North Dakota’s ‘New Normal’ – Energy-Led Growth

An annual report released this week says that taxable sales and purchases in North Dakota rose more than $5 billion, or nearly 30 percent, from 2011 to 2012 – certainly, music to the ears of government officials who know that this kind of economic surge equals surging revenue for the state as well. (Take note, New York and California.) The important numbers, according to North Dakota Tax Commissioner Cory Fong:

• $6.7 billion in taxable sales and purchases for 2012’s fourth quarter, up 9.7 percent over the fourth quarter of 2011.
• $25.291 billion for all of 2012, a 28.7 percent increase over 2011.

Playing a big role is energy – oil and natural gas production thanks to the Bakken shale, hydraulic fracturing and state policies that embrace development. Oil extraction was one of the leading growth sectors in 2012, increasing by 43.6 percent. That was second only to construction (52.2 percent), whose growth no doubt was linked to demand stemming from Bakken energy development. Fong:

"On the heels of a strong run up to 2012, we had anticipated that the economy would keep growing throughout the year. During 2012, we continued to see statewide growth in all industry sectors. … This will likely become our new normal.”

Wow! Think about it: Sustainable statewide growth in all industry sectors as the “new normal.” Fong told the Jamestown Sun that North Dakotans’ confidence in the state economy is reflected in retail sector growth, up from $5.4 billion to $6.3 billion:

“It’s the sector of the economy where people are going down and making expenditures. When people feel good about where they’re at and their financial position, they will feel more comfortable with making those expenditures.”

The root of this consumer confidence is that North Dakotans are working – lots of them, judging by the state's nationwide-low 3.3 percent unemployment rate. Many folks are holding well-paying jobs in the oil and natural gas industry, or in areas supported by our industry. They have dependable income, freeing them to make purchases that generate the tax revenues that have Mr. Fong smiling. You would be smiling as well if you led the country in state GDP growth last year (13.4 percent) as North Dakota did, according to the U.S. Bureau of Economic Analysis. Again, the energy stimulus at work: oil and natural gas investments and development sparking economic benefits beyond the sector's primary scope. 

Now, back to New York and California. Both also are energy-rich states. Both have vast shale deposits that could be developed with hydraulic fracturing. California Gov. Jerry Brown has said the state should look at fracking, and we agree. The state’s Monterey Shale play could hold 15 billion barrels of oil. But opponents are pushing for a hydraulic fracturing moratorium … which leads us to New York, where a moratorium in place since 2010 is keeping the benefits of the Marcellus play out of reach. Meanwhile, the state is running commercials trying to attract business investment.

Both states should look to North Dakota, where energy potential is being turned into reality – with jobs, economic growth, consumer confidence and tax revenues for state government.