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AMERICA’S ENERGY FUTURE PART II: A 

BLUEPRINT FOR DOMESTIC ENERGY PRODUCTION 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 14, 2012 

Serial No. 112–165 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

DAN BURTON, Indiana 

JOHN L. MICA, Florida 

TODD RUSSELL PLATTS, Pennsylvania 

MICHAEL R. TURNER, Ohio 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

CONNIE MACK, Florida 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

ANN MARIE BUERKLE, New York 

PAUL A. GOSAR, Arizona 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

JOE WALSH, Illinois 

TREY GOWDY, South Carolina 

DENNIS A. ROSS, Florida 

FRANK C. GUINTA, New Hampshire 

BLAKE FARENTHOLD, Texas 

MIKE KELLY, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

EDOLPHUS TOWNS, New York 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

DENNIS J. KUCINICH, Ohio 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MIKE QUIGLEY, Illinois 

DANNY K. DAVIS, Illinois 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

CHRISTOPHER S. MURPHY, Connecticut 

JACKIE SPEIER, California 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

(III) 

C O N T E N T S 

Page 

Hearing held on July 14, 2012 ............................................................................... 1 

WITNESSES 

Mr. Al Anderson, Commissioner, North Dakota Department of Commerce 

Oral Statement ................................................................................................. 7 

Written Statement ............................................................................................ 10 

Ms. Lynn D. Helms, Director, North Dakota, Department of Mineral Resources 

Oral Statement ................................................................................................. 13 

Written Statement ............................................................................................ 15 

Mr. Michael Ziesch, Manager, Labor Market Information Center, Job Service 

North Dakota 

Oral Statement ................................................................................................. 22 

Written Statement ............................................................................................ 24 

Mr. Jack Ekstrom, Vice President, Corporate and Government Relations, 

Whiting Petroleum Corporation 

Oral Statement ................................................................................................. 41 

Written Statement ............................................................................................ 43 

Mr. Jack Stark, Senior Vice President of Exploration, Continental Resources, 

Inc. 

Oral Statement ................................................................................................. 60 

Written Statement ............................................................................................ 62 

Mr. Kevin Hatfield, Senior Director, Gathering Systems, Enbridge, Inc. 

Oral Statement ................................................................................................. 70 

Written Statement ............................................................................................ 72 

Mr. Henry ‘‘Tad’’ True, Vice President, Bridger Pipeline, LLC, Belle Fourche 

Pipeline Company 

Oral Statement ................................................................................................. 76 

Written Statement ............................................................................................ 78 

APPENDIX 

Questions for Jack Ekstrom, response attached, Whiting Petroleum Corporation ........................................................................................................................ 96

Questions for Kevin Hattfield, response attached, Enbridge Pipelines (North 

Dakota) LLC ......................................................................................................... 99 

Questions for Lynn Helms, response attached, North Dakota Department 

of Mineral Resources ............................................................................................ 101 

H.Z. Tad True, Bridger Belle Fourche Pipelines, response to questions ............ 103 

(1) 

AMERICA’S ENERGY FUTURE PART II: A 

BLUEPRINT FOR DOMESTIC ENERGY PRODUCTION 

Saturday, July 14, 2012 

HOUSE OF REPRESENTATIVES

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Washington, D.C. 

The committee met, pursuant to call, at 9:02 a.m., at Beckwith 

Recital Hall, North Dakota State University, Fargo, North Dakota, 

Hon. Darrell E. Issa [chairman of the committee] presiding. 

Present: Representatives Issa, Lankford, and Farenthold. 

Also present: Representative Berg. 

Staff present: Alexia Ardolina, Majority Assistant Clerk; Joe 

Brazauskas, Majority Counsel; Mark Main, Majority Director of 

Oversight. 

Chairman ISSA. A couple of announcements before we start. First 

of all, this mic does not amplify. It is just for recording. Second of 

all, it is always on. Always on. 

[Laughter.] 

Chairman ISSA. Lastly, this is a conventional hearing in every 

sense, so there is no waiver of any rules. We have a quorum and 

so on. But it will be less formal and considerably less formal. I will 

tell you, you know, your written statements are here, but we are 

under a time constraint only in that, you know, we have to get to 

an end. But we are not under a time constraint in that if you really 

need to get something out, we are not going to cut you off and say, 

you know, the gentleman is next. That does not mean that you can 

ignore that light, okay. 

So now we are really on. 

The committee will come to order. 

The Oversight Committee’s mission statement is that we exist to 

secure two fundamental principles. First, Americans have a right 

to know that the money Washington takes from them is well spent. 

And, second, Americans deserve an efficient, effective government 

that works for them. Our duty on the Oversight and Government 

Reform Committee is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have the right to know what they get from their government. 

We have a responsibility to work tirelessly in partnership with 

citizen watch dogs to deliver the facts to the American people and 

bring genuine reform to the Federal bureaucracy. 

2 

I am pleased today to be joined by my colleagues, including my 

friend from the great State of North Dakota. And I now ask unanimous consent that Rick Berg be able to participate fully in the committee, including opening statement and questioning. 

Without objection, so ordered. 

Additionally, if you would like to introduce your witnesses today, 

it would be my honor to yield to you. 

Today we are examining how oil production here in North Dakota has created jobs, but it more importantly has created the opportunity, spoken of since the Jimmy Carter era, to be energy selfsufficient. This shale formation is part of a new frontier of domestic 

oil production. 

A new technology not available 20 years ago, in combination with 

hydraulic fracking or fracturing, and a technology that goes back 

more than 60 years, has shown us that we can produce from solid 

rock more oil, more billions of barrels of oil, than we thought existed in America just a few years ago. 

North Dakota is not just producing oil, it is producing jobs, creating an extraordinary economic boon. Since 2004, the number of 

available jobs in the oil and gas production in this State has increased more than 100 percent. As of May 2012, North Dakota has 

the lowest unemployment rate in the country at 3 percent. And as 

we all know, 3 percent is effectively zero. 

Compared to the current national average of 8.2 percent, much 

of the State’s success has to do with its regulatory environment. 

Currently, it could take as few as 15 to 20 days to get a permit 

in this State to drill oil on private or State land. However, the everincreasing red tape from Washington threatens to keep this positive effect from continuing. Transportation is key to bring oil to 

market. 

The President’s refusal to grant a permit for the Keystone XL 

pipeline, which would have transported 100,000 barrels a day from 

these fields to the American refineries in the Gulf of Mexico, is just 

the tip of the iceberg. North Dakota is producing in the neighborhood of 600,000 barrels a day. The most efficient way to move oil 

is never going to be by the bucket, by the truck, or even by the 

train. Pipelines have, in fact, been critical for both oil and natural 

gas for 100 years in America. 

The recognition that by stopping an efficient distribution you 

slow the natural distribution would be bad enough. But ultimately 

what it does is it simply wastes additional carbon. Inefficiency of 

transportation, by definition, means we burn fossil fuels in order 

to get these fossil fuels to market. So for those who believe that reducing the carbon footprint is important, Washington is today 

working to the detriment of that very goal. 

The amount of oil coming out of North Dakota will not affect the 

world’s consumption of oil by one drop. It will affect the $600 billion that we might be paying in transfer costs to other countries 

if we do not become energy self-sufficient. 

Today, everyday, more than a billion of U.S. dollars leave the 

country to pay for foreign oil. North Dakota and other new finds 

with new technology will allow us to in the future be oil self-sufficient, natural gas self-sufficient, coal self-sufficient, and ultimately 

prosperous enough to invest in and to bring sustainable next genVerDate Aug 31 2005 11:33 Aug 23, 2012 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\75521.TXT APRIL
3 

eration energy to market. So those who so often ask us why is it 

we are not for all of the above, we are. But all of the below are 

a great part of the affordable energy today that funds all of the 

above’s future. 

And with that, I recognize Mr. Lankford for his opening statement. 

Mr. LANKFORD. Thank you, Mr. Chairman, and thank you to the 

witnesses for being here today, and for the University for hosting 

this as well. 

Since the 1970s and all the energy crisis and the price spikes 

that we have experienced, our Nation has talked about how do we 

become energy independent. This is a common conversation for decades now. We focused on exploration. We focused on supply lines, 

diversification of fuels, renewable fuels, natural resources and the 

environment, and more. We have asked ourselves, do we consume 

too much? Do we produce too little? Is our resource in short supply? 

Do we lack the resources to move and refine what we produce? 

In the middle of this 40-plus year journey, we have invested in 

oil, coal, natural gas, hydroelectric, solar, nuclear, geothermal, bio 

fuels, hydrogen, and a lot of experimental fuels. But we are not energy independent, not even North American energy independent. 

So I want to know why. What is preventing us from maintaining 

energy independence? 

Our economy runs on inexpensive and reliable energy, and millions of jobs are connected to energy. If we can move from talking 

about this to actually doing it, our energy independence could make 

the difference in the American economy. Around $300 billion a year 

is spent on purchasing crude oil from foreign sources, which is a 

tremendous drain on our economy. We also have to deal with the 

national security implications of depending on foreign sources for 

our energy. 

I want to know, is it a supply issue? The President has often 

quoted lately that America has 2 percent of the world’s proven reserves, but we use 20 percent of the world’s oil. He implies we are 

running out. I want to know, are we running out? 

In the 1970s, President Jimmy Carter’s Administration forced 

electricity generation towards coal because they believed that we 

running out of natural gas and we needed an abundant fuel for 

electricity generation. I want to know is it our regulatory environment. The Federal regulations and guidance appear to be in front 

of science at times. Are we getting ahead of science with our regulations? 

BLM and EPA have already made major moves against hydraulic 

fracking, but the 2010 congressionally-mandated study of fracking 

has not even released its draft report yet. Not even the first of the 

year study is complete yet, and the final study is not to be done 

until 2014. Yet actions have already been taken from the Federal 

government based on a study that does not even exist yet. So I 

want to know is there something that we are doing that we are getting ahead of science in our regulatory scheme. 

There are a lot of issues. We look forward to asking the questions 

and pummeling you with random different factoids of information 

to get on the Congressional Record. But it is important that we 

4 

continue on this conversation and that we get as much as we can 

of the facts and the details in. 

We hear a lot when we are in Washington, D.C. hearings from 

EPA, from the regulatory environment there. We hear a lot from 

folks that speak often inside the beltway. These field hearings are 

important to us to get the other side of the story and to be able 

to get a balanced perspective of what is happening in the field. So 

I appreciate you being here today. 

Mr. Chairman, I appreciate doing the opening statement as well. 

Chairman ISSA. Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much, Chairman Issa. I am a 

representative from Texas. I think we are the only State ahead of 

North Dakota right now. 

Mr. LANKFORD. So far. 

Mr. FARENTHOLD. But what Texas, I think, has learned is that 

the energy sector can lead a State’s economic growth, economic development, and create jobs. I think we have seen a lot of the same 

effect here in North Dakota. But we also need to be constantly vigilant about what we can do to continue to create jobs, continue to 

bring affordable energy to market, especially in this country. 

I think I agree with my colleagues that have spoken so far that 

energy independence is absolutely critical to this country, not just 

from a jobs standpoint, but from a national security standpoint. 

And the opportunity to create jobs, and not just jobs, but good-paying jobs associated with the energy sector is huge. 

You know, we are blessed in this country that our wages are 

high, but we’re also cursed that our wages are high because we 

sometimes particularly manufacturing to places overseas where 

labor costs are lower. But the low energy costs made available by 

new drilling technologies that have enabled North Dakota to prosper in their own oil production are great because what they do is 

they lower energy costs. And our lower energy costs in the United 

States can counteract some of the high labor costs that we have. 

But another curse we have in the United States is excessive government regulation. And low energy costs can help with one or the 

other, but probably cannot overcome both. These same regulatory 

burdens that affect other industries are acutely present in the oil 

and gas industry, especially in a time where it seems like there is 

from some sectors a war on traditional energy. 

There is a belief, I think, among some people, and it is an erroneous belief, that for green or new energy to succeed, traditional 

oil and gas needs to fail. And I think that is absolutely wrongminded. That is looking at the cup is half empty when in America 

I think we have looked as the cup being half full. We are a land 

of plenty, and our ingenuity, and our technology, and God’s grace 

are going to keep us as a prosperous, great country and best place 

in the world to live. 

With that, I will yield back. 

Chairman ISSA. And now for the gentleman from all of North Dakota, Mr. Berg. 

Mr. BERG. Thank you. I really want to thank the panel for being 

here. Just for information, Chairman Darrell Issa is a businessman 

from California. And he is probably one of the most visionary people that we have in the House. He is one of those people that can 

5 

see a solution, and he can put the pieces together. And I am just 

thrilled to have him here to see what is going on because as we 

have put the pieces together to have energy independence, Chairman Issa will be a true leader in the House of Representatives for 

that. 

So, I mean, this is a Saturday, too. I mean, I am not sure how 

many people are willing to do this type of work on a Saturday, so 

I certainly thank you for being here. 

And, Congressman James Lankford, is one of my freshmen colleagues from Oklahoma, and he has really distinguished himself as 

a real expert and leader in the oil industry, as well as all of energy. 

But certainly been a hard worker and also communicating with 

both the public as well as within our conference the issues that are 

important. 

And then certainly last but not least, Congressman Blake 

Farenthold, who is also a freshman colleague from Texas. And, you 

know, obviously Texas is doing a lot of things right. When you look 

at States that have good economies, growing economies, they have 

got that balance. And so I have seen a lot of parallels when it 

comes to the things we have done in North Dakota and the things 

that Texas has done. And also the things we need to do as a Nation 

probably reflect Oklahoma and Texas a little more than California. 

