While Minnesota lawmakers wrestle over which state taxes to increase, North Dakota’s Legislature just closed out its session by approving $1.1 billion in tax relief.
Minnesota’s neighbor is flush with money because of the major oil boom that’s turned North Dakota into the second-biggest oil producing state.
North Dakota has been a national magnet for workers who were casualties of the Great Recession. As more and more oil wells were brought on line, the state’s roads, law enforcement and housing were overwhelmed by the huge influx of oil people. Meanwhile, many experts and long-time residents speculated about how long the spike in oil commerce would last.
Now a federal government source has weighed in.
More than double the oil
The scope and duration of the oil boom officially expanded recently when the U.S. Geological Survey more than doubled its projection of the oil that’s recoverable in the Williston Basin.
North Dakota’s oil fields create major business opportunities for companies in Minnesota.
“A number of Minnesota businesses have benefited from the Bakken [oil formation] boom,” Rob Grunewald, an economist with the Federal Reserve Bank of Minneapolis, told MinnPost. “Minnesota oil and gas companies have operations in the Bakken and other businesses have been investing in retail and housing.”
Grunewald added, “The new USGS report findings probably didn’t surprise energy companies and investors, but likely gave them more confidence in the longevity of oil and gas production in the region.”U.S. Sen. John Hoeven, R-N.D., had urged the federal government to update its projections about oil in the Williston Basin. In a statement, Hoeven said that he wanted to use the credibility of a new USGS study “to stimulate more private-sector investment in infrastructure like housing, hotels, retail stores and other services to meet the needs of a rapidly growing western North Dakota.”
Hoeven noted that the conclusion of the new USGS study “confirms and reinforces the fact that the Williston Basin is a sustainable, long-term play warranting strong private-sector investment for decades into the future.”The term “decades” may be one of the most important words in Hoeven’s observations about the oil industry in North Dakota.
Many oil employees are housed in man camps during the weeks they are working in North Dakota, and then they travel back to their home states to be with their families for the weeks they have off. Western North Dakota has plenty of lines at retail stores, gas stations and fast-food restaurants and housing is expensive and hard to find.
Hoeven is clearly talking about building the public and private infrastructure that’s needed to support the robust economy in western North Dakota.
Minnesota construction companies, manufacturers and other businesses are in close proximity to North Dakota and well-positioned to capitalize on North Dakota’s economic expansion.
Staff at the Minnesota Department of Employment and Economic Development (DEED) frequently hear anecdotes about Minnesota companies doing business in North Dakota’s oil country, but DEED spokesman Monte Hanson said the agency doesn’t have hard data to quantify the oil boom’s impact on Minnesota’s economy.
Bakken’s ripple effect
The Federal Reserve Bank of Minneapolis released a study Tuesday in which it examined the “ripple effect” on employment of North Dakota’s oil boom. The Bakken formation oil activity is centered in 12 core counties of North Dakota and Montana. In prime oil country, there has been strong employment growth, tight labor markets and an increase in wage rates.
The Fed researchers drew concentric circles around the Bakken region in 100-mile bands to see how widespread the spillover effects from the oil boom might be.
“We observe strong increases in average weekly wages in counties within 100 miles of the Bakken and lower unemployment rates closer to the Bakken than further away,” Grunewald said. “However, the Bakken ripple effect doesn’t seem to appear in aggregate economic statistics in Minnesota counties.”The oil industry has had a profound effect upon the economy in the Bakken oil region, however, and the economic bases of counties are more diversified as you move farther and farther away from the region. But the Minnesota companies that hit the oil jackpot are going to be those that supply parts and equipment for the oil industry, build roads, homes, hotels and restaurants and perform specialized services, such as engineering.Now that the USGS has forecast a long and widespread oil boom, Minnesota companies will be capturing more business and new customers in North Dakota’s oil country.
Fedor can be reached at email@example.com. She is on Twitter @LizFedor.