Why North Dakota Is Booming

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Living on the harsh, wind-swept northern Great Plains, North Dakotans lean towards the practical in economic development. Finding themselves sitting on prodigious pools of oil—estimated by the state's Department of Mineral Resources at least 4.3 billion barrels—they are out drilling like mad. And the state is booming.

Unemployment is 3.8%, and according to a Gallup survey last month, North Dakota has the best job market in the country. Its economy "sticks out like a diamond in a bowl of cherry pits," says Ron Wirtz, editor of the Minneapolis Fed's newspaper, fedgazette. The state's population, slightly more than 672,000, is up nearly 5% since 2000.

The biggest impetus for the good times lies with energy development. Around 650 wells were drilled last year in North Dakota, and the state Department of Mineral Resources envisions another 5,500 new wells over the next two decades. Between 2005 and 2009, oil industry revenues have tripled to $12.7 billion from $4.2 billion, creating more than 13,000 jobs.

Already fourth in oil production behind Texas, Alaska and California, the state is positioned to advance on its competitors. Drilling in both Alaska and the Gulf, for example, is currently being restrained by Washington-imposed regulations. And progressives in California—which sits on its own prodigious oil supplies—abhor drilling, promising green jobs while suffering double-digit unemployment, higher utility rates and the prospect of mind-numbing new regulations that are designed to combat global warming and are all but certain to depress future growth. In North Dakota, by contrast, even the state's Democrats—such as Sen. Kent Conrad and former Sen. Byron Dorgan—tend to be pro-oil. The industry services the old-fashioned liberal goal of making middle-class constituents wealthier.

Oil also is the principal reason North Dakota enjoys arguably the best fiscal situation in all the states. With a severance tax on locally produced oil, there's a growing state surplus. Recent estimates put an extra $1 billion in the state's coffers this year, and that's based on a now-low price of $70 a barrel.

North Dakota, however, is no one-note Prairie sheikdom. The state enjoys prodigious coal supplies and has—yes—even moved heavily into wind-generated electricity, now ranking ninth in the country. Thanks to global demand, North Dakota's crop sales are strong, but they are no longer the dominant economic driver—agriculture employs only 7.2% of the state's work force.

Perhaps more surprising, North Dakota is also attracting high-tech. For years many of the state's talented graduates left home, but that brain drain is beginning to reverse. This has been critical to the success of many companies, such as Great Plains Software, which was founded in the 1980s and sold to Microsoft in 2001 for $1.1 billion. The firm has well over 1,000 employees.

The corridor between Grand Forks and Fargo along the Red River (the border between North Dakota and Minnesota) has grown rapidly in the past decade. It now boasts the headquarters of Microsoft Business Systems and firms such as PacketDigital, which makes microelectronics for portable electronic devices and systems. There are also biotech firms such as Aldevron, which manufactures proteins for biomedical research. Between 2002 and 2009, state employment in science, technology, engineering and math-related professions grew over 30%, according to EMSI, an economic modeling firm. This is five times the national average.

While the overall numbers are still small compared to those of bigger states, North Dakota now outperforms the nation in everything from the percentage of college graduates under the age of 45 to per-capita numbers of engineering and science graduates. Median household income in 2009 was $49,450, up from $42,235 in 2000. That 17% increase over the last decade was three times the rate of Massachussetts and more than 10 times that of California.

Some cities, notably Fargo (population 95,000), have emerged as magnets. "Our parking lot has 20 license plates in it," notes Niles Hushka, co-founder of Kadrmas, Lee and Jackson, an engineering firm active in Great Plains energy development. Broadway Drive in Fargo's downtown boasts art galleries, good restaurants and young urban professionals hanging out in an array of bars. This urban revival is a source of great pride in Fargo.

What accounts for the state's success? Dakotans didn't bet the farm, so to speak, on solar cells, high-density housing or high-speed rail. Taxes are moderate—the state ranks near the middle in terms of tax per capita, according to the Tax Foundation—and North Dakota is a right-to-work state, which makes it attractive to new employers, especially in manufacturing. But the state's real key to success is doing the first things first—such as producing energy, food and specialized manufactured goods for which there is a growing, world-wide market. This is what creates the employment and wealth that can support environmental protection and higher education.

Thankfully, this kind of sensible thinking is making a comeback in some other states, such as Ohio and Pennsylvania. These hard-pressed states realize that attending to basic needs—in their case, shale natural gas—could be just the elixir to resuscitate their economies.

This piece originally appeared in the Wall Street Journal.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

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North Dakota oil boom

If there's a downturn, someone forgot to tell North Dakota. CNN notes that while six-figure salaries are possible, the road to the cash isn't for everyone. North Dakota's oil boom, tied to beneficial tax laws and the presence of the Bakken oil development, have kept the state's joblessness rate at 3.5 percent, which is the lowest. The circulation of oil has brought careers, but there's a trade-off for applicants: superhuman hours, lack of housing and winter months from the bowels of hell. Article resource: North Dakota oil boom brings jobs aplenty

North Dakota

There are quite a few developments in western North Dakota we have been involved in (planning), mostly small residential.

The problem is housing workers who move into the state with little or bad credit from previous foreclosures and losing work. As such there are new workers who cannot qualify for loans resulting in a possible future excess of apartments or temporary housing that is not sustainable.

From what I've been told (by developers) is that because of the lack of quality housing and cities (that are actually towns) with desirable conditions, if the family moves along with the worker and another job arises in an area that offers a higher quality of living, the worker leaves. So the big problems are both quality housing and building towns that offer things that families will desire to keep workers from leaving the moment a better job elsewhere comes along. Apparently the large corporations are beginning to realize this.

Anyhow, my two cents.

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What did they really do differently?

Whatever they did right was not just "doing the first things first—such as producing energy, food and specialized manufactured goods for which there is a growing, world-wide market." I live in West Virginia, which has been producing coal, oil and gas, chemicals and plastics, not so much food. Ohio and Pennsylvania are not that different, either. And all three are closer to markets. I can see business tax climate as a problem in Ohio, but not WV and PA.

North Dakota doing what North Dakota does best

North Dakota is doing what North Dakota does best - using its natural resources for the betterment of its residents. I am hesitant to say that its tax policy or 'right-to-work' status has much to do with its economic success (although the business-friendly environment certainly doesn't hurt).

North Dakota's rich agricultural environment has typically, but not always, acted as an economic stabilizer through recessions. Energy production is the real growth industry here - primarily oil, but wind production helps. The problem with wind energy is that it is still heavily subsidized and may prove not to be a long-term sustainable model for economic growth.

Regarding manufacturing and the technology sector: I'm not tremendously familiar with either, however it appears that North Dakota may have trouble competing in the long-run (especially in the tech sector). Yet, time will tell.

I recommend checking out a new TV mini-series about North Dakota's oil rush called "Boomtown" (http://planetgreen.discovery.com/feature/boomtown-oil). The first three episodes are definitely praise-worthy.