[Laughter.] 

Chairman ISSA. Let it be. 

Mr. FARENTHOLD. But that is the path we are on. And the panel 

that is here, I am just so excited. 

You know, I was thinking about today, some of these discussions 

happened in 1994. How do we increase energy production in North 

Dakota? This is not something where someone just kicked a rock 

and all of a sudden oil started squirting up. This precision hydraulic fracturing is a very scientific code that was broken by a partnership between really I would say the government research and the 

private sector, are really out there risking a lot of dollars. 

And in doing so, you know, what we have created to be, and everyone knows about that. I mean, 3 percent unemployment. Actually, I should correct everyone. It is not 3 percent unemployment 

any longer. 

Chairman ISSA. It is 2? 

Mr. FARENTHOLD. Two point seven. Well, we have $2 billion in 

reserve. I mean, as you will hear from Michael later, what is going 

on in our jobs, I mean, there are a lot of good things. When I talk 

to people around the State that operate multiple States, they say, 

you know, North Dakota has very strong, strict regulations. They 

do. But we know what they are, and they are stable. 

In 2005, I think one of the fundamental things we did in 2005 

is we created what we called Empower North Dakota. And as leader at the time, we used to have all these political debates in our 

chamber between solar, and oil, and wind, and coal, and all these 

different things. We were wasting so much political energy. And we 

ended up, we stepped back and said, you know what? We all want 

energy independence, and we recognized that. And we said, you 

know what? Everyone has a piece of this long-term solution. It is 

not going to be without wind. It is not going to be without solar. 

6 

But it is not going to be totally solar. It is not going to be totally 

wind. 

So what we did is we created this committee called Empower. 

Before our bill would be introduced in the North Dakota legislature, it would go through this Empower committee. And we had all 

the stakeholders on that committee. So at the end of the day, the 

bills that came through the legislature were well thought out. They 

had a plan, and their plan was to develop a logical process to really 

making North Dakota a key exporter of energy. And that is really 

when, if you crisscrossed the State, you would find all of the above 

here in North Dakota, from our wind, from our ethanol, to coal, our 

oil. And so there are a lot of partnerships that we have created. 

My goal, quite frankly, is that we create and empower America. 

And I think we can do that by, again, getting our focus—as the 

businessmen know, we need to have crisp, clear focus. And I think 

we can pull those things together long term for our country’s future. So I look at this as a big step and a good step to moving in 

that direction. Thank you. 

Chairman ISSA. If you will introduce —— 

Mr. FARENTHOLD. I would love to introduce the panel. The first, 

Al Anderson, who I think I first got to know Al when he was in 

charge of North Dakota’s only refinery. And just really a visionary 

and a great person, and now as the head of our Commerce Department. Really has spent his whole life in the private sector, and now 

is in the government sector and knows how those work together. 

Lynn Helms, who is—do you want me to introduce each one before they speak? 

Chairman ISSA. Yeah. No, I have to swear them in after you introduce them, so go ahead. 

Mr. FARENTHOLD. Do them all? 

Chairman ISSA. Let us just do them all. 

Mr. FARENTHOLD. All right. Get the formalities out of the way. 

Lynn Helms was the head of our regulatory here in North Dakota. 

I think typically you see, when you talk about a regulation in the 

private sector, you will see a barrier between those two, certainly 

from the EPA and a lot of things that happened in North Dakota. 

We had that barrier. Lynn has been, and I have been on all sides 

of the table with Lynn, from majority leader putting the budgets 

together and that kind of thing. And he has really, again been part 

of this long-term focus to help get things done. And I think the testament to his office and what he is doing. 

You know, we went in 2005, we had 3,000 barrels a day coming 

out of the block. 

Chairman ISSA. Three thousand. 

Mr. FARENTHOLD. In 2012, we have 610,000 barrels a day coming 

out of the block. That was his office is trying to manage and done 

it very effectively with permits coming out, as you said, 10 to 15 

days. 

And Michael from Job Service. This is going to be the fun story 

today is what does all this mean, because that is the bottom line. 

You know, North Dakota has seen more income rising faster. The 

economy is growing faster than any other State in the Nation, and 

it is because of this economic engine. So I look forward hearing 

about that. 

7 

Chairman ISSA. Thank you. Pursuant to the committee rules, all 

witnesses must be sworn. Would you please rise to take the oath? 

[Witnesses sworn.] 

Chairman ISSA. Let the record reflect that all—please have a 

seat—all witnesses answered in the affirmative. 

As I said before we opened, this is an official hearing no different 

than one in Washington. The lights that you are going to see come 

on in a moment in front of you are part of the universal system. 

Green means go, yellow means go faster so that you do not get 

caught underneath when it turns red, and red means stop. Please 

try to do that, particularly understanding your entire written statement is to be placed in the record. 

Additionally, I am going to hold the record open both for other 

members who could not be here today and for additional remarks 

you may have. 

Chairman ISSA. Before we begin, I would ask one more request, 

which is, would you all agree to answer additional written questions if we are not able to get all of our questions in during this 

time? 

Okay then. By unanimous consent, we will hold the record open 

for members’ questions and a reasonable amount of time for answering. 

Chairman ISSA. And with that, Mr. Anderson, you are recognized 

for 5 minutes. 

WITNESSES STATEMENTS 

STATEMENT OF AL ANDERSON 

Mr. ANDERSON. Mr. Chairman and members of the committee, I 

appreciate the opportunity to testify before this committee concerning America’s energy future. 

My name is Al Anderson. I serve as the commissioner of the 

North Dakota Department of Commerce. In that role, I also have 

the pleasure of serving as Empower North Dakota Commission 

chair. And Congressman Berg talked a little bit about that. And it 

is one of the exciting things that has truly made a difference in our 

growth over the past decade. 

North Dakota has experienced tremendous growth, and because 

of the limited time, I will just touch on some of the real short ones. 

We are number one in strongest economy. Our GDP was 7.1 percent. We have added over 65,000 jobs in the last decade. We have 

gone from 38th in the Nation to ninth in the Nation in per capita 

personal income in that last decade. That is a 78 percent increase. 

North Dakota has the lowest unemployment rate in the Nation, 

as you all noted, at 2.7 percent. What you did not note is that we 

have almost 23,000 jobs open today in North Dakota. We have also 

increased our exports dramatically, exceeding a billion for the first 

time in our State’s history. 

We have been blessed like Texas, like Oklahoma, with a lot of 

diverse natural resources. We are the second largest oil-producing 

state, and Lynn can talk about where we are at because it keeps 

going up so quickly, I cannot keep track. 

But we are also number 10 in coal production. We have significant—4,000 megawatts of lignite and other coal generation from 7 

8 

facilities across the State. We lead in 9 different agricultural commodities, many of those tied to the energy crops. 

We are ranked 10th in wind generation. We did not have a wind 

industry a decade ago, and now we deliver more than 1,400 

megawatts of wind generated power. 

In addition, we have increased our natural gas processing significantly. My numbers are slightly incorrect in here. We only have 17 

of those facilities in place. It has only been a 383 percent increase, 

not the 389 percent increase. 

We have also increased our—the State only has one oil refinery 

at the time, and that has gone through a 20 percent increase in its 

capacity. But we have 3 more that are considering. 

So, you know, one of the questions is, why has North Dakota 

been so successful? And I would first acknowledge that the success 

is primarily a result of the private sector, who have taken the risks 

and invested their resources in developing our energy industries. 

What the State does is it supports this development through positive business climate and policies that encourage that type of private investment. 

Empower—that is how Representative Berg identified it—is one 

of the primary vehicles in which we ensure that we have the appropriate policies in place. It was established by the legislature in 

2007. The members are appointed by the Governor. It covers all of 

the industries that exist in North Dakota. And its role is to make 

recommendations concerning the State’s energy policy. It brings individuals from the traditional side as well as the renewable energy 

side all together at the same table. The entire process has helped 

everyone work together. It has taken an in-depth look at the 

strengths, weaknesses, and opportunities in all of those key sectors, 

and helped develop policies to overcome those. 

These are busy business leaders with demanding schedules, yet 

they make this a priority and that is ultimately it works. 

Our EmPower Commission is currently working on its next 

version for our State legislature. It is on four topics: infrastructure, 

R&D, workforce, and regulatory environment. What I would like to 

focus on with my remaining comments, since it is turning yellow, 

is the regulatory environment, because the Federal government 

needs to provide a fair and responsible regulatory environment 

based on sound science and the capacity of current technology to 

ensure future development. Federal regulations must be cost-effective. There is always that balance. It must include sufficient lead 

time for the industry to adapt to any of these requirements affecting production. 

It is tempting for the Federal level to establish uniform regulatory policies; however this one-size-fits-all approach fails does not 

take into account the unique nature of each State and the scientific 

requirements to make good policy. We feel that Federal agencies 

need to recognize the unique environmental issues and partner 

with the States in regulations development. 

We ask that you also recognize the additional burdens that new 

regulations put in place for not only the State agencies, but also 

the industry. Appropriate programs are a necessary part of ensuring that North Dakota can maintain its clean environment in conjunction with a healthy business environment. Industry needs that 

9 

reduced uncertainty when making those long-term investments. 

Both would be aided by a national energy policy that provides some 

certainty for the future. 

We will learn by bringing individuals together from all sides, traditional and renewable; that that provides better solutions to our 

issues. This strategy might be a model for you to take forward at 

a national level. 

Mr. Chairman, members of the committee, thank you very much 

for allowing me today to come and visit with you. And that concludes my testimony, and I very am happy to entertain any questions. 

[Prepared statement of Mr. Anderson follows:] 

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Chairman ISSA. Thank you. Mr. Helms. 

STATEMENT OF LYNN HELMS 

Mr. HELMS. Thank you, Chairman Issa, and members of the committee for coming to the great State of North Dakota and for this 

opportunity to address you. 

I will keep my remarks brief on the first part. You are going to 

have experts talk about the size of the Bakken Resource. Let me 

just say that the State of North Dakota recognizes that the part 

of the Bakken that lies in the new State of North Dakota is probably 2 to 4 times the size of the USGS assessed in 2008 when they 

said it was the largest in the lower 48 States. 

One of the things I want to draw your attention to is it is so 

large that a 1 percent increase in recovery from this resource is 

equal to 5 months’ consumption in the United States. It is this that 

gives us the hope that North America can be energy independent. 

A 1 percent increase is equal to 5 months of U.S. oil consumption. 

And we are currently able to extract about 5 percent of the Bakken 

Resources, so a tremendous upward potential. 

We have vaulted from number 8 to number 2 in U.S. daily oil 

production amongst the States. We have added over 35,000 new 

jobs to the State’s economy. But we are not at the peak yet. We 

need to hire 10 people a day between now and the year 2020 in 

order to satisfy the needs of this growing oil industry sector in the 

State. It does produce real jobs with real income. 

North Dakota’s geology is unique, and I have included in my 

written testimony a characterization of that geology to show you 

why hydraulic fracturing is safe in North Dakota, why water disposal is safe in North Dakota, and how it all works. I think that 

is critical when you look at regulation and look at the fact that it 

needs to be state-based because each basin is unique. Each State 

is unique in their geology and in their approach to extracting oil 

and gas resources. 

I think the key, and Mr. Anderson touched on it, is that North 

Dakota’s resources are in excess of 80 percent owned by the private 

sector. Surface ownership is 89 percent private. Mineral ownership 

is 82 percent private. And our drilling rigs reflect that; 86 percent 

of them are working on private lands. 

Within the State, we average 15 to 20 days. So far in the year 

2012, we have averaged 18 days to issue a drilling permit. On the 

Federal level, our Federal counterparts at the BLM are exceeding 

6 months in approval of a drilling permit for Federal lands. 

What happens in the State of North Dakota is that most of the 

blocks of Federal acreage are very small. Thirty-four percent of our 

Bakken spacing units contain a small piece of Federal minerals. 

The average size of that Federal mineral tract is 27 acres, and 

yet if a wellbore is going to penetrate that Federal mineral tract, 

it requires one of those 6-month plus Federal permits in order to 

drill that wellbore. It also requires all of the NEPA studies and 

things like that, and imposes those upon private surface ownership. 

That is not good regulation. 

North Dakota has worked hard to have a stable tax and regulatory environment. Our regulations undergo a two-year review 

cycle, and every single comment has to be responded to in writing 

14 

by my Department of Oil and Gas. The industry always knows 

what the regulations are. They know what is coming. They know 

that their comments are going to be considered, as well as the public. Every comment from every individual has to be considered in 

writing, and it has to pass muster with the State legislature before 

those rules can take effect. 

So we keep them modern. The rules are modern. They keep up 

with the economics. They keep up with the technology. But there 

is that stable environment of knowing what the rules are, and how 

they are going to be enacted, and how they are going to be imposed. 

The North Dakota Industrial Commission Oil and Gas Division 

has commented on the EPA and BLM proposed hydraulic fracturing rules, and I have summarized those comments in my written testimony. What I really want to say is much of that is being 

driven by some agenda other than science. 

This is a States’ right issue. The geology is unique State by State 

and basin by basin, and it should be approached that way. States 

that have hydraulic fracturing rules should be exempted from the 

Federal rules. 

These proposals are going out, as Congressman Lankford said, 

even before the EPA–Congress mandated study is completed at the 

end of this year. They are going out without proper consultation 

with our Native American tribes. Their definitions of things like 

‘‘diesel fuel’’ are not science based, nor are the concentrations of 

these chemicals science based. 

