Oil drilling means business at Port of Olympia

ROLF BOONE

Oil drilling means business at Port of Olympia

The Port of Olympia is back in the import business, bringing a product to the marine terminal that arrives in 11/2-ton “super sacks,” is dumped into enclosed rail cars and then travels 900 miles to the northwest corner of North Dakota, where it plays a role in an economic oil boom reminiscent of Alaska in the 1970s.



The new cargo represents $1.5 million in annual revenue for the port.

The product, manufactured in China, is called ceramic proppants – grains of sand with a hint of alumina that are coated with ceramics. The proppants are used in an oil exploration process known as hydraulic fracturing, or “fracking,” that literally props up the weight of the earth so that oil, deep underground, can be released.

For some, fracking is a controversial process, prone to contaminate groundwater, while others say fracking takes place at such deep levels underground that there is no threat to groundwater. Others, too, say the fracking process in North Dakota is closely regulated and means jobs and growth, as well as jobs in Olympia.

An economic development official in Williston, N.D., the center of much of the oil exploration in the state, said unemployment is seven-tenths of one percent; Washington state unemployment was 8.5 percent in September.

“If you’re not working, there’s something wrong,” said Shawn Wenko, assistant director for Williston economic development.

MORE THAN EXPORTS

The port’s marine terminal in recent years has mostly been an export port, sending logs to Japan, China and South Korea. Japan remains a steady log market for the port, but the China log market, after a red-hot 2011, has cooled to become what Port of Olympia marine terminal director Jim Amador calls a more “mature market.”

Because markets can change quickly, the port is constantly on the lookout for new cargoes, he said, finally securing shipments of ceramic proppants for the next two years with a Houston-based company, Rainbow Ceramics, with operations in China.

Three ships from China have made deliveries to the port this year, and another three are expected before the end of the year. The last ship to arrive at the port was the M/V Star Dieppe, which delivered 6,500 metric tons of ceramic proppants this month.

The $1.5 million revenue from the cargo, combined with the marine terminal’s existing business, boosts total marine terminal revenue to $4.5 million, a level not seen at the port since a Russian container line called Sunmar did business at the port in the late 1990s, finance director Jeff Smith said.

Other occasional imports at the port over the years: garnet – also a sand-like material, used for water-jet cutting technology – wind-farm wind blades headed to Eastern Washington, and aluminum ingots used to manufacture airplane parts.

Once the rail cars are loaded with proppants, they roll out of Olympia, typically during the late afternoon or evening, and head to East Olympia before connecting with BNSF railway lines in DuPont, said Mike Klass, marketing and resource planning manager for Tacoma Rail.

From there, the shipments can depart in one of three directions: south to Portland and east along the Columbia River; north to Everett and east through Wenatchee; or east through Yakima. No matter the route, they all wind up in Spokane and then head east through the Rockies to North Dakota, Klass said. The trip can take seven to 10 days, he said.

BOOMTOWN

Once the proppants arrive in North Dakota, they are put to work in finding oil in the Bakken shale, deep underground in the northwest corner of the state, as well as Eastern Montana and parts of Saskatchewan. The town of Williston, the center of much of the oil exploration activity, has grown to 30,000 people, nearly tripling its population since 2009, Wenko, the Williston economic development official, said. It’s also the fastest-growing community under 50,000 people in the country, according to recent census data, he said.

Oil exploration is not new to North Dakota, Wenko said. It began in the early 1950s, then the state underwent boom and bust periods in the 1970s and 1980s. The Bakken shale was long thought to have oil, but the technology had not advanced to access it until the development of horizontal drilling and hydraulic fracturing in the early 2000s, he said.

“Then things really took off,” Wenko said.

The Williston area is now home to 400 oil and gas service companies, including some of the largest in the world, such as Halliburton, he said. North Dakota is thought to have the capacity for 70,000 wells. Seven thousand wells have been drilled so far, and the oil service companies are drilling at a rate of 1,200 to 1,300 a year, Wenko said.

Sudden growth has produced some positives and negatives.

Unemployment is low, wages are high, but so is the cost of living, including high rents and the cost of goods. He also estimates the community is facing $500 million in infrastructure improvements, including upgrades to wastewater treatment, roads and an airport relocation, as well as more in the way of local government services, such as fire and police.

Positives include a generation of young people who have returned to Williston, including Wenko, 36, who, after graduating with a tourism degree, left the area for 15 years.

“You moved away because there was no opportunity,” he said.

The area also is developing a commercial base of restaurants and retail, and there’s a plan for downtown revitalization and increased funding for parks and recreation, he said.

Jim Knight, in charge of business development at the Port of Olympia, got a firsthand taste of Williston’s growth when he visited in February.

Unable to find a hotel room, he wound up staying in the house of somebody he met on the way there, and then spent a week sleeping under a pool table, he said.

But what about environmental concerns?

Wenko said there’s a misconception about the area that drilling is out of control, which is not the case, he said. “North Dakota regulates it very well,” Wenko said, although he added that the U.S. Environmental Protection Agency continues to look at the fracturing process and that action by the federal agency could slow things.

Knight argues that the ceramic proppants are safer for port dock workers to handle because it doesn’t result in as much dust as typical sand does, he said. The proppants, too, are used in a process that takes place 10,000 feet below the surface of the earth, while groundwater typically is found between the surface and 1,000-foot levels, Knight said.

The EPA is set to release a progress report on hydraulic fracturing late this year; a draft report is due in 2014, according to the EPA website.

“The scope of the research includes the full lifespan of water in hydraulic fracturing, from acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced water and its ultimate treatment and disposal.”

Knight added that the new cargo helps the port meet its economic development mission, including about 40 dockworkers who now regularly work at the port’s marine terminal.

“We are participating in increasing our energy independence and jobs,” Knight said. “I couldn’t be prouder.”

Rolf Boone: 360-754-5403 rboone@theolympian.com theolympian.com/bizblog @rolf_boone