North Dakota Enjoys Oil Boom—But Girds for Slowdown – by Russell Gold (Wall Street Journal – December 23, 2012)

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DICKINSON, N.D.—North Dakota officials have a challenge many states would love to face: figuring out how to manage big permanent investments such as roads and bridges for an energy boom that is drawing hordes of newcomers.

Already home to some of the fastest-growing towns in the country, according to Census Bureau estimates, the oil-rich western half of North Dakota is likely to experience a population jump of more than 50% over the next two decades, a state study predicts. That works out to a rise of about 110,000 in a state that as of last year had just 684,000 residents.

The draw is high-paying jobs, and lots of them—last year, workers in the state’s energy industry made $91,400 on average, more than double the state average of $41,800. And with a state unemployment rate of just 3.1% there is much demand for more workers.

Behind the boom is the extraction of vast amounts of oil from the rock formation called the Bakken Shale, made possible by the drilling technique known as hydraulic fracturing, or fracking.

The drilling has created tremendous demand for new roads and housing, law enforcement and sewer lines as oil workers have flooded into North Dakota. The state expects demand for electricity to double by 2017.

But energy booms seldom proceed on a smooth path; they tend to wax and wane as crude prices rise and fall. So government leaders are trying to keep pace with the jump in population and industry activity without overbuilding and stretching public finances, problems that have plagued other energy-rich areas, including parts of Louisiana.

“Everyone in North Dakota is concerned about getting overextended and having some kind of a—even if it is not a bust—just a slowdown in the oil production,” Gov. Jack Dalrymple said in an interview.

The state’s spending on infrastructure in the western, oil-producing region may rise more than fivefold in four years, to $2.5 billion proposed for the two-year budget cycle of 2013-15.

Five years ago, North Dakota produced 125,000 barrels of oil a day. But a surge of drilling in the Bakken has increased crude production nearly sixfold, and industry experts say the state might reach 2 million barrels a day in a decade, putting North Dakota in the same energy-producing league as Nigeria.

Officials expect strong growth for another decade, but there have been a few signs recently that the rapid industry development has created an inflationary environment that could cool the boom a bit.

For the rest of this article, please go to the Wall Street Journal website: http://online.wsj.com/article/SB10001424127887324296604578177432510742360.html

 

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