The growth of unconventional oil and gas in North America in recent years is an energy success story. In 2009, North Dakota edged out Louisiana to claim bragging rights as the fourth ranking oil producing state.
Lynn Helms, Director of the state Department of Mineral Resources, reported in his April 2010 newsletter that if sweet crude oil prices hold at current levels North Dakota could produce 350,000 barrels of oil a day by late 2011. That level of production would be nearly double the production which previously was limited by the lack of export facilities to get the oil and gas to market. February 2010 results showed record production of 261,000 barrels per day. Natural gas production also hit record levels at 280,589 MCF/day.
Investors see the potential for unconventional oil and gas and have pumped capital into expanding North Dakota’s shipping capacity from 189,000 barrels per day to nearly 400,000 barrels per day. This is enough to handle the expected production growth for the next two years.
A Sweet Spot in America’s Economic Growth
This is one reason unemployment in North Dakota is the lowest of any state. Every $1 increase in the price of oil brings the State $9.3 million in additional tax revenue and that multiplier effect of spending from workers, capital investment in equipment and the growth in earnings. The Bismarck Tribune reported that the spread between North Dakota Sweet Crude and the NY MERC price had closed to within ten percent. Before the infrastructure improvements expanding shipping capacity that spread had been as much as twenty-eight percent keeping North Dakota Crude prices depressed.
While the Nation debates health care reform that is expected to raise health care costs, stimulus spending expected to raise taxes, and deficits expected to raise inflation, a quiet revolution is going on in places like North Dakota exploiting new technology and competitive energy markets to reduce America’s dependence on imported oil and natural gas. Every day North Dakota saves America $22 million in imported oil wealth transfer (at today’s average crude price of $82.98).
The good news is that what is happening in North Dakota is spreading to other parts of the country from the Rockies to Pennsylvania, from North Dakota to Texas putting America’s technology to work solving America’s energy problems.