 Fracking background
- 2 History
- 3 Production
- 4 Economic impact
- 5 Environmental impact
- 6 Socioeconomic impact
- 7 Departments, agencies and organizations
- 8 Major organizations
- 9 Natural gas use in Montana
- 10 News items
- 11 See also
- 12 External links
- 13 References
There is limited information about when fracking has been used to extract oil or natural gas in Montana. The practice, however, often occurs with horizontal drilling, for which some data are given below. In 2011, Montana put into practice new rules regarding the disclosure of non-trade secret chemicals used in the fracking process. The rules Montana adopted can be found here.
- See also: Fracking
Hydraulic fracturing, or "fracking," is the process of injecting fluid -- mostly water and sand, but with additional chemicals -- into the ground at a high pressure to fracture shale rocks to release the oil and natural gas inside.
Recent technological advances in oil and gas drilling -- horizontal drilling and hydraulic fracturing -- have created a wealth of opportunities and challenges for states that have fossil fuel reserves that can be accessed through the combination of these two technologies and the industries that support them. The increased use of fracking has been an economic boon for states, not only those with fracking but also those with supporting industries, such as frac sand mining or associated machinery manufacturing.
Those opposed to fracking argue that the potential environmental and human health impacts could be large. Although wells have been fracked for over 65 years in the U.S., concerns have been raised over the ability for federal, state and local regulatory agencies to keep up with the recent and rapid growth and adequately protect the environment and human health. As with any type of energy extraction, either traditional or renewable, there are tradeoffs.
Exposed crude oil was discovered in Montana in 1864. Oil drilling first occurred in 1901, though the industry did not gain a footing in the state until the 1920s (owing to the discovery of reserves in the Kevin-Sunburst and Cut Bank fields).
In 2008, the U.S. Geological Survey estimated that the Bakken formation, a large shale formation spanning North Dakota and Montana, could contain between three and 4.3 billion barrels of crude oil. The resources contained in the Bakken formation have become accessible to producers due to directional drilling and fracking, which was first used in the Bakken formation in 2006.
|Montana oil and gas well permits|
In 2000, 15,760,923 barrels of oil were produced in Montana. Production steadily increased until 2006 when production peaked at 36,294,047 barrels of oil. After 2006 production decreased. In 2013 production rebounded, reaching 29,262,250 barrels of oil.
In 2000, 71,465,474 MCF (71.46 BCF) of natural gas were produced. Production generally increased until 2007 when production peaked at 120,432,953 MCF (120.43 BCF). After 2007 production sharply decreased, and in 2013 63,343,498 MCF of natural gas were produced.
The Board of Oil and Gas Conservation is responsible for well drilling permits. In 2012, 411 well permits were distributed. Of these, 95 were vertical wells, 300 were horizontal wells, 16 were abandoned wells that were being re-entered and one horizontal well was permitted for re-entry. This is an increase of 140 permits from 2011.
|Montana natural gas production|
|Year||Production in MCF|
|Montana oil production|
|Year||Production in BBLs|
Areas of activity
In 2012, 89.4 percent of all oil production occurred in the northeastern section of the state, as seen in the map to the left. Also in the northeastern section of the state 67 percent of all natural gas was produced.
The map to the right shows the oil and gas fields in Montana. These fields are located across the eastern fourth of the state; the center of the state, near the border with Canada; and the central-southern portion of the state.
The use of fracking, often in combination with horizontal drilling, has made it possible to extract supplies of oil and natural gas that were once economically unfeasible to extract. This has led to significant growth in the domestic oil and gas industry, and in the supply of domestically produced oil and natural gas. The growth in activity has impacted the economy in direct ways, such as increased capital investments (from both the U.S. and other countries), royalty and lease payments, and government revenues in the form of fees and taxes. The increased supply of natural gas and oil has also affected electricity prices, manufacturing, service industries and employment. In many places, fracking has increased employment in the mining (oil and gas) sector and supporting industries, such as the restaurant and housing sectors. Consumers and manufacturers have also benefitted thus far from lower oil and natural gas prices, and increased demand for pipeline, drilling and other ancillary equipment. As demand for natural gas and oil grows, however, prices are expected to rise.