Just a little research from the Federal Consumer Product Safety 

Commission would reveal that you can have up 10 percent petroleum products in something under your sink, and it does not even 

require a Mr. Yuck Sticker. And yet there is no cutoff for the concentration of these products in hydraulic fracturing fluid. It is not 

science based. We need that stable regulatory environment across 

the Nation. 

I will be happy to answer questions later. Thank you. 

[Prepared statement of Mr. Helms follows:] 

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Chairman ISSA. Thank you. Mr. Ziesch. 

Mr. ZIESCH. Yes. 

Chairman ISSA. Thank you. You are recognized. 

STATEMENT OF MICHAEL ZIESCH 

Mr. ZIESCH. Chairman Issa, members of the Committee, Representative Berg. I am happy this morning to be here to speak to 

the Committee on Oversight and Government Reform to testify on 

a blueprint for domestic energy production and North Dakota’s contribution towards the Nation’s energy independence. 

Among many other activities, our office—and for the record, I am 

Michael Ziesch, manager of the Labor Market Information Center 

of Job Service North Dakota. And among many other activities, our 

office produces the labor force statistics and the supply/demand 

analysis for the State of North Dakota. So we handle much of the 

labor force data for the State. It gets produced out of our office. 

And North Dakota has experienced a long period of economic 

strength and employment opportunity. Activity has been led in recent years by agriculture and energy. But the economic gains have 

also been more widespread through the industries of North Dakota. 

This gives evidence of a balanced economy in the State and is highlighted in several labor force statistics. For instance, the 2.7 percent; 3 percent unemployment rate. They are both correct in that 

one is seasonally adjusted, and one is not seasonally adjusted. So 

you can both be correct on that. And as lowest in the Nation, it is 

a position we have held for approximately 3 years. 

As mentioned, energy development is an important contributor to 

the State’s strength. And also as mentioned earlier and touched 

upon, North Dakota has many components of energy production: 

coal and gas, oil and gas, coal, biomass, geothermal, solar, hydroelectric, and wind. But to keep on topic with this morning’s committee hearing, we will focus on oil and gas exploration and production activity in the Bakken Formation. 

The impact of the Bakken Formation on employment and wage 

levels in the State has been significant. However, measuring its 

total contribution to the State’s economy is challenging. This is because the activities taking place in the Bakken include companies 

involved that are the direct oil exploration company codes, industry 

codes, which are subsets of the mining industry and easily identified. But as well, subsets of related industries are involved. For instance, a portion of employment and wages from companies across 

all industries codes could possibly be associated with the Bakken 

play, especially those located in the northwest part of our state. 

Industries with strong Bakken relationships that are not in the 

mining code which include such things as transportation, the movement of oil, water, sand and gravel, and other material and supplies, construction of roads, bridges, well pads, commercial and residential buildings, through many other industries, even utilities, 

the providing of infrastructure and power supply to the rig sites. 

And then we can get into the next tier of service, which would 

include such things as lodging and eating establishments, and even 

public administration and support, the rise in support of the 

Bakken. With that being said, to get an idea of the Bakken impact, 

we will look at employment and wage levels geographically for just 

23 

those oil and gas producing counties to see how they have changed 

since pre- and post-Bakken, as well as the oil and gas company 

subset that I spoke of earlier. We will use 2004 as our benchmark 

period, and we will 2011 as our post-period. That is the most recent 

annual average we have available. 

In looking at the total economy of the 17 oil and gas producing 

counties, total employment grew by almost 50 percent over that period compared to 18.2 percent for the State. Total covered wages 

or payroll in those counties increased by almost 180 percent over 

that period compared to 70 percent for the State. And annual average wages in those counties increased from slightly over $27,000 in 

2004 to over $51,000 in 2011, almost an 88 percent increase, approximately double that of the State. 

Looking specifically at oil and gas producing companies during 

the same time frame, in 2004 there were approximately 2,050 

workers in oil and gas companies in the State under our industry 

codes. And that has increased to nearly 15,000 by 2011, about a 

631 percent increase. 

Total average covered wages for those types of companies also increased almost double over that period from about $50,000 a year 

in 2004 to over $90,000 a year in 2011. And that does include the 

influence of such things as overtime and bonuses, which are prevalent in the industry. 

For the current condition and in terms of job openings, as alluded to earlier, our labor exchange system administered by Job 

Service North Dakota had 22,695 open and available positions, almost a 50 percent increase over the year. These jobs occur in all 

occupational groups, including those are a little more general and 

mainstream, such as those in healthcare and sales related, to those 

that are more Bakken-focused, such as those in construction, extraction, transportation, material. However, only about a third of 

the job openings in the State are in oil and gas-producing counties. 

The balance are in the rest of the State anchored by the 3 largest 

cities: Bismarck, Fargo, and Grand Forks. 

As I see, I only have 10 seconds left. I would be happy to answer 

any questions. I thank you for this opportunity this morning to 

visit with you. 

[Prepared statement of Mr. Ziesch follows:] 

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Chairman ISSA. Thank you. I recognize myself for a round of 

questions. 

Mr. Ziesch, you are the best witness, so I will go with you first. 

The best witness who somebody who answers questions and answers them quickly. Average in the field oil worker about $97,000. 

Is that a pretty good figure? 

Mr. ZIESCH. It is. 

Chairman ISSA. And that is so much higher than the average 

American salary. Is it fair to say that a rising tide helps all ships; 

that, in fact, people who make that kind of money, families who 

have one or more work are making nearly $100,000, that ripples 

into the grocery store, the restaurants, the addition put on the 

house, all the other things that add to a vibrant economy? 

Mr. ZIESCH. Mr. Chairman, it does indeed cause wage compression. It does indeed reflect in competition for workers amongst 

other industries. And as I alluded to, in those oil- and gas-producing counties, that was totally economy effect. So indeed it does. 

Chairman ISSA. So even when the growth ceases when you get 

to a level area, if your makeup of jobs includes jobs that pay 

$100,000 a year, in other words, high-paying jobs, the element of 

high-paying jobs is, in fact, where the success of an economy goes. If you are at full employment, but the average wage is $35,000, 

I would presume you are not as well off as if you have more and 

more of those positions that pay the high dollars. 

Mr. ZIESCH. Mr. Chairman, that is indeed correct. It becomes a 

function of discretionary income and ability to buy beyond subsistence. 

Chairman ISSA. And when you mentioned the 29,000 job openings, what is 3 percent of your workforce, or 2.7 percent, Mr. Anderson. How many people would that be roughly? 

Mr. ZIESCH. It is 23,000 open and available positions. Three percent of that—— 

Chairman ISSA. No, 3 percent unemployment means how many 

people in this State? 

Mr. ZIESCH. The number of unemployed for the most current 

months was 10,611. 

Chairman ISSA. Okay. So, Rick, you know, you were kind of 

sandbagging us. What you are really saying is you have negative 

6 percent unemployment because you have about 9 percent of the 

force in job openings, while you have 3 percent in people who say 

they cannot find a job. 

Mr. ZIESCH. Mr. Chairman, the labor force statistic only includes 

native North Dakotans. So we do benefit from the influence of commuters and out-of-state job seekers. 

Chairman ISSA. Well, of course you would. You have got to import labor when you have got more job openings than you have people to fill them. You folks are really kind of—that 3 percent, you 

should go aw, shucks when you say. 

[Laughter.] 

Chairman ISSA. The truth is anybody that walks in that can 

meet the minimum requirement for a job, you are going to hire 

them in the State right now based on these openings without people to fill them. Is that not true? I am not trying to say that you 

have the easiest job in America. 

33 

[Laughter.] 

Chairman ISSA. But it is looking pretty good. 

Mr. ZIESCH. Mr. Chairman, you bring up an interesting side light 

to what happens here. I do interact almost on a daily basis with 

out-of-state job seekers. And one of the myths that we want to dispel or one of the messages that we want to instill, and I am sure 

Mr. Anderson would support me on this because his office has a 

lady that works specifically for this, is we work very hard with outof-state job seekers to make sure that when they look for a position 

in North Dakota, that they do an honest assessment of their skills, 

knowledge, and abilities. Are they able to pass the drug test, pass 

a criminal background check? 

We want them to come up here and be successful, but we hope 

that they utilize our services at seekjobsnd.com, and do their homework prior to coming up to maximize their chance for success. 

Chairman ISSA. Okay. You have got a hard job. You have got to 

try to bring only good people in to fill these jobs. 

Okay. Mr. Helms, you mentioned the small tracts of Federal 

lands. Just real quickly, when you go from, in the Bakken field, 

when you go from State land to private land—under the land, if 

you will—to Federal, is there any change in the hydrology, in the 

geology, in the water table? Does it change when there is a title 

change of that sort? 

Mr. HELMS. Mr. Chairman, you are on track. Absolutely none. 

The geology is consistent that as you cross those boundaries of 

property ownership, the only thing that changes is the regulatory 

burden. 

Chairman ISSA. So from a Federal need to produce all these additional red tape, all this additional—if you’re laterally drilling and 

you happen to go from private land to State land and then to Federal land, since there is no change at all, there is absolutely no difference to the American people or the people of North Dakota in 

that. Where is the Federal need to have you change your standards? Let me rephrase that. You have an additional permit. I am 

assuming there is no need. no demonstrated need. 

Mr. HELMS. Mr. Chairman, I would agree with you. We do not 

believe that there is any need for that Federal permit when you are 

just crossing into Federal lands from private or State lands. 

Chairman ISSA. So now your pad, I would assume, almost always—and we have a second panel—but almost always selected not 

to be on Federal lands. So let us assume that the pad is not on 

Federal land, but laterally you are drilling under Federal land. 

Since you are going through or the companies are going through 6 

months or more of paperwork and additional studies. At the end 

of the day, is there a material difference in the drilling? Do you 

see, as somebody who sees these permits, do you see a change? 

Mr. HELMS. Mr. Chairman, there is no material change in environmental protection—— 

Chairman ISSA. Same drill bits? Same drill bits? 

Mr. HELMS. Same drill, same permits. 

Chairman ISSA. Same crews? 

Mr. HELMS. Same crews. Same completion. 

34 

Chairman ISSA. So we are going through cost and a lot of paper 

studies, and at the end of the day 10,000 feet under the ground 

make no difference in the actual production. 

Mr. HELMS. Mr. Chairman, that is correct. 

Chairman ISSA. I will reserve the rest of mine for a second 

round, Mr. Anderson. 

With that, Mr. Lankford. 

Mr. LANKFORD. I was thinking along the same things on that. 

Mr. Ziesch, by the way, sitting behind me on the plane last night 

was a plumber who was on his way to North Dakota to come find 

a job. And so it was interesting to get a chance to interact with him 

a little bit on that. 

Mr. Helms, I want to talk to you briefly about the diesel guidance that has just come out. There is a, as you mentioned, a little 

cornucopia of new regulations that are coming out ahead of the 

study. One of them deals with diesel. Can you dive a little bit more 

into that, because this should be an issue that is traditionally a 

State primacy issue for making decisions on that. What has 

changed or has anything changed on that? 

Mr. HELMS. Representative Lankford, the diesel guidance that 

was proposed, and now the comment period has been extended into 

September, which we are grateful for, expands greatly the regulation under the Safe Drinking Water Act, and actually puts the Federal government oversight in a position of stepping over State primacy where it has been granted for 20 or 30 years in underground 

injection controls, and begins to require permitting and consideration of permitting schemes among States that have been granted 

primacy over that program. 

Yet one of the problem is that it takes a long-standing and very 

successful program of regulating water disposal or waste disposal 

in the oil fields, and shoehorns an energy policy act 2005 allowance 

to regulate diesel in the Safe Drinking Water Act into that program, into the UIC class. 

Mr. LANKFORD. Why was diesel put into that in 2005? 

Mr. HELMS. I was in this position in 2005 when that occurred, 

and it was placed there because companies were hydraulically fracturing coal bed methane wells, using diesel fuel as the carrier fluid. 

And it was believed that that created some endangerment where 

those coal seams were being used as drinking water resources. 

That was logical and thoughtful and probably a good move. 

What has happened with this guidance is to take any amount of 

anything that is defined in the guidance as diesel fuel as under the 

regulatory realm of UIC class 2 and shoehorn it into that regulation. 

Mr. LANKFORD. So go back to 2005. Thousands of gallons of diesel fuel are used as the primary fluid that is going through to get 

fracked. Now shifting it to say if you put 6 ounces in 3 million gallons worth of water, anything that we could remotely call diesel, 

we are now going to impose all these new regulations. Is that 

where we are? 

Mr. HELMS. Mr. Congressman, that is where we are. 

Mr. LANKFORD. Solution wise, we have got to put some boundaries around EPA not only to get back to the intent of what the 

35 

2005 law intended to do rather than its huge overreach it is currently participating in. 

What is an appropriate amount to balance out that? I think you 

mentioned a 10 percent level before. Is it a 50 percent level of diesel? Is it a 5 percent level? What would you recommend, or is it 

just a classification issue to make sure the classification of diesel 

is correct? 

Mr. HELMS. Well, Mr. Congressman, I think it is sort of all of the 

above. I think if the Consumer Product Safety Commission has 

done all of the studies, which they have, to determine what is a 

safe level of petroleum products in consumer products under the 

sink without requiring any labeling or warning labels at 10 percent, then 10 percent is a pretty good rule of thumb to start with. 

That perhaps ought to be the starting point, and then allow comments one way or the other to adjust that slightly up or down. 

But at the same time, States like Oklahoma and like North Dakota understand their local geology. And many of the States have 

adopted hydraulic fracturing regulation that requires certain 

wellbore construction techniques, testing, and chemical disclosure 

on the nationwide tract focused program. 

