North Dakota Economy Booming Thanks to Oil Production

Published August 1, 2011

While the rest of the nation struggles with more than 9 percent unemployment and economic stagnation, North Dakota is experiencing an economic boom driven by oil production. According to the U.S. Department of Commerce, North Dakota’s economy is growing at an annual rate of 7.1 percent, a full 2 percentage points higher than the second-fastest growing state economy.

More Jobs than People
Unlike other states, North Dakota has a balanced budget, rising housing prices, and low unemployment. It’s one of the few places in the United States where there are plenty of jobs.

Much of the reason for the state’s phenomenal economic growth during a killer recession is the Bakken Shale oil field. Located in the western part of the state, the Bakken Shale could hold up to 3.65 billion barrels of oil, making it the second largest known reserve in the United States.

“Right now, North Dakota is the envy of the nation, with no recession and unemployment averaging about 3.2 percent,” said Brett Narloch, executive director of the North Dakota Policy Council. “There are more jobs than people to fill them.”

High Salaries Beckon
“There is so much oil and so many companies looking for people to work in the oil patch that kids fresh out of high school are being paid six figures. Of course they’re earning it—the conditions are tough, the hours are long, and it’s not fun work. But the high demand for oil workers has driven wages up for support positions, even entry-level type work at McDonald’s. The bottom line is there is no shortage of good-paying jobs for hard-working people,” Narloch explained.

Because so many workers are coming to North Dakota, oil companies are renting out entire hotels and apartment buildings for their workers to stay.

The oil wells are all at least 100 miles west of North Dakota’s capital city of Bismarck. Several oil companies have nevertheless opened offices in the state’s capital city, with oil company executives setting up their families there. 

“They want to raise their kids in a place with a ‘small-town’ feel,” said Narloch. “This has been absolutely great for North Dakota. Anytime you can have a nationwide recession and not feel it, that’s a good thing,” he says.

Right now, he says, it’s very hard to find beds for all the oil workers, and as many as 15,000 of them are living in crew camps. People are looking for houses or rooms to rent but can’t find them.

State Awash in Tax Revenues
The Bakken Shale produces about 100,000 barrels of oil per day, making North Dakota the fourth largest producer in the United States, behind Texas, Alaska, and California.

All of that oil being dug out of the ground means the state’s tax coffers are getting filled, noted Ron Ness, president of the North Dakota Petroleum Council.

“In 2011 the oil industry paid $1 billion in oil and gas taxes. That number has grown from $152 million in 2005 to $750 million in 2010 and $1 billion in 2011. The reason oil has taken off here is because North Dakota has a very friendly business climate. As a result, North Dakota has not seen any of the effects of the economic slump and just recently returned $500 million in property taxes to the citizens,” Ness said.

“The industry is creating a tremendous amount of personal wealth for many people,” said Ness.

Long-Term Benefits
“The Bakken is critical to a lot of the state’s economic development. It isn’t a boom, because this is going to be around for a long time,” said Tim Rasmussen, Communications Manager for MDU Resources Group. “Because of advances in drilling technology, oil companies are drilling two miles into the ground, extending over an ever-greater part of North Dakota. The U.S. Geological Survey says the potential is huge. Right now, we’re at the front end of a very long play. We expect the Bakken to produce for a long time to come.”

Kenneth Artz ([email protected]) writes from Texas.