Taxes, fees and revenue
Fracking booms can increase local government revenue through increases in property and sales taxes, which can help compensate for the costs detailed below. The primary revenue streams from fracking -- mineral leasing revenues and severance taxes -- go to state and federal governments. As of June 2013, Montana employed the following oil and gas severance taxes.
- Oil is taxed as a percentage of gross production value. For the first 12 months a well is producing, that oil is taxed at a rate of 0.5 percent. After a year, wells drilled before than 1999 (pre-1999 wells) are taxed at 12.5 percent, while wells drilled after 1999 (post-1999 wells) are taxed at a rate of 9 percent of gross production value.
- Stripper wells are taxed at 5.5 percent for the first 10 days of production and at 9 percent after 10 days. There are bonuses and exemptions for stripper wells.
- Horizontal wells are taxed at 5.5 percent for the first 18 months of production. Pre-1999 wells are taxed at 12.5 percent and post-1999 wells have a 9 percent tax on gross production.
- Natural gas is also taxed a percentage of gross production value. For the first year these wells are taxed at 0.5 percent. After 12 months, wells that predate 1999 are taxed at 14.8 percent, post-1999 wells are taxed at 9 percent.
- Stripper natural gas wells that predate 1999 are taxed at 11 percent.
- Horizontal wells are taxed at 0.5 percent for the first 18 months, and 9 percent thereafter.
The revenue from these taxes is split between the state and county where production is occurring. This split is approximately 52/48, although those numbers vary by county. After this split the revenue is divided up as seen below.
- 2.16 percent goes to state special account for natural resource projects;
- 2.02 percent goes to the state special account for natural resources operations;
- 2.95 percent goes to the orphan share account;
- 2.65 percent goes to the state special account for the university system in Montana; and
- The remaining funds go into the state general fund.
The chart to the right shows oil and natural gas revenue in Montana from 1969 through 2012 (the most recent year for which data are available). Between 1969 and 1980 revenue stayed below $12 million annually. From 1982 to 1985 revenues were at or above $50 million, after which revenues decreased. Revenues sharply increased in 1991 to $62.9 million. Revenue peaked again in 2001 reaching $92.4 million. After two years of falling revenues, the taxes collected peaked at $324.3 million in 2008. In 2012 oil and gas revenue was $210.6 million. One study of the tax breaks given to oil and gas producers during the first year a well produces oil or natural gas found that from 2008 to 2012 just over $152 million in revenue was foregone.
Royalties and land sales
The United States is one of the few countries where property owners can own the right to use and build on their land, known as surface rights, but they may not own the rights to the minerals located under their property. Depending on the state, the mineral rights may have been sold in the past and may now belong to someone other than the surface owner. In fact, those mineral rights may belong to more than one individual, a company, or many individuals, who now have the right to extract those minerals, and in some states this can happen without the permission of the property owner. This can cause tension between the mineral owner, or whoever is leasing the mineral rights, and property owner.
The federal government doesn't collect data on oil and natural gas royalty and land sales on private land. A 2014 study attempted to estimate these figures and determined that Montana (among the lower 48 states) had the 13th highest private royalty income in the nation. The study also found that for 2010:
- Private oil revenue was $1.425 million.
- Private natural gas revenue was $206 million.
- Estimated royalty income was $210 million.
- Royalty income was 0.63 percent of state average income.
Economic impact study
|IMPLAN and REMI are two econometric modeling systems used in both the private and public sectors to predict economic outcomes of policy changes. While these systems are widely used and highly respected, their results are theoretical and may not be universally accepted.
Because the oil and gas industry has grown so rapidly, there is not a wealth of data regarding its economic impacts. Instead economists use forecasting models, such as IMPLAN and REMI, to predict the impact increased fossil fuel extraction is having on the economy. These studies usually measure both direct impacts, i.e., the jobs and income being added within the oil and gas industry, and indirect impacts, i.e., jobs created throughout the supply chain. These studies also include induced impact, i.e., jobs created through increased spending due to growth in the industry.