If a State has taken those 3 steps, it should be explicitly exempted from this guidance. If it has not, perhaps Federal oversight is 

a good idea. But States understand their geology and ought to be 

explicitly exempt. 

And then finally, I really think we need to wait for the EPA 

study, and we also need to base the definition of diesel fuel on 

science. It needs to be something we would recognize as diesel fuel. 

It does not need to be any synonym or possible future name that 

somebody might think looks or acts like diesel fuel. It needs to be 

science-based. 

Mr. LANKFORD. I had some interesting interaction with some 

leadership on the water side of EPA because some of their definitions, I said if I had my diesel truck and I put this into the tank, 

will it run? And they said, yes, but it comes from the same origin. 

And I said, I understand, but it is not diesel by any means. So with 

that, I yield back. 

Chairman ISSA. If the gentleman would yield for a second. 

Mr. LANKFORD. Absolutely. 

Chairman ISSA. Mr. Helms, I just want the record to be clear. 

What you are really saying is that if I have one sub element, some 

part that is found in diesel fuel, and I put 1 drop into a thousand 

gallons, 1 drop of something that is a component of diesel fuel, EPA 

wants to say that hook now allows us to call it diesel and regulate 

it. Is that basically what you are seeing in the proposed rule? 

Mr. HELMS. That is what we see, Chairman Issa, in the proposed 

guidance as it is proposed. Any amount of anything that contains 

a component, like diesel fuel, and that is brought in under the synonyms, would then provide the hook for it to be regulated under 

the UIC class 2 program and permits be issued. 

Chairman ISSA. But in order to get that hook, you could have an 

amount of benzene or something, that I could still drink the water 

you are injecting, and they would still say the hook got them in. 

Is that right? They are not talking about a concentration of something that is terrible. They are talking about something that may 

36 

already be diluted before it ever hits anywhere else. And they still 

want to regulate it. It is something I could drink from under my 

sink, and they want me to keep from doing it. 

Mr. HELMS. Mr. Chairman, that is how we see this guidance in 

its current form. 

Chairman ISSA. But I can take it out from underneath my sink, 

and I can pour it into my sink into the water supply, and it would 

be okay. 

Mr. HELMS. That is correct. 

Chairman ISSA. Oh, so it is okay to pour it into the water supply, 

but not okay to inject it 10,000 feet down. 

Mr. HELMS. That is how this current guidance works. 

Chairman ISSA. Mr. Farenthold? 

Mr. FARENTHOLD. Thank you, Mr. Chairman. Actually, Mr. 

Chairman, I would like to follow up on something that the chairman was asking about, and it is about the additional permitting requirement once you have made it to Federal lands. 

Let me make sure I understand this correctly. I could have a 

drilling platform, let us say, half a mile from government land. 

What is the typical depth of the Bakken well? 

Mr. HELMS. About 10,000 feet. 

Mr. FARENTHOLD. All right. So I am a half a mile away. I have 

drilled 10,000 feet—2 miles underground, and the way these horizontal wells work, you get 10,000 feet below, you hang a right, and 

you go out a mile. So you creep under some Federal lands 2 miles 

deep, and you have to jump through these hoops. 

Mr. HELMS. That is correct, Congressman. 

Mr. FARENTHOLD. There is nothing on the surface of the Federal 

land. There is nothing within 2 miles of the surface—well, half a 

mile in my scenario. There is nothing within a half a mile on the 

surface and 2 miles underground, is that correct? 

Mr. HELMS. That is correct? 

Mr. FARENTHOLD. And 2 miles underground, those two miles, it 

is just rocks. 

Mr. HELMS. That is correct. Nothing changes at the end of that 

drill hole. Nothing changes. 

Mr. FARENTHOLD. I just wanted to make sure we were clear on 

the absurdity, what I consider to be the absurdity of that. 

Let me shift gears a little bit and talk to Mr. Anderson. You 

know, we have got some shale formations in Texas, the Eagle Ford 

in particular. And we are experiencing some real growing pains as 

a result of that. I have been curious how you all are dealing with 

the issues like housing for the variety of new residents, additional 

road wear on the roads, qualified an oil field, traffic. And how your 

cities are dealing with the increased truck traffic through the city 

center. 

Mr. ANDERSON. And, Representative, thank you for that question. We have actually worked with several Texas representatives 

on sharing notes on those specific challenges because they are very 

similar in Texas and in North Dakota. 

And let me—even though I may not be the best witness, I want 

to expand a little bit on it because western North Dakota was—you 

know, the roads in that is two-lane roads. They were agriculture. 

They were not set up for the heavy traffic and things like that. So 

37 

it is understandable where that infrastructure needs to be beefed 

up. 

What our State legislatures did in the last session was they identified $1.2 billion set aside specifically for construction issues. 

Within that $1.2 billion, a significant amount is tied to highway, 

whether it is State, whether it is county, or whether it is township, 

to help out in that particular area. 

Other programs, like the Housing Incentive Fund, which are tax 

credits that are given to developers to give low and affordable housing, has been established. And those are set up to—it is not the 

Federal government’s designation of low income. It is a designation 

that the State has done itself because it is the folks on Main 

Street. While we are waiting for the wage inflation to hit others in 

all of those particular areas while that settles out. There are folks 

that are in —— 

Mr. FARENTHOLD. And companies are very cooperative with you 

on this, or there is an adversarial relationship? 

Mr. ANDERSON. Industry has been outstanding on it. Some members have gone as far as doing their own developments in talks. 

Many others, as in Marathon, has donated a significant amount of 

their tax revenues —— 

Mr. FARENTHOLD. I am running out of time. I did want to ask 

Mr. Ziesch a quick question. With the high wages the oil companies 

are paying, is that driving wages in other sectors? I mean, are your 

folks in fast food restaurants doing better wage wise because they 

come to you, and you might come hire them away. 

Mr. ZIESCH. Representative Farenthold, indeed the wages have 

spilled over into those leisure and hospitality type industries as 

well, and restaurants have had to pay considerably more shift differentials during the lunchtime hours, yeah. 

Mr. FARENTHOLD. Would it be fair to say you all have full employment? Anybody who wants a job, willing to show up, can pass 

a drug test, and do the work is going to be able to get a job? 

Mr. ZIESCH. Mr. Farenthold, Representative, certainly some employment is always frictional, but we are at full employment. I 

would say as much. 

Mr. FARENTHOLD. Yeah, I would imagine that, you know, the 2 

percents are people who are between jobs because they quit because they did not like it or they got fired for something else. I 

mean, that figure looks pretty close to full employment. 

Mr. ZIESCH. Representative Farenthold, you are exactly correct. 

Some of it is frictional. Some of it seasonal. Very little would be 

structural. 

Mr. FARENTHOLD. Thank you. 

Chairman ISSA. The gentleman from North Dakota, Mr. Berg. 

Mr. BERG. Thank you, Mr. Chairman. I really appreciate the 

panel discussion. I want to just briefly talk about the regulatory 

partners. In North Dakota, there is a unique difference between 

how Washington and North Dakota operate. In North Dakota, we 

have an administrative rules committee, and so when the legislature passes a bill having to do with the energy industry, whatever 

department is closest to that will write the rules. And before those 

rules are put out in the public or enforceable, they go through a 

38 

bipartisan committee, House and Senate, Republican and Democrat, called administrative rules. 

And once in a while we will have rules that come down that really do not make any common sense. And typically, everyone is 

aware of that before it even gets to the committee. Everyone comes 

to the table, they talk it out, and they figure out a better way of 

applying that regulation to get the right outcome in a common 

sense manner. 

And in Washington, we passed a bill called the REINS Act that 

was similar in the fact that if there was a major rule before it 

would be imposed, it would go through for an up or down vote in 

the House and Senate. 

I guess I would just like, Mr. Helms, for you to address the 

checks and balances in our regulatory process here that really end 

up with common sense regulations and stability. 

Mr. HELMS. Well, Representative Berg, thank you for the opportunity. I touched on that a little bit in my testimony, but we have 

a continuous improvement cycle, as I stated, in our rulemaking 

within the oil and gas division. Not every agency does that, but we 

do because technology and economics change so rapidly in this industry. 

What makes it work in North Dakota partially is the fact that 

our Administrative Practices Act requires every comment to be addressed in writing. And so they can be lumped. I mean, if we get 

a thousand comments from citizens that are very, very similar, we 

can sort of summarize that. But it has to be addressed in writing 

as to how we are going to deal with that in the rulemaking. 

That addressment in writing has to go the State’s attorney general, first of all, to make sure that we follow the proper legal practice in making that rule. And then it does have to be presented to 

the administrative rules committee, which is bipartisan, and can 

look at that and say, I do not believe you have really addressed 

these comments coming from industry or from the general public. 

We need to remand this back to you for some reconsideration, some 

changes, and bring it back to us in the future. 

That is what keeps the practice common sense. That is what 

keeps it very stable and creates this regulatory environment where 

everybody knows what the rules are and how they are going to be 

imposed upon industry or the public. And it provides that stability 

that this industry needs to be making the kind of investments we 

are talking about. 

If you are going to put $10 million on the table to drill a Bakken 

well, you need to know what the rules are going to be 120 days 

from now when it goes on production in order to make that kind 

of investment. And it drives investment when you have that kind 

of common sense. 

Mr. BERG. Thank you. You know, the example was used about 

a drop in a thousand barrels compared to 20 percent petroleum 

under the sink. I mean, that is the uncertainty that is created in 

this industry when there is not that consistent rulemaking. So 

whenever you can have your elected officials can have a final veto 

on the rulemaking, I think that is real positive. 

Mr. HELMS. It is beneficial. And—continue. 

39 

Mr. BERG. Well, I just wanted to make two summary points and 

then yield back. The first point I think that has been made is when 

you have wages of $87,000, that does not mean that that is the 

only wage of $87,000. That means that every wage all the way 

down is being driven up. And I think, you know, we have heard 

stories of the McDonald’s and Dairy Queen with $500 bonuses and 

$15 to $17 an hour. I mean, that is really what we are seeing happening. It is really pulling across the whole State. 

The other point that I wanted to make, and, Mr. Helms, you 

pointed this out to me before that I thought was real good, that 

there are easements, old easements that the government has that 

might be for a road, or a pipeline, or something. And so that easement would go all the way down to the center of the earth. 

And so part of when we are doing these permittings, some of 

these Federal lands are because of that, you know, narrow, but 

really going all the way down, creates a challenge. 

Mr. HELMS. Absolutely. We have got a couple of situations where 

we have a 1,280-acre Bakken spacing unit. Then the horizontal 

wellbore is going to be 2 miles long. It needs to cross a hundred 

feet of Federal easement, and that triggers going from an 18-day 

State permit to a 6-month Federal permit. All the archaeology 

studies on the private land, all of those things that come in with 

a Federal permit. That is not common sense regulation. 

Mr. BERG. I yield back. 

Chairman ISSA. Thank you. And we are going to do just a oneminute second round. So let me understand this. Has the Federal 

government at the end of 6 months of cost and paperwork ever said 

no? 

Mr. HELMS. Mr. Chairman, I think at the end of that 6 months, 

they have said maybe, but I do not recall them ever saying no. 

Chairman ISSA. Okay. And just to ask the question one more 

time. The EPA wants to regulate something I can drink if it put 

it 10,000 feet under the ground. 

Mr. HELMS. I think that is an accurate description. 

Chairman ISSA. Certainly I pour it into the water supply. 

Mr. HELMS. Yep. 

Chairman ISSA. Okay. Last but not least, Mr. Berg is with us, 

and of course he was a leader in the legislature before he came to 

Congress. Which, in each of your opinions, has more to do with the 

current economy here in North Dakota? His effort and the efforts 

of the State legislature and the governor, or President Obama’s 

current strategy for energy production, including obviously Keystone pipe and so on. If you could just briefly say which one do you 

think wins that. 

[Laughter.] 

Mr. HELMS. Without a doubt, our local leadership has set the 

stage because that was set 10 years ago on our vision, so there is 

no doubt—— 

Chairman ISSA. So the State is where it is because of the State, 

not because of what we in Washington have done for you. 

Mr. HELMS. Mr. Chairman, I think that is accurate. If you look 

at oil production in the United States, it is up in general, but it 

is down on federal lands. And it is because of the actions of the 

40 

State over a long period of time to create this stable environment 

that the investment has occurred. 

Chairman ISSA. Does anyone else have a quick follow-up? Mr. 

Lankford. 

Mr. LANKFORD. I do. I have a quick one, thank you. This is for 

Mr. Anderson. You made an offhand comment—and it might not 

have been offhand at all. But you mentioned that there are 3 more 

refineries considering coming to North Dakota. Can you tell me a 

little bit about the timing, the when issues of that, and what are 

the issues—are you talking about expanding existing refineries or 

entirely new and starting ones in an area that previously did not 

have a refinery. 

Mr. ANDERSON. Thank you, Representative. These would be 3 

brand new ones. And that is why there is always some skepticism 

when it comes to that, but they are at different stages. The why 

is because—— 

Mr. LANKFORD. Why the skepticism of 3 new refineries? What 

would hold them back from being in an area like this? 

Mr. ANDERSON. We, as the U.S., has not built a refinery since 

1976, so with all of the regulatory hurdles and challenges, as well 

as the marginal economic environment from their standpoint over 

a long period of time, that uncertainty associated with the regulations makes it very difficult for people to invest in. 

