North Dakota Official: Low Taxes and State-First Regulation are Behind Bakken Success Story

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Drew Wrigley, lieutenant governor of North Dakota, would like the federal government to stay out of his state. In a keynote address at an oil & gas conference in Bismarck last week, Wrigley said the dramatic crude-oil production gains in the Bakken formation shows what can happen when oil & gas production is regulated by states, not the federal government.

"North Dakota reminds people that markets work, supply and demand works," Wrigley told about 100 attendees at the Fourth Annual Bakken Infrastructure Finance & Development conference, sponsored by Information Forecast Incorporated (Infocast) (Woodland Hills, California). "Scarcity of a product leads to increased interest in producing that product, which leads to innovation. The 700,000 citizens of North Dakota are giving the nation an economics lesson. Innovation from the private sector figured out a way to crack the Bakken."

Five years ago, crude oil production from the Bakken averaged about 100,000 barrels per day (BBL/d), but production has surged to an estimated 874,000 BBL/d as of July 2013, according to North Dakota Industrial Commission. Several speakers at the conference predicted continued vast production growth in the state.

Wrigley acknowledged the state has been "blessed" by geology, but he added "it's no accident" that crude-oil production in North Dakota has soared in recent years: "Because we have combined the right people, the right amount of capital and the right regulatory framework, we are changing the world. The decisions we make in North Dakota have an impact on the U.S. economy and U.S. national security. Truly, we are living and working in legendary times."

The lieutenant governor said states, not the federal government, should be the primary regulator of the Oil & Gas Industry. This "state-first" approach produces better results than solutions developed in Washington, D.C., he added: "We are the best stewards of our future. No one respects local quality of life better than local officials. No one is better qualified (to regulate) than local officials."

Low taxes are another critical element of the Bakken success story, Wrigley continued. The state is "an island of prosperity," in part because it has low taxes. "The state has a lot of money today, and we cut taxes in the last two legislative sessions while increasing our investment in infrastructure," he told conference attendees. Wrigley said that full financials coffers are not a reason for state government to do "something dumb" with its tax receipts. "We will not grow state government to fit the revenue stream," he pledged.

And while North Dakota has a business-friendly tax and regulatory environment, Wrigley warned oil & gas companies that state officials and residents have certain expectations about companies that operate in their state. "Over the long term, you can't do business in our state if you don't understand our commitment to environmental stewardship," the lieutenant governor said. "North Dakotans have a longstanding tradition of hunting, fishing, and outdoor recreation that requires clean air and clean water. We have a right to have clean air and clean water."

Wrigley said the state's Heritage Fund is an important part of preserving and improving the state's quality of life. Funded by taxes on the extraction of oil & gas, the Heritage Fund today has grown to about $1 billion. By 2017, the first year the state is allowed to utilize those funds, Wrigley said the Heritage Fund could reach $3 billion.

"With our Heritage Fund, we are looking to invest in the future of North Dakota," Wrigley told the Infocast conference. Exactly where and how the state will invest those funds will be decided by a board that has not yet been assembled. But the lieutenant governor suggested some priorities were bridges and roads, flood control projects, education and environmental protection.

North Dakota has the nation's fastest-growing economy and lowest unemployment rate, and one organization recently named it the best-run state in the U.S., Wrigley said. Oil & gas production "has breathed new life into our communities--lots of people who left North Dakota are coming back, lured by the opportunity. North Dakotans have the right can-do spirit, and we are watching talent and capital flow back to North Dakota. The future of the Bakken is very bright," Wrigley concluded, because businesses want to operate where taxes are low and the state practices innovative regulation.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.