In the Colosseum

Lessons From North Dakota’s Oilfields

Building the right climate for energy development can produce remarkable results.

By From the February 2013 issue

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Delayed energy projects and regulatory hurdles to domestic oil production not only cost the United States economy billions of dollars and millions of jobs, but they also stand in the way of an elusive goal: true American energy security.

I believe, however, that our nation is within striking range of that goal and, with the right approach, can achieve it within five to seven years. We have the resources and technology to produce more energy than we consume and break our long-standing dependence on foreign sources of oil. All we need is the will.

In fact, there’s a path to follow, one that North Dakota blazed over the last decade by building a comprehensive energy plan we called Empower North Dakota. We worked to create a business environment that encouraged energy companies across all industry sectors to invest in our state. We created the kind of legal, tax, and regulatory certainty that attracted capital, expertise, and jobs.

North Dakota’s oil industry is just one example of how this building the right climate for energy development can produce remarkable results. Just 10 years ago, oil companies had left or were leaving our state’s oil patch, the Bakken formation, for a host of reasons: inadequate technology, an aging workforce, lack of transportation infrastructure, and insufficient data about our oil reserves. Industry leaders decided they had better places to invest shareholder dollars and earn a return.

But North Dakotans decided to turn this situation around. Our measures included:

• Creating a pro-growth tax environment that invited investment

• Updating geological studies of the Bakken oil formation

• Establishing an oil and gas research fund, paid for by the industry

• Improving infrastructure

• Creating a pipeline authority to expand transport capacity, and

• Establishing a petroleum safety and technology center at Williston State College to train skilled workers.

These steps improved the business environment and drew new technologies and billions of dollars of investment capital to the Williston Basin, which unleashed the potential of North Dakota’s oil patch.

Since 2006, we have surpassed Alaska, Oklahoma, Louisiana, and California in oil production to become the second largest oil-producing state in the nation, trailing only Texas. In 2012, North Dakota produced more than 245 million barrels of oil and provided nearly 11 percent of all U.S. output.

Notably, North Dakota’s policies weren’t about government spending for its own sake. They were about creating an environment for private investment. That approach generated revenues for the state, broadened the economic base, and actually enabled us to reduce taxes several times over the past decade.

SINCE COMING to Washington, I have advanced similar initiatives in the U.S. Senate, measures that will provide the energy industry with the certainty and business environment it needs to thrive. For example, the Domestic Energy and Jobs Act (DEJA), which I introduced this summer with 29 co-sponsors, is a package of 13 diverse energy bills addressing both traditional and renewable development.

DEJA is designed to streamline and simplify regulations, boost domestic energy supplies, build American energy infrastructure—including the Keystone XL pipeline—and safeguard America’s supply of critical minerals used in high-tech manufacturing. Like our Empower North Dakota plan, it’s a true “all-of-the-above” approach to energy development that will drive America’s overall economic recovery and help advance us toward energy security.

This legislation is both timely and necessary. A study by the U.S. Chamber of Commerce released in 2011 cited 351 energy projects, both renewable and traditional, that were stalled because of legal, tax, and regulatory uncertainty, at a cost of $1.1 trillion to the American economy and nearly 2 million American jobs.

A second measure I’ve introduced, the Empower States Act, is vital to continuing the recent remarkable growth of shale oil extraction. It will help ensure that states retain primary authority to manage hydraulic fracturing. The bill takes a states-first approach because states know their land, their geology, and their water resources; they have a vital stake in protecting their environment and citizens. At the same time, the Empower States Act provides for a safety net that allows the Environmental Protection Agency to step in if there is a danger to health or the environment.

The need for a sensible approach to fracking was underscored by a recent U.S. Chamber study of shale energy production. The study projects that between 2013 and 2035, the shale energy industry is expected to invest more than $5 trillion, create nearly 3.5 million jobs, and generate more than $2.5 trillion in local, state, and federal tax revenues.

We are at a moment in our history when we can turn adversity into opportunity and realize a goal—true energy security—that we could only dream of a generation ago. We must seize this opportunity to make America stronger, safer, and more financially secure by developing energy right here at home to meet our needs, now and for the future.

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