Mr. LANKFORD. So you are saying we could have 3 more refineries here if it were not for the Federal government. Now those refineries exist somewhere in the world, so the oil will be refined. So 

the issue really is we could have three more refineries here, all the 

construction, all the billions in investment, all the jobs, everything 

else here, if it was not for the Federal government prohibiting it 

basically. 

Mr. ANDERSON. That is definitely a factor in the decision to invest that much capital. 

Mr. LANKFORD. Does anyone have a set of ideas that you have 

seen on how we get past that, identifying what the regulations are? 

I mean, Rick Berg is working on it as hard he can, I know. But 

does anyone have ideas on some of these things to say how do we 

solve this? 

Mr. ANDERSON. And the best way I could answer that, and it 

probably is not very effective, is that having an understanding 

what the regulatory environment would be at five years, 10 years, 

15 years down the road, if you had an energy policy that was clearer on that would encourage investment. 

Mr. LANKFORD. So you are talking about current regulations, 

plus the uncertainty of the future. 

Mr. ANDERSON. Absolutely. 

Mr. LANKFORD. Okay. With that, I yield back. Thank you. 

Chairman ISSA. Thank you. 

Mr. FARENTHOLD. Yeah, I just want to follow up with that, Mr. 

Anderson. In this period since the 70s when there has been no new 

refinery built in the United States, that is not because the demand 

for the product—the refinery was built elsewhere. Is that not correct? 

Mr. ANDERSON. Yes, sir. 

Mr. FARENTHOLD. Okay. Thank you. 

41 

Chairman ISSA. Okay. I want to thank our panel. You have been 

very good. And, Mr. Anderson, you did not need to be quite as 

scared that we were going to hurt you if you went long. We have 

gotten done within our timeline. We thank you, and we will now 

take a quick recess and set up for the next panel. 

[Recess.] 

Chairman ISSA. The committee will reconvene. 

We now recognize our second panel: Mr. Jack Ekstrom is Vice 

President of Corporate and Government Relations at Whiting Petroleum Corporation. Mr. Jack Stark is Senior Vice President of 

Exploration at Continental Resources. Mr. Kevin Hatfield is Senior 

Director of Gathering Systems at Enbridge, Inc. And Mr. Tad True 

is Vice President of Bridger Pipeline, LLC. 

As you saw in the first panel, all witnesses on this committee 

must be sworn. Would you please rise and raise your right hands 

to take the oath? 

[Witnesses sworn.] 

Chairman ISSA. Let the record reflect all witnesses answered in 

the affirmative. 

You have also seen our stoplights. I give a B plus to our first 

panel. They were pretty good. See if you folks can get an A. 

Mr. Ekstrom. 

STATEMENT OF JACK EKSTROM 

Mr. EKSTROM. Mr. Chairman and members of the committee, 

good morning. I am Jack Ekstrom, vice president of Whiting Petroleum Corporation, a Denver-based New York Stock Exchange trading exploration of production company. Whiting was founded in 

1980 and became a publicly-traded company in 2003, and through 

acquisitions doubled the size of the firm in 2004, and again in 

2005. Among those were properties in North Dakota that provided 

Whiting with a toehold that has allowed us to become the number 

3 oil producer in this State. 

How does this translate into jobs? When Whiting went public in 

2003, we had 110 employees. As of July 1st, 2012, Whiting employed 776 individuals, and we have over 150 open positions in 

North Dakota. Currently, we have 21 drilling rigs operating in the 

State and in Montana drilling in the Bakken field. 

The drilling rig employs approximately 25 individuals, the frack 

crew employs approximately 65, and we employ two full-time frack 

crews. There are approximately 40 vendors involved in the drilling 

of each well. If each vendor had only one employee, that would be 

another 40 jobs. Add it all up and it approached 100 indirect jobs 

created by our activity alone. 

These people need housing, food, daycare, schools, and churches. 

So the impact of our efforts on the economy is far reaching. Our 

saying is if you drill a hole, money and jobs come out. 

Whiting, like the vast majority of our peers, strives to be a good 

steward of our assets for our shareholders, for the State and governmental areas where we operate, and for the mineral interest 

owners who have allowed us to develop their resource. We are good 

stewards of the environment to preserve the environmental resource for future generations. 

42 

I have provided a Whiting map partially in your packet there of 

some of our operations in North Dakota. It provides graphic evidence of how our operational focus and many other operators is on 

private- and State-owned lands. On this map, the green shaded 

acreage is federally owned. You will note that in comparison to 

private- and State-owned acreage, there is little drilling, but the 

Federal acreage is clearly within areas known to be productive. 

Well, why is that? Because the process on Federal lands is so bureaucratic and time consuming that companies avoid Federal acreage if at all possible. 

Obtaining permits from the State of North Dakota is a reasonable process. The one area we are having difficulty is in Stark 

County where there is Federal surface and mineral ownership near 

Teddy Roosevelt National Park. And by the way, the park is off 

limits. 

The average time to receive an approved drilling permit for us 

on this acreage is 298 days. On average, we receive an approved 

drilling permit from the North Dakota Industrial Commission in 

just a matter of days. That is why oil production on private lands 

was up 14 percent last year, was down 11 percent on Federal 

lands. 

If the Bakken were largely on Federal lands, operators would be 

tied up somewhere in the Federal process. Production would be 

considerably lowered, and North Dakota would not be enjoying a 

2.7 percent unemployment with a billion dollar budget surplus. 

The Federal government owns millions of acres prospected for oil 

and gas across the Intermountain West. The unmistakable conclusion is that the prosperity, the jobs, the harvesting of domestic resources from unconventional oil and gas ways, enhanced recovery 

projects, and technology breakthroughs to come can only be realized by mandating the Department of the Interior plan to encourage development, provide leasing certainty, and streamline oil and 

gas permitting. 

In addition, Interior is seeking to regulate well completion operations, as we have discussed earlier. These would directly overlay 

and duplicate individual State regulations that now apply on Federal lands. The Department has neither the staff nor the technical 

expertise to regulate such activities. 

The cost of the proposed rule for western States as calculated by 

John Donovan Associates for the Western Energy Alliance is about 

$1.6 billion annually. The copy of the Donovan report is attached 

for your reference. 

It must be noted that individual States have effectively regulated 

such operations for decades. Of the 1 million plus wells hydraulically fractured since the 1950s, not a single case of contaminated 

drinking water has been documented. The North Dakota template 

should and could be the model for western State with prospective 

oil and gas resources under Federal lands designated for multiple 

use. 

Recent regulation in partnership with resource developers works 

well here. Thank you very much for the opportunity to present our 

views. 

[Prepared statement of Mr. Ekstrom follows:] 

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Chairman ISSA. Mr. Stark. 

STATEMENT OF JACK STARK 

Mr. STARK. Yes, thank you, Chairman Issa, and committee members. And I am honored to be here today to speak with you about 

the prolific Bakken oil field in North Dakota and Montana. 

I am a geologist by degree and serve as senior vice president of 

exploration for Continental Resources out of Oklahoma City. Continental is the 9th largest producer of petroleum liquids in the lower 

48 and is the number one oil producer in the Wilson Basin where 

the Bakken field is located. 

Continental has also been a leader in developing the Bakken 

field. It is currently the largest leasehold owner, and also the most 

active driller in the play with 940,000 net acres under lease and 

26 rigs active in the play. 

Now the committee asked that I provide some perspective on the 

size and the geology of the field, so I will start by stating the 

Bakken field could prove to be the largest oil field discovered in the 

world in the last 40 years. Current estimates of technically recoverable reserves for the field vary from a low of 3 to 4.3 billion barrels 

by the USGS to 24 billion barrels by Continental Resources. 

For perspective, Prudhoe Bay, the largest oil field in the United 

States, has produced approximately 12.3 billion barrels of oil and 

has about 1.3 billion barrels left to be recovered. A more striking 

perspective is that the Bakken field could double the EIA’s estimate of proved reserves for the United States, stand at 21 billion 

barrels. 

As technology continues to improve, I expect, you know, reserves 

for the Bakken will grow. And, in fact, technology is growing and 

advancing so rapidly in the Bakken that the USGS is already updating its 2008 reserve estimates for the field, and expects to announce its revised estimates in 2013. 

The Bakken is currently producing about 575,000 barrels of oil 

per day, and it is projected by many to grow to about 1.5 million 

barrels by year end 2015. For comparison, you know, Prudhoe Bay 

has produced approximately or did produce approximately 1.5 million barrels a day at its peak in production. 

Now the Bakken field is known as an unconventional resource 

reservoir. It is the template for tight oil production worldwide. Resource reservoirs like the Bakken are a totally new class of reservoir that have emerged over the last 10 years thanks to horizontal drilling and fracture stimulation technology. 

Resource reservoirs are typically very large, continuous accumulations of oil that are locked up in an assemblage of low porosity, 

low permeability rocks that are interbedded with organic-rich 

shales or source rocks. And these organic-rich shales are actually 

the source rocks that generated the oil and gas that we have been 

producing in conventional reservoirs for years. 

However, as much as 95 percent of the oil that is generated in 

these shales remains locked up in these resource reservoirs or 

source rocks, and this could historically be considered immobile. 

Through technology, we are now able to produce a small percentage 

of this immobile oil. And, for example, the Bakken and the underlying Three Forks formation, which make up the Bakken petroleum 

61 

system, are estimated to contain 900 billion barrels of oil in place 

based on volumetric calculations. 

With that, it means that current reserve estimates that we have 

for the Bakken represent less than 21⁄2 percent of the total oil that 

exists in the Bakken-Three Forks reservoir rocks. And also you can 

take that one step further and say that you are looking at—each 

1 percent increase in recovery actually translates to 9 billion barrels of oil. 

Now the Bakken field was created by unique geologic conditions 

that generated an over-pressured cell of oil that gets up to 375 feet 

thick and covers approximately 9 million acres, which is equivalent 

to the size of, say, Massachusetts, Connecticut, and Rhode Island 

combined. 

Now the over-pressuring of this rock is significant in that it helps 

push the oil through the rock in the micro pores of this rock, and 

it improves recovery. By comparison, natural gas obviously can 

move through this rock much more easily as a gas, and that is why 

most resource plays that you see today are natural gas. And of the 

20 plus resource plays that are ongoing in the United States today, 

only a few can really be classified as true oil. And, in fact, the 

Bakken oil field is unique in that it does not really contained a continuous gas phase. 

So the discovery of the Bakken oil field is made possible through 

technologies that have revolutionized our oil and gas industry and 

unleashed huge reserves. Various scenarios recently run by HIS 

CERA show that the tight oil reservoirs could add another 3 to 5 

million barrels of oil a day to U.S. onshore production by 2020. 

HHS Global Insight further estimates that for each 1 million barrels of increase in U.S. daily oil production, approximately 430,000 

direct and indirect jobs are generated. 

With this renaissance in technology and newfound reserves, some 

project that North America will be energy independent by 2020. 

This is truly a remarkable achievement by the oil and gas industry 

and helps secure America’s energy future, and creates jobs, and obviously keeps our dollars at home. 

[Prepared statement of Mr. Stark follows:] 

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Chairman ISSA. Thank you. 

Mr. Hatfield. 

STATEMENT OF KEVIN HATFIELD 

Mr. HATFIELD. Thank you, and good morning, Mr. Chairman, 

and members of the committee. As senior director of the Gathering 

Systems, among other things, I am responsible for the oversight of 

the Enbridge pipeline system in North Dakota. 

Enbridge is a leader of energy delivery and distribution, and has 

transported and delivered energy throughout North America for 

more than 60 years. As part of its crude oil delivery system, 

Enbridge operates the longest crude oil pipeline system in the 

world. 

The Enbridge system spans from north in Northern Alberta, 

Canada to the western Gulf Coast refinery hub, and provides more 

than 2.5 million barrels per day of crude oil to the major refinery 

markets located throughout the United States. 

In addition to crude oil and petroleum liquids, Enbridge operates 

natural gas pipeline systems throughout the U.S., owns and operates Canada’s largest natural gas distribution company providing 

distributive services in eastern Canada and New York State, and 

has interests in almost 1,000 megawatts of renewable and alternative energy generating capacity, and wind and solar energy, geothermal, and hybrid fuel cells. 

Enbridge employs approximately 7,000 people, including more 

than 2,500 people here in the U.S., and 150 people here in North 

Dakota alone. 

Enbridge is continuing to expand its delivery system and has an- nounced plans to invest another $11.8 billion in our energy generation and transportation infrastructure, including $6.6 billion in the 

United States over the next several years. These investments follow an equally impressive investment in over 1,500 miles of new 

pipelines along our mainline system over the last 5 years. These 

opportunities would not be possible nor necessary if not for the energy renaissance occurring in North America, such as what is happening in the Bakken here in North Dakota. 

In North Dakota, Enbridge is celebrating its 50th anniversary as 

a pipeline company serving in the Williston Basin. However, the 

past decade has been by far the most exciting for the region and 

the company. In 2005, the capacity of the North Dakota pipeline 

system, which extends into northeast Montana, was 80,000 barrels 

per day. After completion of our current Bakken expansion project, 

and the Berthold rail project in early 2013, the total combined 

Enbridge rail and pipeline capacity out of the State of North Dakota will have increased to 475,000 barrels per day. 

Once the proposed Sandpiper expansion is completed in late 

2015, Enbridge’s capacity to transport Bakken crude will be in excess of 850,000 barrels per day, or more than a tenfold increase 

over historic capacity. 

