The Bakken oil boom in Montana has gone bust, or at least that’s the belief held by Terry Johnson, director of energy research at the University of Montana’s Bureau of Business and Economic Research.
Montana Public Radio reports that Johnson said, “I would argue that the Bakken boom in Montana actually occurred back in 2005 and 2006. That the boom is really no longer that present in Montana at this point in time.”
Last Friday, Johnson gave a presentation in Missoula and said it appears that Montana’s oil wells in the Bakken formation have reached maturity and yielding less with each passing year. Now that the price of oil has declined over half within the past year, there’s not much motivation for companies to drill new wells.
According to MPR, Johnson said, “Continental Resources, the largest oil producer in Montana, is projected to cut their spending by 40 percent, and they also are projecting that they will reduce the number of drilling rigs by about a third, or 33 percent.” Oil production in the state has already declined compared to last year, and when combined with the decreased price of oil, the total value of the resource being extracted will be substantially less than the previous year. He predicts the overall value of oil produced in the state will drop by half with the coming year.
Natural gas production isn’t looking up either. Johnson said, “I’m not seeing any positive signs there because of our maturing wells, reduced investments, so I’m seeing probably about a 10 percent decline in natural gas.” Coal production, however, is expected to hold steady throughout the year, despite the shrinking of domestic demand as many coal-fired plants are decommissioned or converted to use natural gas.
The production decline of fossil fuels will inevitably reduce incoming tax revenue, though not in areas many would suspect. He explained, “When you talk about the state general fund budget, which is the budget that primarily funds the general operations of government, oil, natural gas, etc. are not a real large component.” The regions that will be most impacted will be county governments and school districts, due to the high percentage of oil and gas revenues they receive.
Although Johnson projects that fossil fuel production will be in decline over the coming year, he asserts that renewable energy is expected to continue growing. Johnson told MPR, “I would argue the only real bright spot is wind. We’ve seen incredible growth, somewhere in the range of about 20 percent per year since about 2006 through 2007. From 2013 to 2014 it was almost 29 percent.” The continued growth of wind energy, however, will be highly dependent on the re-authorization of the federal wind energy production tax credit.
To read the full report from Montana Public Radio, click here.