Washington (Platts)--5Aug2012/203 pm EDT/1803 GMT

North Dakota is the US' No. 2 oil-producing state, having leapfrogged over Alaska in March and California a few months before that. And while North Dakota is not expected to vault ahead of No. 1 Texas anytime soon, the oil and natural gas boom that's currently underway in the Roughrider State is promising to get even bigger in the coming years, according to a key state official.

Lynn Helms, the director of North Dakota's mineral resources department, said on the "Platts Energy Week" television show Sunday that the Bakken Shale formation in the Western part of his state produced about 640,000 barrels of oil per day in May, second only to Texas' 1.7 million b/d. But Helms emphasized that oil production in the Bakken is consistently increasing by 15,000 to 20,000 b/d every month, and that thousands of additional wells will be drilled there in the coming years.

"We're seeing back-to-back 5% increases in production," Helms said. "And we've got 35,000 wells left to drill in this Bakken reserve."

Helms said it will take 16 to 18 more years to fully develop the Bakken Shale formation, which is named after a farmer from Williston, North Dakota, who once owned the land. Geologists first discovered oil there in the early 1950s, but it wasn't economically feasible to develop it until a few years ago, when companies became more adept in their use of technologies such as horizontal drilling and hydraulic fracturing.

Helms said there are currently 210 drilling rigs working the Bakken, and that companies there are drilling nearly 3,000 new wells every year. For now, there is just one well in each "spacing unit," he said. But that will change starting about 18 months from now, he said, when workers will begin drilling anywhere from 6 to 16 additional wells per spacing unit.

GAS INFRASTRUCTURE LACKING In addition to its vast oil reserves, Helms noted that the Bakken Shale formation also contains a significant amount of gas. But he acknowledged that currently, a full 30% of the gas that's being produced is being flared off at the wellhead because there are not enough gas-gas-gathering systems in Western North Dakota to capture it. He said the state and the energy industry are attempting to rectify that shortcoming by investing some $4 billion in gas-related infrastructure.

"We'll be a big gas producer two decades from now," he said, citing a state-funded study that found that the Bakken Shale "will be mostly gas production" for the final 15 years of its economically viable lifespan.

A DEARTH OF HOUSING AND PIPELINES Still, Helms acknowledged that there are challenges associated with North Dakota's oil and gas boom. He said the biggest impediment is a lack of housing for the thousands of new oil-field workers who are flocking to tiny communities such as Watford City. Oil companies have tried to address the shortfall by building temporary housing units known as "man camps," but some oil-field workers have had to resort to living in hotel rooms or even recreational vehicles.

"We have tons and tons of home construction and apartment construction ongoing, but it's going to be a year or two before they catch up and can actually house the workforce that we require," Helms said.

Helms also acknowledged that western North Dakota does not currently have sufficient pipeline capacity to transport all of the Bakken's oil to US refineries, many of which are thousands of miles away. He noted that there are several major pipeline projects in the works to address that problem, but until they come online, the Bakken's oil industry will have to rely on rail transport, he said.

"Rail has stepped up," he said. "They're prepared for oil takeaway of whatever we can produce. So we're now shipping oil by rail to Los Angeles, Philadelphia, St. James, Louisiana -- pretty much all over North America in order to get it outside the pipeline infrastructure. We're going to need rail for probably a decade."

WHO GETS CREDIT?

There is also a political aspect to North Dakota's oil and gas boom that flared up at a hearing in Washington a few days ago. Republicans convened the hearing to argue that the Obama administration doesn't deserve any credit for the surge in production, since most US shale drilling is occurring on private and state-owned lands.

Helms, who testified at the hearing at the request of the Republicans, said a full 82% of the mineral rights in North Dakota are owned by private parties, and that another 6% are owned by the state. Only 12% of North Dakota's mineral rights are owned by the federal government, he said.

"It is this private ownership ... that [has] made development of the Bakken possible," Helps testified.

Adam Sieminski, the head of the US Energy Information Administration, also addressed the issue at the hearing, as well as on "Platts Energy Week" on Sunday. In both venues, Sieminski said the US' major shale plays are located primarily on non-federal lands.

"So it's hard for the federal government to show big oil or gas shale-production numbers on its own lands, simply because the geology favors private and state landholdings," he said on the show.

Sieminski reiterated that his agency "does not make policy judgments" on questions such as which political party deserves more credit for fostering the shale boom. But he did praise the oil industry for making investing the necessary capital.

"Oil investments are a very long-term process, and I would say that everybody who has been working on these things for the past 10 years gets some credit for it," he said.

"Platts Energy Week" airs Sundays in Washington at 8 a.m. on WUSA and in Houston at 4 p.m. (both local times) on the PBS channel KUHT, as well as on other PBS stations throughout the US. The show is also available online at www.plattsenergyweektv.com.

-- Brian Hansen, brian_hansen@platts.com