The increased capacity out of North Dakota does create a need 

for Enbridge to look at capacity of the Enbridge mainline system 

downstream of its Clearbrook, Minnesota terminal into Superior, 

Wisconsin, the Chicago area, and beyond. Enbridge has provided 

additional capacity and market access through projects allowing 

71 

the first pipeline access for Bakken crude to not only Cushing, 

Oklahoma in 2008, but also to the U.S. Gulf Coast refineries in 

May 2012, with completion of the seaway reversal. 

Also, Enbridge has announced pipeline expansions of its Great 

Lakes pipeline systems that include new pipe into Toledo, Ohio and 

early stages of developing rail import capacity, and potential future 

pipeline connections to the East Coast and, in particular, to the 

Philadelphia refinery markets. 

Pipelines provide the safest and most reliable means of transporting crude oil from the wellhead to the refinery markets. However, with opportunities to grow our infrastructure come challenges 

to build it. Two of the biggest challenges are regulatory timelines 

and approvals and public scrutiny and acceptance. 

With regard to regulatory timelines and approvals, interstate 

crude oil pipeline projects cross multiple State jurisdictions. Each 

State has its own regulatory regime and timelines, inconsistent 

regulations, and procedures of States in interstate projects require 

companies to conservatively plan for longer lead times and can lead 

to economic uncertainty for a project. 

Federal and State governments need to ensure that regulatory 

processes are predictable, manageable, and balance the impacts of 

such long projects with the undeniable benefits to the United 

States. 

Public scrutiny and acceptance. Developing production areas, 

such as the Bakken, have brought much economic benefit. This activity has also brought many challenges to the communities impacted, such as the infrastructure needs, housing, and highway 

safety, to name a few. Enbridge actively works in these communities to help mitigate the impact of energy production. 

One example of our projects helping local communities is through 

reduced stress on the local roadways in North Dakota. By adding 

new facilities and pipelines or upgrading existing facilities in western North Dakota, it is estimated that Enbridge is saving approximately 143,000 truck miles per day. 

Enbridge’s commitment to the communities where we live, work, 

and raise our families is as strong as our long history of providing 

safe and reliable pipeline transportation, not only in North Dakota, 

but across North America. And our commitment to continuing to 

meet the challenge of providing additional capacity and more markets is as solid as our past. 

Again, thank you, Mr. Chairman, for the opportunity, and I will 

be ready for questions. 

[Prepared statement of Mr. Hatfield follows:] 

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Chairman ISSA. Thank you. 

Mr. True. 

STATEMENT OF HENRY ‘‘TAD’’ TRUE 

Mr. TRUE. Thank you, Mr. Chairman, and members of the committee. My name is Tad True, and I am the vice president of Belle 

Fourche Bridger Pipeline. I appreciate the opportunity to testify 

today. As background, our pipelines are part of a collection of family-owned companies that are referred to as the True Companies. 

The True companies were started by my grandfather as a one rig 

drilling company back in 1954. Since that time, the companies expanded into exploration, pipe supply, pipelines, trucking, trading, 

logistics, and other industries. 

We are headquartered in Casper, Wyoming and have approximately 1,300 employees that work in 12 different states from North 

Dakota to Texas and Pennsylvania. My focus is running the pipeline operations of the True Companies. 

Our pipeline operation consists of gathering and mainline systems in North Dakota, Montana, and Wyoming. We have approximately 3,800 miles of pipe in the ground, and over the past several 

years, most of our effort and construction has been focused on supporting the development of the Bakken in the Williston Basin. 

Ten years ago, North Dakota’s production was 84,000 barrels a 

day. It is now over 640,000 barrels a day, representing a 760 percent increase during that time. North Dakota is now the second 

largest oil producing State next to Texas. However, when you compare the infrastructure between the two, Texas has over 50,000 

miles of liquid pipelines in the State, while North Dakota only has 

than 4,000 miles. Our estimates show that North Dakota production could reach 1.2 million barrels a day over the next 10 years, 

but there is clearly a significant infrastructure gap that needs to 

be solved. 

When it comes to efficiency and transportation, pipelines are 

clearly the most efficient way to transport anything, including oil. 

I do not believe the impact of efficiency is really well understood. 

And to better understand this efficiency, I threw out this hypothetical example of what would happen to the Rocky Mountains if 

our pipelines, the ones we operate, were no longer for some reason 

able to pump oil. What would be the impact to the Bakken, and 

what would be the impact to the Rockies? 

Number one, the cost for the Bakken barrel would increase by 

$10 per barrel for the Rocky Mountain refiners. That is simply the 

cost of transportation to get it to market. 

Number two, the total number of trucks required to haul this oil 

would increase by 250,000 trucks per year that would 275,000,000 

miles on U.S. and State Highways. Additionally, to support these 

trucks, you would actually have to build a 12,000 barrel a day refinery capable of producing enough diesel just to make sure those 

trucks go up and down the road. 

From a different perspective, we just completed a new mainline 

in western North Dakota, called the Four Bears line. It is currently 

transporting over 75,000 barrels a day, and this means that the 

Four Bears line has taken off 300 trucks on a daily basis from 

77 

North Dakota’s highway. And as I have heard several times, if you 

do not like trucks on the road, you have to like pipelines. 

In 2007, our pipeline company had 80 employees. We now have 

152 employees. Most of that increase is due to the explosive growth 

of the Bakken in North Dakota. As importantly to the number of 

jobs that we have created, we believe these are high quality jobs. 

Fifteen years ago, I graduated from the University of Notre 

Dame and went to work for a firm specializing in hi-tech. This was 

during the Internet boom. At that time, I believed that I hit the 

mother lode. But today, we are paying our starting gaugers and 

starting station operators with no experience and only a high 

school education double what I was paid during the Internet boom. 

We also provide comprehensive health insurance, a pension plan, 

and our employees average of 10 years of service from across all 

our companies. These are the type of jobs we are offering and, I believe, these are the types of jobs our Nation needs. 

So in conclusion, three points. Number one, North Dakota is now 

the second-largest oil-producing State next to Texas, yet it has less 

than 10 percent of the necessary liquids pipelines to deliver the 

crude to market. 

Number two, pipelines are the safest and most efficient means 

of transporting the oil. And number three, we as an industry are 

creating high-quality and sustainable jobs. 

That concludes my testimony, and I look forward to questions. 

[Prepared statement of Mr. True follows:] 

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Chairman ISSA. Thank you, and I will recognize myself first and 

start as I did before. 

Mr. True, what you are telling me, though, is that if you care 

about the environment and you want to reduce total carbon consumption, you can reduce 12,000 gallons or, I am sorry, 12,000 barrels a day by having pipelines rather than trucks? 

Mr. TRUE. Right. I use that example that just to replace our pipeline with trucks would require a new 12,000 barrel a day refinery. 

Chairman ISSA. Okay, but I am looking at 12,000 barrels a day 

and saying that is fuel that will be consumed and turned into CO2 

or will not be consumed and will not be turned into it. That is one 

of those great offsets. You could probably sell that offset. 

[Laughter.] 

Mr. TRUE. Let me write that down. 

Chairman ISSA. And if I were not in Congress, I would broker it 

for you. 

[Laughter.] 

Chairman ISSA. In all seriousness, though, very clearly, people 

will die because trucks will have accidents. Thousands of trucks 

day after day after day, will eventually, a certain amount of them 

will be in accidents. They will spill oil. They will kill the driver. 

They will damage the road. They will tie up traffic. All of that is 

a reality if you do not do the efficiency of moving as we have for 

generations into pipelines for more efficient travel. Is that correct? 

Mr. TRUE. Pipelines are clearly the safest mode of transportation. 

I have in my written testimony, I state that pipelines are—or, I am 

sorry, trucking is 3,000 times more likely to have an accident than 

pipelines. 

Chairman ISSA. And, Mr. Hatfield, you were shaking your head 

yes, so I will consider you as a yes on all of those same questions, 

that essentially we are really hurting the environment and snarling roads by not building these pipelines, including Keystone. 

Mr. HATFIELD. We are in the southeast corner of North Dakota. 

If we were in the northwest corner of North Dakota, you would see 

the impact of the trucks on the roads out there. And you are right, 

on a daily basis, trucks are plugging roads, and there are issues 

with them as Tad, or Mr. True, had said. 

We agree. The pipelines are the answer and the solution to the 

problem, and we need to keep moving forward in that regard. 

Chairman ISSA. Now if I understand correctly, Mr. Stark, we are 

not going to hold you for proprietary costs. But it costs in direct 

costs $10 a barrel to get oil to the point where you are going to 

put it on a truck or put it on a train and move it out of the well. 

Now that does not include your huge investment and so on. 

But that is what they call your lift costs. But your transportation 

costs, as I just heard, is equaling your entire lift cost in direct cost. 

It is a huge part. If you had $74 a barrel of oil, you have got $10 

of lift costs, but you have got $10 of transportation costs that ultimately just evaporates from the profit and the taxes to the American people, is that not right? 

Mr. STARK. Well, correct. You know, when you look at a pipeline 

as a means by which you transport your oil, it is the most cost effective. It takes trucks to gather it, trucks to deliver it to the gathering stations, and pipelines or rail to get it to refineries. And so 

83 

there are costs associated with each of those, and so those costs 

vary across the board. 

And so anytime you can eliminate one component of cost in there 

and reduce those costs, it definitely translates immediately to your 

bottom line. 

Chairman ISSA. Well, Mr. Ekstrom, I think you had said that— 

actually I think it was Mr. Stark. But if, in fact, Bakken can 

produce 1.5 million barrels a day, if I do—I am sorry. That is over 

and above what you are doing today. No, that is total. I am doing 

the arithmetic. That means that California, Nevada, Arizona, Oregon, and Washington’s deficit—the amount that they import, that 

ultimately is imported from other countries would all be eliminated. California imports a little less than 1 million barrels a day. 

It is the big kahuna there. But you would be able to produce a surplus created in California’s deficit. 

Mr. EKSTROM. Sure. At this point, we are looking at about 575 

thousand barrels a day coming from the Bakken alone. And so if 

you would look at the growth in the Bakken, you would be looking 

at an incremental 1 million barrels a day approximately by late 

2015, some say 2020, in that range. But that is the level of impact 

the Bakken production can have. 

Chairman ISSA. And my understanding is that we give to foreign 

countries about $300 billion a year to buy oil. 

Mr. EKSTROM. Correct. 

Chairman ISSA. And if your prediction is correct and we support 

these kinds of advancements in technology and facilitation, we can 

get to where we could save that $300 billion and have it all be generating jobs and income in America. 

Mr. EKSTROM. Without a doubt. 

Chairman ISSA. Now I am going to stress a most important point, 

I guess. You are obviously an expert, Mr. Stark, on the Bakken reserves. But would you say that in the world, and particularly in the 

United States, this will be duplicated. There will be other significant reserves that will be found in Texas or Pennsylvania or wherever that will yield similar improvements, allowing not just what 

you are doing here, but America to become oil and natural gas sustainable, independent for generations to come. 

Mr. STARK. Yes. At this point, there are over 20, you know, basins in the U.S. that have resource plays within them. And each 

of these resource plays, they vary in their oil content. But most of 

these basins do have some degree of oil production that will come 

through production there. You will either have liquids in the sense 

stripped from gas, but in particular the crude oil and condensate 

that is produced that the well had is associated with most of these 

fields. 

When I say the Bakken field is unique, it is unique in the sense 

it does not have a gas life to it. And it is truly an oil field. Eightyfive percent of the product that comes out of the Bakken is oil. 

These other fields like the Eagle Ford, does have a particular window in which oil is the main product, but that area is also tied to 

areas of gas. And so you have maybe a bit higher gas production. 

Chairman ISSA. Conventionally, I think about people who say, 

you know, gas prices are too low; let us try to drill for oil and avoid 

84 

the gas. And then sometimes it reverses depending upon where we 

are over the last couple of decades. 

If my colleagues will indulge me for one last question. When you 

were a geology student, I presume that you studied the world as 

it was in oil based on the known pools, right? And the President 

says that, you know, we only have 2 percent of the world’s reserve. 

We consume 20 percent, that, in fact, it is a scarce resource. 

Knowing now that the source rock can be harvested, what you 

are doing here in the Bakken, knowing the source rock can be harvested and the quantity of, if you will, ancient algae that has been 

put into these rocks all over the world, is it fair to say that 2 percent is simply a farce, a disingenuous, perhaps even a lie, to continue saying it? That, in fact, the world’s energy by new technology 

just made a large leap in availability, and America’s known reserves or likely reserves have now gone up so high that effectively 

to say that we cannot consume 20 percent of the world’s—sorry. 

That that 2 percent known oil reserves, if properly stated, is America can produce all of the oil and natural gas for its own consumption for the rest of our lives and our children’s lives. 

Mr. STARK. Correct. You are looking at 21 billion barrels of oil 

for the U.S. today. It is just such a gross understatement of what 

reserves do exist here, and that has been unleashed by the recognition and the ability to access the source rocks themselves, as I said. 

And so the multiples that we will have on this range anywhere 

from, I have heard as much as 10 times to 40 times the amount 

of oil that we are estimating that we have in the ground today. 

Chairman ISSA. Well, lest anyone think that I called the President a liar, I would like to summarize by saying that clearly the 

President is telling the truth, but it is a truth of the past, not a 

truth of the present or the future. 

Mr. STARK. Correct. It is not recognizing the change that has 

happened. 

Chairman ISSA. Mr. Lankford. 

Mr. LANKFORD. Mr. Hatfield, I want to get a chance to bounce 

a few things off of you, and Mr. True also as well. 

There was a pipeline safety bill that was passed last year and 

signed on. How has the regulatory rollout worked for you all on 

that? There were some regulatory changes in the safety and permitting and such. How is that working? Is it working? What do you 

know at this point? 