PricewaterhouseCoopers LLP (PwC), a research consulting firm, completed a study of the economic impact of the oil and natural gas industry in 2011 in Montana for the American Petroleum Institute. According to the PwC study, the oil and gas industry added $4.55 billion in total value in 2011, including direct, indirect and induced value. Of this, $2.69 billion, or 6.4 percent of the state's total value added, was direct, $1.02 billion was indirect and $838.1 million was induced. In total, this accounted for 10.8 percent of the state's total value in 2011.
The PwC study attributes 43,093 jobs, or 6.7 percent of employment in Montana in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry. The industry directly employed 15,505 people, or 2.4 percent of state total employment. Indirectly the industry employed 13,937 people and induced 13,651 jobs.
Direct, indirect and induced labor income, according to this study, was $2.01 billion, totaling 7.7 percent of Montana's labor income in 2011. Direct labor income from the mining sector was $923.9 million, or 3.6 percent of the state's total. Indirect labor income totaled $615.9 million and induced labor income was $469.5 million.
Because of the sudden and unprecedented growth in fracking across the United States, getting high-quality, unbiased, state-specific information on the environmental impacts of fracking can be difficult. Most studies that would fit those first two qualifications are government studies that focus on the nation as a whole. As such, much of the information that follows in this section may only apply generally to the state. State-specific information has been added where possible.
As with any type of energy extraction, there are several areas of risk when it comes to air quality. In the case of fracking, these risks include air pollutants such as VOCs and methane. When natural gas obtained due to fracking is used to generate electricity in power plants, it produces fewer carbon emissions than coal-fired power plants. According to a 2014 study by the National Oceanic and Atmospheric Administration, "as a result of the increased use of natural gas, CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increase in natural gas use. During the extraction process, however, more methane is emitted, and methane actually traps 20 times more carbon dioxide than other greenhouse gases. Nevertheless, according to the International Energy Agency (IEA), CO2 emissions in the United States dropped by 3.8 percent in 2012, due in large part to the "increased availability of natural gas, linked to the shale gas revolution."
Some environmental groups have also raised concerns that methane could be leaked during the extraction process, resulting in unnecessary pollution. Most of this pollution occurs during the well completion phase. Fracking operations can also emit known carcinogens, which have been linked with increased rates of cancer.
A 2014 report from the U.S. Environmental Protection Agency found a decrease of 3.3 percent in overall greenhouse gas emissions and a 12 percent decrease in methane emissions from 2011 to 2012. Natural gas extraction is the second largest producer of methane, after cattle.
The central and eastern United States have been experiencing an increase in earthquakes over the last few years, according to the U.S. Geological Survey (USGS), the government agency responsible for such data. Studies from the USGS have not found fracking directly responsible for this increase in felt earthquakes; however, the USGS is looking into regulations that would use seismic data to determine thresholds dictating when and where fracking can occur. There is a growing body of evidence suggesting that this growth in the number earthquakes has been caused by the increased use of injection wells to dispose of fracking wastewater. While fracking has been rarely known to cause earthquakes, there is an established scientific link between earthquakes and the disposal of fluids in deep, underground injection wells. Once a well has been fracked, the water that returns to the surface is called wastewater, which contains large amounts of salt and other contaminants. Some of this water can be recycled, but that water which can't be recycled is often stored in injection wells. These injection wells are generally considered the safest and most cost-effective place for wastewater remaining from fracking operations to be stored. Injection wells are located thousands of feet underground and are encased in cement. Multiple drilling wells often rely on one disposal well for storing their wastewater. The U.S. Environmental Protection Agency estimates there are 144,000 of these wells across the United States receiving 2 billion gallons of frack fluid per day.
Induced seismology, or man-made earthquakes, have been around for decades and can be caused by mining, damming rivers and injecting fluids into underground wells. Earthquakes are caused by injection wells as water is pumped into underground wells, causing the faults under the earth to slip. Even though scientists at the USGS have even been able to cause earthquakes on purpose by carefully injecting liquid into the earth, the link between injection wells and earthquakes is not fully understood. One of the largest concerns for scientists and regulators is that they do not have the tools to predict whether wastewater will cause seismic activity. These concerns are compounded by the lack of knowledge about where faults are located across the central and eastern United States. The USGS is just beginning to map these areas in more detail in order to understand the seismic risks. As of June 2014, these earthquakes have typically been small, two or three in magnitude on the Richter scale, but at least one scientist has raised concerns that earthquakes could grow in intensity if old injection wells continue to be used for storage.
