By Richard Martin, Contributing Editor

Oilmen who have been counting on the Bakken formation, which stretches over 25,000 square miles in Montana and North Dakota, to boost U.S. reserves now have a new and enticing play to conjure with: the Three Forks-Sanish reservoir, which lies directly underneath the Bakken.

Results from exploratory wells in the last few weeks have indicated that the Three Forks could contain as much oil as the Bakken – which was estimated in a revised U.S. Geological Survey to hold 4.3 billion barrels of “technically recoverable oil,” making it the largest find in North America in decades.

Now, preliminary results from the reservoir that lies underneath the Bakken oil indicate that it could have an equal amount of recoverable oil – doubling the Bakken finds and making the U.S., in theory, a major oil producer once again.

Lynn Helms, director of the state Department of Mineral Resources, told reporters that recent production results from 103 wells in the Three Forks-Sanish formation show production levels “as good or better” than wells in the Bakken. Already, companies with significant holdings in the Bakken/Three Forks area are reaping the rewards. “Shares of Brigham Exploration Co. (BEXP) shot up more than 24% Wednesday after the oil-and-gas explorer said late Tuesday that a well in North Dakota was producing better than expected,” the Wall Street Journal reported.

Here’s how heated the rhetoric has gotten: writing in Energy and Capital, a stock-hawking newsletter, Keith Kohl exults, “If geologists and officials are right about Three Forks, they could soon be confirming this giant basin as a a separate oil-producing formation… one of major significance to our national energy landscape… one that could literally double the output of the Bakken… one that could finally break our addiction to Saudi oil.”

It goes without saying that “breaking our addiction to Saudi oil” is not in the cards, even if the most outlandish estimates of the oil held in the Three Forks formation turn out to be accurate. The Bakken estimates themselves, from an April 2008 report by the U.S.G.S., are almost certainly exaggerated: they represent a whopping 25-fold increase in the amount of recoverable oil compared to the agency’s previous, 1995 estimate of Bakken reserves.

Oil that is “technically recoverable” may still be too expensive and too laborious to produce, as this analysis on the Oil Drum blog demonstrates. “Will Bakken ever produce as much as 4.1 billion barrels, the amount suggested by the USGS estimate? It seems very unlikely.” More plausible is a total production of around 500 million barrels - “equating to about 23 days worth of United States oil usage, spread over many, many years.”

What’s more, Three Forks may not be a separate reservoir from the Bakken – oil there may simply be run-off from the upper reservoir, in which case Three Forks is not a major find at all. Tests by state and industry officials will show later this year whether the Three Forks is a big discovery, or just a drip pan.

And while industry officials are excited about the prospects for more oil in the Northern Rockies, they are not jumping up and down like outsiders. Denver-based Whiting Petroleum Corp., which has drilled two wells in the Three Forks formation, is “excited about Three Forks but it’s early on in the play,” company spokesman John Kelso  told the Associated Press.

“With the turbulence in crude oil prices, we’ve kind of backed off Three Forks for the Bakken,” Kelso added. “We will very likely get after Three Forks in 2010, depending on oil prices.

So, while any big oil find on U.S. land – especially in a relatively non-controversial area like the Northern Rockies – is cause for celebration, it’s not time to expect unlimited cheap domestic oil. Like the Bakken, the Three Forks oil will likely stretch out the gradual decline of U.S. production – not reverse it.