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Why the government shutdown isn’t slowing oil in North Dakota

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It will be a couple of months before we see a report for oil production in North Dakota for October – as I write this we just got a report for August wherein the state broke yet another production record, topping 900,000 barrels for the first time.

But I think it will be safe to say one thing about the October report when it comes out: North Dakota’s production numbers will be little impacted by the government shutdown.

Allow me to explain.

In the latest edition of National Review, there’s an interview with Harold Hamm who is acknowledged to be the biggest player in oil development in North Dakota.

“Hamm spoke of the “renaissance” that’s going on today — a renaissance in oil and gas,” Senior Editor Jay Nordlinger wrote on his magazine’s website of the interview. “The renaissance…owes something to federal distaste for, or indifference to, North Dakota. Because the federal government controls very little land in that state, citizens are free to conduct their own affairs, and they have an oil boom going on there.”

For evidence of this, we need look no further than a comparison of oil production in North Dakota and oil production on federal lands.

“The state’s average daily oil production increased by 29.4% in August compared to a year ago, following an annual increase of 29.3% in July,” University of Michigan Professor Mark Perry writes of the most recent North Dakota oil report. “Remarkably, in only the last two years, oil production in North Dakota has more than doubled from 446,300 bpd in August of 2011 to more than 911,000 bpd in August this year (a 104.2% increase). At the current pace of production increases, oil output in the Peace Garden State will likely exceed the one million bpd milestone by early next year, possibly as soon as February 2014.”

Meanwhile, on federal lands nationwide, things are very different.  “In contrast to North Dakota’s ongoing increases in oil output, oil production on federal lands fell last year to a ten-year low and is 12% below the production level in 2003,” wrote Professor Perry in a posting earlier this year. “Natural gas production on federal lands has fallen by an even greater 37% since 2003.”

North Dakota has already dodged a bullet by having most of its oil and gas reserves under private and/or state land. If the opposite were true, if most of the state’s oil and gas were under federal lands, we wouldn’t be seeing an oil boom.

Oil and gas production in North Dakota won’t be impacted by the government shut down for the same reason the Obama administration’s anti-oil policies haven’t tamped down production. The oil and gas in North Dakota is simply beyond the federal government’s reach.

 

(Photo Credit: Bakken.com)

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