When it comes to water protection and fracking there are four main areas of risk: the depletion of fresh water sources, spills and leaks of fracking fluid into water, mismanaged produced water and flowback, and stormwater pollution. Up to 10 million gallons of fresh water may be required to frack one well. Stormwater, flowback, produced water and wastewater can be harmful because they contain total dissolved solids and naturally occurring radioactive materials. Because of the recent and rapid growth in fracking there are still many uncertainties about the effects of fracking on water. There are studies that link fracking to groundwater contamination, but they remain controversial. The U.S. Environmental Protection Agency is releasing a report in 2014 on the potential impacts of fracking on drinking water, and is working on effective programs for managing these potential risks.
Because of the recent and rapid growth of fracking, little is known about the potential impacts to human health. Government agencies dealing with human health issues have raised concerns about some chemicals that can released during the fracking process, including VOCs. The Centers for Disease Control is working with the EPA and federal, state and local agencies to better understand potential impacts.
|Voting on Fracking|
|Not on ballot
Fracking can also present challenges to communities. Increased oil and natural gas production happens in boom or bust cycles, and often these cycles disproportionately occur in rural communities. Increased oil and gas activity near homes has been traced to depressed home values. Large scale fracking booms can also lead to increases in crime, such as substance abuse, sex trade and domestic abuse. An influx of oil and gas workers also strains housing and traffic resources. This lack of housing can push oil and gas workers into 'man camps', or "clusters of mobile homes, RVs, and trucks" or into hotels. A fracking boom also puts heavy traffic on roads, which can strain infrastructure, increase traffic accidents, and increase the likelihood of oil spills. These changes can force local governments to respond by hiring more police, social workers, health care workers and emergency response personnel, thereby spending more funds on repairing roads and social programs. Currently, much of the tax revenue generated by the oil and gas industry goes to the federal and state government, making it difficult for local governments to respond to strains on their infrastructures.
Departments, agencies and organizations
The Montana Department of Natural Resources and Conservation (DNRC) was founded in 1971. It is charged with "promoting the stewardship of Montana's water, soil, forest, and rangeland resources [and] regulating forest practices and oil and gas exploration and production." The department is comprised of seven separate divisions:
- Director's Office
- Conservation and Resource Development
- Oil and Gas Conservation
- Reserved Water Rights Compact Commission
- Trust Land Management
- Water Resources
The Montana Board of Oil and Gas Conservation is the state regulatory body for the oil and gas industry, and is administratively tied to the DNRC. The board is responsible for establishing spacing units, issuing drilling permits, classifying wells and adopting rules, among other duties. The primary stated purposes of the board are:
—DNRC Montana Board of Oil and Gas
The board is comprised of seven members appointed by the governor, and must include the following:
- Three members must be from the oil and gas industry and must have at least three years of experience in the field.
- Two must be landowners residing in counties that produce oil and gas (but these members cannot be be active in the industry); one of these members must own mineral and surface rights, while the other must not own mineral rights.
- One member must be an attorney.
- The Montana Petroleum Association (MPA) is a trade group whose stated mission is "to maintain a positive business climate for Montana's petroleum industry, and foster public awareness of its many economic and ecological contributions to the state and nation." The association is comprised of some 220 members. MPA is listed as a "cooperating association" by the Independent Petroleum Association of America, which is a national trade group that "advocates its members' views before the U.S. Congress, the Administration and federal agencies."
- The Northern Plains Resource Council (NPRC) is a "grassroots conservation and family agriculture group that organizes Montana citizens to protect our water quality, family farms and ranches, and unique quality of life." The organization calls current methods of oil and gas development in Montana, including fracking, "extreme." The group works at both the local and state levels to implement laws and reforms that "ensure responsible development that protects our water and communities" and "protect landowners and community members from the potential negative effects of oil and gas development."