Mr. HATFIELD. I believe we all understand that one of the keys 

to being successful in permitting and continuing to build pipelines 

is to do that safely. From the standpoint of the bill itself, we are 

working with what is in it to apply that to our situation and our 

pipelines and ensure that we are keying on the development and 

the necessary points that we need to fall within it. I think overall 

it is a good thing. We need to make sure that we are towing the 

line with regard to it. 

The predictability and the clarity of it is a good thing in making 

sure that we are going to know what we need to follow in the future. 

Mr. LANKFORD. Okay. Mr. True, do you have any comments on 

that? 

85 

Mr. TRUE. Number one, it was developed in conjunction with industry. 

Mr. LANKFORD. Right. 

Mr. TRUE. And that was helpful. Number two, any time I look 

at a regulation, I call it the three Cs. It is clarity, common sense, 

consistency. Those are the three Cs that I deal with, and I think 

that fits all of them. 

Mr. LANKFORD. Okay, terrific. Mr. Hatfield, again, you flipped 

the direction of the seaway. 

Mr. HATFIELD. Excuse me? 

Mr. LANKFORD. The seaway reversal that you had there from 

Houston to Cushing, you flipped it, and now Cushing to Houston. 

How has that gone? Is that complete at this point? Any major 

issues there? 

Mr. HATFIELD. As of May 2012, we have got the successful reversal of that at approximately 150,000 barrels per day. By next year 

we will be up 400,000 barrels per day of crude moving from Cushing down to the Gulf Coast. And then with the twinning of that 

would be up to 850,000 in upcoming years. 

Mr. LANKFORD. Terrific. In Oklahoma, we have a major pipeline 

starting in construction—well, actually it has stopped construction 

now. It is headed from the Cushing area all the way down to the 

Gulf as well because we have a burrowing beetle, and there has 

been strong limitations on when and how we can do construction. 

And there has been a stay on a lot of things. 

And the beetle is common in Oklahoma. It is also a nasty beetle. 

If you saw it in your driveway, you would step on it. But that beetle has caused major issues for us in pipeline construction. Have 

you experienced anything like that in Fish and Wildlife, the Department of Interior, here in North Dakota on your construction for 

pipelines? 

Mr. HATFIELD. Yes and no. We have, as Representative Berg had 

mentioned earlier, North Dakota does have a top regiment of policies and guidelines for insuring and permitting our projects. They 

do cover similar type of effects or impacts to pipelines. But the one 

thing I think that we do have in North Dakota that has benefitted 

us, and, again, Representative Berg referred to it, is the predictability of it. We know what those policies and procedures and our 

requirements are. 

Mr. LANKFORD. This is the Federal Fish and Wildlife stepping in 

and saying this species in particular, you have to do additional protections for—mowing. There are all kinds of things you have to be 

able to determine on this. Every 2 days somebody has got to walk 

the area. It is amazing the regulations that are around this beetle 

in construction if you are going to turn the soil for that. Is there 

any Fish and Wildlife particularly on the Federal side is causing 

you any issues here in North Dakota? 

Mr. HATFIELD. Absolutely. We have run into, whether in North 

Dakota or across the country, on larger pipeline lays. We run into 

the same impact of protected species and those type of things delaying the project. And so long as we are doing the right thing and 

doing it as quickly as possible, and we know that it is coming as 

a business commercially, we can deal with it. It is the unknowns 

that kill us. But, yes, absolutely, we have been impacted by that. 

86 

Mr. LANKFORD. Okay. A quick question as well dealing with this 

whole issue of the Federal leasing time versus State permitting 

time, the time to get into the permitting. 

When Mr. Helms earlier had mentioned before, 290 days to permit on tribal or Federal lands, and 3 weeks or less if it is a State 

permit. You guys live and breathe this all the time. What are some 

solutions to this? We see the problem. What are some clear-cut if 

we did this, this, and this that would provide us some good solutions as well as good protections for Federal lands? 

Mr. EKSTROM. Mr. Chairman, we visited the Department of Interior earlier this year and suggested to them that if they had a certain percentage of ownership or less that they simply accept a 

State permit since there is no surface disturbance involved. 

Mr. LANKFORD. Okay. So if it is no surface, it is all below a certain percentage, did you recommend a certain percentage on that, 

or is that—— 

Mr. EKSTROM. We recommended less than 50 percent. 

Mr. LANKFORD. Okay. 

Mr. EKSTROM. There was not a positive response to that in the 

Department of Interior. 

Chairman ISSA. Did you try 40, and then 30, and then 20, and 

then 10? 

[Laughter.] 

Mr. EKSTROM. It appeared they were not going to be in favor of 

it. 

[Laughter.] 

Mr. EKSTROM. I would like to add one other thing, if I may, about 

the pipelines. Private companies, producing companies also build 

their own pipelines. We built a 17-mile pipeline to hook into 

Enbridge in Montreal County, and happily that went swimmingly 

because it was all on private land, and we took virtually all of our 

trucks off that were going to that terminal. Producing companies 

did that as well as pipeline companies. 

Mr. LANKFORD. Mr. Stark, any other ideas on specifically how we 

deal with this Federal land issue? 

Mr. STARK. I second Mr. Ekstrom’s recommendation there. If any 

time we can avoid duplicating permitting processes that do not 

need to exist. We need to eliminate that. The State does an excellent job of regulating and forming units and basically taking care 

of the permitting process. And I do not see the need for the Federal 

involvement where Federal lands are not involved. 

Mr. LANKFORD. Thank you. I yield back. 

Chairman ISSA. Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much. Before we get started, 

Mr. True, I understand you are lamenting the size of the North Dakota pipeline infrastructure as opposed to the Texas infrastructure. 

I remind you everything is bigger in Texas. 

[Laughter.] 

Chairman ISSA. Especially the ego. 

[Laughter.] 

Mr. FARENTHOLD. I wanted to visit for a second with you, Mr. 

Stark. You were talking about the technology has greatly enhanced 

the recovery. And I think you mentioned that in the Bakken in particular, we are still not getting 100 percent recovery with the techVerDate Aug 31 2005 11:33 Aug 23, 2012 Jkt 000000 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 C:\DOCS\75521.TXT APRIL
87 

nology that we have got. It is still an inefficient recovery even as 

we start to do the fracking. We are not getting all that trapped oil. 

Mr. STARK. No. By no means are we getting anywhere near, and 

nor do we ever get anything near 100 percent of the oil out of the 

reservoirs. 

What we are looking at here is really, I put an exhibit in here 

that shows essentially, you know, the field itself or the reservoir as 

we see it. And if you consider most times you are looking at in reservoirs, you are going to get between 8 percent recovery, maybe 15 

percent recovery out of a reservoir, on a conventional reservoir, on 

a primary basis. Here we are talking about a very, very low 

porosive permeability rocks that you are getting less than 5 percent 

recovery. 

Mr. FARENTHOLD. Ten years ago you would have gotten zero percent recovery out of that. 

Mr. STARK. Correct. 

Mr. FARENTHOLD. So as the technology has improved, that percentage of the recovery—I guess you consider fracking a secondary 

recovery method. 

Mr. STARK. Well, it is a new technology that allows us to access 

oil that was essentially immobile in this reservoir by conventional 

means. And so right now we estimate that we are getting maximum 5 percent recovery out of a reservoir using this technology. 

And we think, you know, as technology advances, we will be able 

to get significantly more because just the sheer volume of oil that 

is in place, 900 billion barrels, 1 percent increase in recovery 

equals 9 billion barrels. 

Mr. FARENTHOLD. So we are getting easily less than 10 percent. 

And as technology improved, just like it did with fracking, that 

number could go way up. 

Mr. STARK. Right. 

Mr. FARENTHOLD. So it is way higher. I just wanted to make sure 

that we are clear about that. 

Mr. Ekstrom, you were talking about the—and, Mr. True, you 

were both talking about employment and the folks you are hiring. 

What sort of skill sets are you looking for? Are there entry level 

jobs there and a lot of them? If you were looking to get a job in 

the oil and gas industry up here in North Dakota or anywhere else 

we have got a play going, what sort of skills should you be learning 

or getting or do you need? 

Mr. EKSTROM. Well, Mr. Chairman, the skill sets range from the 

very most basic—being able to operate a machine or drive a vehicle—all the way up to executive level experiences or capabilities, I 

should say. 

We have a particular focus right now on gas plant operations, so 

people who are used to working with heavy equipment or large 

kinds of mechanical installations are particularly favored. I might 

point out, and I regret not saying this earlier, but I put some 

Bakken core samples on the table if you wanted to see them and 

understand—— 

Chairman ISSA. We are hoarding them over here. 

Mr. EKSTROM. Obviously we would like to have more geologists. 

We are funding educational institutions in the State. We have the 

National Energy Center of Excellence in Bismarck at Bismarck 

88 

State College. Any scientific discipline, just about any scientific discipline would find a home. 

Mr. FARENTHOLD. If you are not a college-bound person, it is hard getting a job. I know in Texas, there are $5,000 signing bonuses for folks with a commercial driver’s license and a clean driving record. I mean, is it a similar situation here? 

Mr. EKSTROM. Similar situation here. In fact, we have a similar 

situation in Texas where we are involved the Bone Spring development out by Midland. We also have a CO2 flood there, which is another advanced technology. We also have one in Oklahoma out on 

the panhandle, Representative Lucas’ district. 

So the technology is moving inexorably. I like to think that we 

are at the end of the beginning. There are those in Washington 

who say it is—— 

Mr. FARENTHOLD. So you are saying your entry level jobs are 

gaugers. What are saying they are getting paid? Sixty plus, right? 

Mr. TRUE. Sixty plus, $60 to $80. 

Mr. FARENTHOLD. And what does a gauger do? I mean, I know, 

but would you tell—— 

Mr. TRUE. Okay. What a gauger does is when we are ready to 

ship oil down the pipeline from the lease, the gauger will go out 

to the well, climb up the tank using a gauge that—you got a plumb 

bob and stick it down, figure out how much oil is in there, turn on 

the equipment, and ship it. 

Mr. FARENTHOLD. So they are pretty entry level jobs. 

Mr. TRUE. We do not require a college education. 

Mr. FARENTHOLD. Thank you. I do have some questions if we 

have time for a second round. 

Chairman ISSA. Okay. Mr. Berg. 

Mr. BERG. Thank you, Mr. Chairman. First of all, I want to 

thank everyone for being here. I do not know if it came out, but 

several years ago we were taking huge discounts in North Dakota, 

so we could not get out of the State. So, I mean, when the market 

was $70, $80 a barrel, we were getting $24 a barrel in North Dakota. There was just no capacity. So there has been just a lot of 

things that people have been trying to do to figure out how. So 

thank you for your expansion of the pipelines. 

And, Tad, I thought your three Cs on regulation were just great. 

And this is one of our problems, you know. We talked about the 

Keystone pipeline, and obviously in the House, we have tried several different ways time and time again to get that through and go 

to the Senate, even the last time on the transportation bill. And it 

is not part of the highway transportation bill. Senator Reid has just 

continued to block that. 

And I guess that is kind of one of the things that, again, you look 

at the President saying, you know, we have crossed all the boxes, 

crossed the Ts, dotted the Is, and he makes a ruling not to allow 

it to go forward. 

I mean, this is that uncertainty that you are talking about regulation. This is the challenge that you have got. All the money that 

goes into planning the pipeline before you actually start to build it, 

let alone have it done and start earning income off it, I mean, these 

are all challenges that if we get the certainty in, we can make that 

happen. 

89 

I wanted to kind of just mention one thing that we did in North 

Dakota, and that is the pipeline authority that we enacted, and I 

do not know if anyone is doing that. But we set up the a special 

State fact pipeline authority that says if we want to put in a pipeline, the State will help finance or sign on the dotted line for the 

loan to do those things. And so, I mean, that is out there. 

Chairman ISSA. Because it saves your State money. 

Mr. BERG. Absolutely. Absolutely. And if there is not one entity 

that can get the financial backing to do the pipeline or someone to 

pull it together, that we would basically sign the note for them to 

do the pipeline. We did the same thing with the transmission authority years before for coal and electricity. 

I wanted to just talk, Mr. Stark, just to kind of touch on—this 

is a renaissance that is going on. I mean, we are actually going into 

the source rock, and rather than waiting for this tool to develop, 

we are tapping into that source rock. I have heard the word that 

this is a renaissance in energy development, and I really think it 

is. When you think about our precision horizontal drilling and what 

we are doing, you know, we talked back in ’94, 18 years ago we 

were working on this horizontal. Your company has been a real 

leader in this. 

And I would like if you could just share—this is not something 

that just happened overnight, but what you went through trying to 

crack the code on the Bakken, and why this is kind of here to stay 

depending on the price of oil and the regulations. 

Mr. STARK. Sure. Well, it has been an evolution, that it started 

back when I guess we first met back in ’94. And, you know, at that 

time—— 

Chairman ISSA. He is not new in trying to help North Dakota do 

well and succeed. 

Mr. STARK. No, he has been advocate for sure for quite a while. 

But, you know, horizontal drilling was just becoming a process that 

was being available to onshore operators. It was really starting to 

happen in that time frame. And at that time, we were not really 

looking at drilling horizontally and fracture stimulating the wells. 

We were just using horizontal drilling to harvest the rock. But yet 

it was very expensive, very risky because it was new technology. 

And we were basically on the leading edge. And what we did is 

we actually worked together with the State. The State actually put 

a tax incentive in place in ’95 actually that allowed that basically 

incentivized us and other operatives to go out and apply horizontal 

drilling in North Dakota. 

