Energy and oil expert Byron King recently spent three weeks crossing North America as part of his “2008 Energy and Geology Tour.” The purpose of the journey was to search for new ideas and resource opportunities that can benefit investors. In the following extract from The Daily Reckoning, Byron tells readers what he learned first hand about the Bakken Formation and the Marcellus Shale…

In Saskatchewan and North Dakota, I saw the development efforts that are going on in the Bakken Formation. The Bakken is a rock formation within the Williston Basin, a sedimentary basin covering parts of three states and two provinces. The Williston Basin contains a vast wedge of sediments as much as 15,000 feet thick in some places.The Bakken itself is one of several hydrocarbon-bearing formations within the Williston Basin. But the Bakken reaches a maximum thickness of only about 150 feet. In fact, it’s even thinner in most areas.

The best understanding of the Bakken Formation is that it is both a “source rock” for hydrocarbons, as well as an oil and gas reservoir. That is, over millions of years, organic matter accumulated in the sediments and became chemically altered by heat and pressure. All of this produced oil and gas. Now the oil and gas have collected within the sedimentary beds of the Bakken. But it’s tricky to get them out. It requires directional drilling and subsurface “fracturing” to break up the shale and release the hydrocarbons.

Wells in the Bakken Formation are not easy to drill, and they are not cheap. Yet on my travels, I saw at least a dozen working drilling rigs. I saw many dozens of brand-new oil wells with the pump jacks still breaking in. The roads of Saskatchewan and North Dakota were clogged with literally hundreds of trucks hauling rig components and drilling supplies.

Investment is moving into the Bakken play, what with the high prices for oil in the last few years. I spoke with farmers who described years of toughing it out on the hard prairies, followed by recent lease payments in the millions of dollars.

And there’s a human migration going on as workers from all over North America travel to this exciting new energy patch to take jobs that can pay over $100,000 per year. But if you are thinking of going, take your fur-lined underwear - they drill year-round, and in winter, the temperatures have been known to get down to 60 below.

There’s much more to discuss about where I went and what I saw. But I want to say that I’m home now and there’s another hydrocarbon boom going on right around me. It’s the Marcellus Shale play, and in a sense, it’s like reliving the history of the old boom days of the Pennsylvania oil patch in the mid- and late 1800s.

The Marcellus Shale is a vast rock formation that extends over New York, Pennsylvania, Ohio, West Virginia and parts of Maryland, Kentucky and Virginia. And like the Bakken, it’s loaded with (mostly) natural gas, but in some areas, there are a lot of natural gas fractions like ethane, propane, butane, etc.

And just the initial leasing and land plays of the past year or two have brought immense new money into the region. Indeed, in parts of Pennsylvania, it seems like entire counties have hit the lottery. Prices for oil and gas leases have just plain soared.

From one end of Pennsylvania to the other, courthouses are packed with land agents. The agents are searching titles as far back as the 1850s. Really, there are lines out the doors of some courthouses due to the Marcellus land rush. In Bradford - home of the original Pennsylvania oil boom of the 1860s - the local register of deeds has placed a 15-minute time limit on any one person’s use of the title search computer terminals.

One woman told me that she and her husband have been “land rich and dirt-poor” for their entire lives. “My husband had to work at a factory job just to make enough money for us to pay the taxes on the farm,” she said. “And we almost never made any money off farming.” And now they are millionaires. They have engaged a “big name” law firm in Pittsburgh to write up a business plan for the newfound family wealth.

Stories like this are occurring all over the lands west of the Alleghenies, and even in hardscrabble places like northeast Pennsylvania. As a matter of fact, some of the thickest sections of the Marcellus Shale are in northeast Pennsylvania. (Marcellus Shale is shown as the gray region below)

So the Marcellus play is going to have some serious legs. And I have already identified a few great investment opportunities, which I will share with you in the coming weeks.

Source: How I Spend My Summer Vacation