Natural gas use in Montana
- For more information on energy consumption in Montana, see "Energy policy in Montana"
In 2011, roughly one-third of Montana’s energy use was for transportation, and a little over a quarter was used for industry; the rest was used mostly in residential and commercial buildings for heating, cooling, lighting and other functions. Most of the energy used in the state is in the form of coal, followed by natural gas and electricity.
|Consumption of energy for heating homes in Montana|
|Source||Montana 2011||U.S. average 2011|
|Liquid Petroleum Gases (LPG)||12.1%||5%|
Montana has a small amount of natural gas-fired electrical generating capacity. Natural gas is mainly supplied and transported through several interstate pipelines. The companies that operate these pipelines include: KM Interstate Gas Co., Northern Border Pipeline Co., Northern Natural Gas Co., Northwest Energy Co. Shoshone Pipeline Co. and Williston Basin Pipeline Co. Major electricity generating plants include Colstrip run by PPL Montana LLC; Noxon Rapids run by Avista Corp; Libby run by USCE-North Pacific Division; Silver Bow Generation Plant run by CES Acquisition Corp; and, Hungry Horse run by the U.S. Bureau of Reclamation.
|Where electricity comes from in Montana|
|Type||Amount generated (MWh)||% of state**||% of U.S.**|
|Total net electricity generation||2,093||100%||0%|
|**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.|
This section displays the most recent stories in a Google news search for the term "Montana+Fracking"
- All stories may not be relevant to this page due to the nature of the search engine.
- U.S. Energy Information Administration, "Montana Profile"
- Frac Focus, "National Hydraulic Fracturing Chemical Registry"
- U.S. Bureau of Land Management - Montana State Office, "Do you really OWN the minerals under your land?" accessed July 17, 2014
- U.S. Energy Information Administration, "Montana Profile Analysis," accessed July 17, 2014
- Department of Natural Resources and Conservation, Oil and Gas Conservation Commission, "Annual Review 2012," accessed August 18, 2014
- Billings Gazette, "Montana implements fracking disclosure rules," September 2, 2011
- Montana Board of Oil and Gas Conservation, "36.22.608 Well Stimulation Activities Covered by Drilling Permit," accessed August 19, 2014
- Montana Governor's Office of Economic Development, "Montana Is Oil and Gas Country," accessed July 17, 2014
- Montana Board of Oil and Gas Conservation, "Monthly Production," accessed August 1, 2014
- Montana Board of Oil and Gas Conservation, "Montana WebMapper," accessed August 19, 2014
- IHS, "US unconventional oil and gas revolution to increase disposable income by more than $2,700 per household and boost US trade position by more than $164 billion in 2020," accessed September 17, 2014
- Montana Budget & Policy Center, "Montana Communities Cannot Afford the Oil and Gas Tax Holiday," November 2012
- National Conference of State Legislatures, "State Revenues and the Natural gas Boom: an Assessment of State oil and gas Production Taxes," June 2013
- Montana Legislative Fiscal Division, "Montana's Oil & Gas Production Tax," October 2012
- Geology.com, “Mineral Rights,” accessed January 29, 2014
- All of the above data are in nominal dollars. The royalty income figures assume a 1/8th royalty rate.
- Social Science Research Network, "U.S. Private Oil and Natural Gas Royalties: Estimates and Policy Considerations," March 12, 2014
- IMPLAN, "IMPLAN's History of Expert Economic Data," accessed September 17, 2014
- REMI, "About Us," accessed September 17, 2014
- REMI, "Clients," accessed September 17, 2014
- PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
- Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
- International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
- University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
- Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
- Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
- The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
- U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
- National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
- National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
- U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
- U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
- Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
- Montana Department of Natural Resources and Conservation, "About Montana Department of Natural Resources and Conservation," accessed July 17, 2014
- DNRC Montana Board of Oil and Gas, "About MBOGC," accessed July 17, 2014
- Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
- Montana Petroleum Association, "About Us," accessed July 17, 2014
- Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
- Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
- Northern Plains Resource Council, "About Us," accessed July 17, 2014
- Northern Plains Resource Council, "Oil and Gas," accessed July 17, 2014
- U.S. Energy Information Administration, "Montana Profile Overview", accessed February 24, 2014
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