We went ahead and we did that, and we actually found a very 

large field in North Dakota called the Cedar Hills Field, and it is 

probably 250 million barrels of oil ultimately it produced. And from 

that technology, and this is why I say it is an evolution. From that 

technology, then we started to recognize other applications that we 

could use this precision horizontal drilling in. And that is where 

the Bakken evolved. And so we ultimately started to apply this 

technology industry wide up in Montana where the Bakken actually was originated as far as the play as we know it today. That 

is where it started. 

But the trick there was of saying, okay, horizontal drilling would 

tap into this rock and allow us to get oil out, but it still was not 

90 

at commercial rates, so what we could do next? Fracture stimulation technology was applied to it. So then we found that that 

worked in Montana, so if it worked in Montana, gosh, it could go 

over into North Dakota. 

And so it is an iterative process of learning and gaining knowledge as we continue to get better and better at the technology we 

have got and what it has done. And it is not just in North Dakota. 

It has happened across the country with this technology because 

we have gleaned technology out of the Barnett shale, for instance, 

and the technology that was gained there and applied that up here. 

So we went from doing horizontals and open hole completions, as 

we called them, to then staged fracks in North Dakota, which was 

required because when we went and took the Montana model and 

applied it to North Dakota, it did not work immediately. It did not. 

We had to find another key. 

So each time we continue to tweak and work and grow our technology and our capabilities to tap into these remarkable reservoirs. 

When I was in school, I was not taught that these were ever rocks 

or reservoir rocks. They were source seal, never reservoir rock. And 

today that is what we are tapping. And if you consider these rocks 

generated the oil that we produce today by conventional means, but 

yet up to 95 percent of that oil still remains in these rocks. There 

is a huge resource of oil and gas in this country and worldwide that 

could be tapped with this technology. 

So it is an evolution. This did not happen overnight. This evolved 

over a period of, you know, we are talking 15 years, 20 years of 

technological advancement that has taken us here. And you have 

to really admire the ingenuity and the persistence of the domestic 

energy independent or energy operators for the effort and the time 

they have put in and the money they have done to put into this. 

And support like we had in North Dakota from the tax incentive 

for horizontal wells was just instrumental in us kicking off our program up in North Dakota. And today we are the number one producer in the Williston Basin, which includes North Dakota. 

And I will also mention, too, at that time when we were looking 

at horizontal drilling, it was kind of a novel thing that was really 

kind of going on up in Saskatchewan. But in North Dakota, it was 

just barely starting. And today, 99.5 percent of the wells drilling 

today are horizontal. 

Chairman ISSA. Excellent. Following up on that, Mr. Stark, 

working for Continental, what countries do you operate in? 

Mr. STARK. The United States. 

Chairman ISSA. No other countries. 

Mr. STARK. No. 

Chairman ISSA. How many employees do you have? 

Mr. STARK. We are right around 700. 

Chairman ISSA. And growing. 

Mr. STARK. Growing. Growing substantially here in the last few 

years. 

Chairman ISSA. So when we in Washington talk about big oil, is 

that you? 

Mr. STARK. No. 

91 

Chairman ISSA. So you are 700 employees, founder, CEO, still at 

the helm. You have been with them for decades. This is one of 

those sort of big family businesses in a way, is it not? 

Mr. STARK. Yes. 

Chairman ISSA. Mr. True, you are sort of in the same boat, are 

you not, big family business. 

Mr. TRUE. Yes, we are a family business. 

Chairman ISSA. It did kind of drag you back from that high tech 

job when the bus came? 

[Laughter.] 

Chairman ISSA. The reason I ask is, we have not talked about 

it here today, but in Washington they are constantly talking about 

subsidies. And the word ‘‘subsidy’’ is pretty easy to put in. But just 

for each of your companies, and, Mr. Stark, I will kind of just start 

with you, your company pays taxes? 

Mr. STARK. Yes. 

Chairman ISSA. You pay royalties when you are on Federal land? 

Mr. STARK. Yes. 

Chairman ISSA. So you pay income tax. You pay royalty taxes. 

You pay sales taxes, property taxes. You pay fees to all those 

leases. You are leasing them from individuals who own them, and 

they pay taxes on that income. Where is the subsidy? I mean, I am 

here from Washington. I just want to know what is it that we subsidize from Washington to your company? 

Mr. STARK. It is a very good point. There is no subsidy for this 

industry. 

Chairman ISSA. Now do we let you eventually take your investment as it depreciates write it off? 

Mr. STARK. Correct. 

Chairman ISSA. Is that what is often called a subsidy in Washington? 

Mr. STARK. I have heard it called that. 

Chairman ISSA. So I just want to understand because, my undergraduate degree was in accounting even though I worked in electronics as an engineer. I still try to put everything down to something, you know , decimal point and two zeroes. When we often 

talk about subsidies for your form of harvesting, often called manufacturing, but harvesting of this oil, what we are really doing is we 

are saying, you put your money up at risk, and if it busts, then we 

will let you write it off and not pay taxes on the money you invested in what yielded you zero. But if it yields something, we will 

let you depreciate your investment over time. Is that right? 

Mr. STARK. Correct. 

Chairman ISSA. So it is possible for you to actually pay taxes on 

income that is less than your carry cost of your investment. You 

sometimes pay the government taxes and then have to go to the 

bank to borrow, to pay those taxes because all of your money is reinvested in those holes you are drilling. 

Mr. STARK. Correct. 

Chairman ISSA. Now is your company—and it is my last question, and I think it probably is a good question for each of your 

companies. Are you essentially reinvesting every additional penny 

post-tax that you can into exploring and doing this very potentially 

lucrative development here in North Dakota? 

92 

Mr. STARK. Yes, we are and more. 

Chairman ISSA. Okay. 

Mr. HATFIELD. And the same with us. Our capital expenditure 

budget this year is $1.9 billion, and our cash flow is projected to 

be about $1.8 or $1.75. That is accurate. As far as subsidies go, we 

are still looking for our first check. It has not arrived. 

Chairman ISSA. You have not gotten the check. 

Mr. HATFIELD. No. Neither have the other two, same sort of 

thing even though you are on the non-drilling side. 

Let me just ask one closing question because it is frustrating for 

us in Washington because we hear all these things, and we know 

they are true. We just cannot seem to find the verification of it. Are 

you sending any jobs offshore? Are you exporting jobs right now? 

Mr. HATFIELD. Absolutely not. We operate in the United States. 

Chairman ISSA. Are you outsourcing to India? Are you sending 

jobs? Is that what your company is doing? 

Mr. HATFIELD. No. 

Chairman ISSA. Are either of you exporting your production of 

pipelines and distribution outside the country? 

So at a time when we are always hearing about people 

outsourcing and getting rid of jobs, I have 4 people in front of me 

whose companies, every single additional opportunity that we facilitate or at least get out of the way of means an additional U.S. 

job. One hundred percent U.S. jobs will be produced if you do better. 

Mr. HATFIELD. Correct, Mr. Chairman. 

Mr. STARK. Correct. 

Chairman ISSA. That is enough for me. Anyone else have followup questions? 

Mr. LANKFORD. A quick follow-up. Mr. Stark is a geologist. Just 

to push one more time this question. You made a statement that 

the Bakken is a completely new type of reservoir. Now I am not 

asking you to give any company secrets here publicly on the Congressional Record. Is it your gut there are reservoirs like this in 

the United States? 

Mr. STARK. Well, there are. And that is why I say there are 20 

plus resource type, oil and gas. 

Mr. LANKFORD. That are major oil because the others are oil and 

gas, and that kind of stuff. 

Mr. STARK. Correct. And so we have only begun to scratch the 

surface. 

Mr. LANKFORD. But it is your gut there is undiscovered. You 

have got the 20 basins you have talked about. You think there are 

other undiscovered areas. Again, you go back 10 years ago, no one 

understood how plentiful the oil would be here. And understand, it 

is a gut. 

Mr. STARK. Oh, without a doubt, I do not believe by any stretch 

that we have found all the resources here. And the technology will 

allow us to identify and unleash more if we are allowed to do that. 

Mr. LANKFORD. Okay, thank you. I yield back. 

Chairman ISSA. Mr. Farenthold? 

Mr. FARENTHOLD. Yeah. I realize we are getting short on time, 

much like getting the oil out of North Dakota to Texas for refining. 

93 

It is several hops for us to get home on an airplane to Texas as 

well. But I did want to—— 

Chairman ISSA. Hopefully there are no beetles in our way. 

[Laughter.] 

Mr. FARENTHOLD. I have not had good luck with air travel these 

past couple of weeks. But I did want to take just a couple of minutes to talk about the pipelines and some of the issues that you are 

facing. Mr. Hatfield, you mentioned that as you do these transstate pipelines, you face a variety of different regulations in the 

States. And it is a time consuming and expensive process. 

I am assuming you do not want the feds to take over regulating 

the pipelines. You are better off dealing with the States? 

Mr. HATFIELD. What we would like is clarity and predictability. 

And the fact is, either side that they came from we would be happy 

with it. But I believe the answer to the question is, yes, we would 

be happy with States working and being more predictable in 

their—— 

Mr. FARENTHOLD. You talked a little bit about the seaway reversals. That was a pipeline that was taking refined product north, is 

that correct? And now you are bringing crude south to refine it. 

Mr. HATFIELD. Yes. It was reversed, and we are bringing crude 

back south. You are exactly right, yes. 

Mr. FARENTHOLD. All right. How does the product now get back 

north now that that capacity is gone? I guess the point I am making is, you all reversed that because it made economic sense to do 

that. It was much cheaper to reverse that pipeline. You felt like 

there was more of a demand and you could make more money 

bringing the crude south. 

Did you revere that pipeline because it had taken too long and 

been too expensive to build another one? I mean, explain to me 

kind of the thought process in that. 

Mr. HATFIELD. I have my focus in North Dakota. And so the fact 

is I do not have a huge amount of detail with regard to some of 

the bigger mainline projects. But any time that you do a project, 

if you have the opportunity to use a pipeline that is in place, it is 

going to be much more efficient and economical than going through 

the steps today. Whether that was absolutely the reason, I cannot 

say here. 

Mr. FARENTHOLD. And you are talking about 21 of your other 

pipelines. That is going into your existing easement and putting in 

another pipeline. Is that what that means? 

Mr. HATFIELD. What we will be doing is running a secondary 

pipeline along the existing easement in the same direction doing 

the same essential thing. 

Mr. FARENTHOLD. I would say that that is substantially cheaper 

because in most of your easements, you have the ability to lay multiple pipelines. Do you have to get re-permit? Are there regulatory 

hurdles associated with that? 

Mr. HATFIELD. You will essentially run some of the, and in many 

cases, most of the same regulatory requirements. But it will be— 

it should be a more effective process of going along with existing 

regulations. 

94 

Mr. FARENTHOLD. And for a trans-state pipeline, let say the 

Bakken. We will be nice to Lankford and only take it to Cushing 

and not bring it all the way to Houston. 

Mr. LANKFORD. It is going to Cushing, though. I can tell you 

that. 

Mr. FARENTHOLD. How long would it take to build that? If you 

said that you wanted to do it today, which you have, when would 

the first drop of oil flow down? How long would it take, and what 

are the big impediments there? 

Mr. HATFIELD. If I could give you an example, on our southern 

access line, which was very simplified compared to what you just 

laid out from going from the Bakken to Oklahoma, which would require more States. This was a line, primarily an existing right-ofway, that encompassed 2 States. That permitting and approval 

process essentially took 34 months to go from initial permit to construction being completed. Construction was 11 months. 

Mr. FARENTHOLD. And in the meantime, that product is being 

moved by rail or truck, which is inefficient and less environmentally friendly. 

Mr. HATFIELD. It is has been moved by whatever mode the customers can find to move it to market. 

Mr. FARENTHOLD. Thank you. 

Mr. HATFIELD. Thank you. 

Chairman ISSA. Mr. Berg. 

Mr. BERG. Well, I just want to conclude and thank everyone for 

being here. Our goal, quite frankly, is to create energy independence in America, and I think some of these facts that are coming 

out in this committee makes it a critical committee. It becomes 

part of the record. A lays down really something for others to look 

at as we start to say and get serious about how do we reach that 

point of energy independence, which obviously is about national security. It is about economic security. We have heard that. And it 

is about American jobs. Thank you. 

Chairman ISSA. I want to thank our witnesses. I think I am 

probably the only one on this side of the panel who is old enough 

to remember when the Alaskan find came in, and when similar to 

North Dakota jobs that paid incredible, unbelievable wages caused 

people to leave their families, and head north, and send home more 

money from Alaska than they could have made if they stayed 

there. I am glad to see that one State, in spite of the Federal Government’s assistance, is finding a way to do that. 

The record will remain open for additional questions and any additional ideas or inclusions you want to place in the record. 

Chairman ISSA. Mr. Stark, I want to give you one last kudo, if 

you will. If I can find a way to get you back to Washington to explain to people just how significant this geology change, the change 

between when you were in college and today, has been, I hope you 

will be able to accept our invitation. 

Now I probably should get somebody in to teach financial literacy 

first. 

[Applause.] 

Chairman ISSA. But second only to that, I think that you would 

be the greatest addition to the education of members of Congress. 

95 

And lastly, I want to thank my colleague. I know that successes 

like here in North Dakota do not begin overnight, and I know your 

years of service before you came to Congress meant a lot. And 

thank you for coming and adding so much to today’s hearing. 

And with that, we stand adjourned. 

[Whereupon, at 11:15 a.m., the committee was adjourned.] 

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