In many respects, North Dakota is one of the least significant of the 50 states. It comes in at 47th out of 50 in state population rankings. With a population of only about 760,000, it has a total of one representative in the United States House of Representatives. And despite tourism being the state’s third largest industry, it is widely considered the least visited state in the United States. For many people, the only reason to visit North Dakota is to check it off as the last of 50 states visited. In fact, if you decide to finish up your 50-state round trip there, you can join the “Best for Last Club” at the Fargo-Moorhead Visitors Center, a high honor which comes with a certificate and a T-shirt.
In terms of cultural influence, North Dakota’s rankings are undeniably dismal. But economically, it’s a much different story. For years, North Dakota had the single fastest growing state economy in the country, with an average annual growth rate of 6.5%, compared to the national average of 1.4%. Over 123,600 net new jobs have been created in the state since 2004, a 26% increase compared to the national increase of 6%. It currently ranks No. 1 in increase in wages, No. 3 in economic competitiveness, and perhaps most significantly, No. 2 in crude oil production.
This perceived economic prosperity due to oil has come with immense environmental consequences, from oil rigs and pipelines disrupting communities and ecosystems, to the rapid acceleration of anthropogenic climate change caused by fossil fuel emissions. The COVID-19 pandemic has slowed oil production, presenting an opportunity to reconsider the future of North Dakota’s economy and landscape.
A Deceptive Oil Boom
North Dakota’s economy is largely commodity-based, with a focus on agriculture and energy. The biggest industry and use of land is agriculture, with the state ranking among the largest producers of soybeans, corn, and wheat. By far the biggest source of money, however, is the extraction of crude oil, with almost 1.5 million barrels produced every day in 2019.
Oil has been drilled across the state since 1910, but the current economic high is tied to an oil boom beginning in 2002 in the Bakken shale formation on the northwestern side of the state. Many North Dakotans, especially those who have been a part of the economic prosperity in recent years, see the oil boom as the state’s savior.
“We were a state that was losing population — people were leaving because there weren’t good jobs here, a slow economy,” Kristen Hamman of the North Dakota Petroleum Council said in an interview with the HPR. “So we’re just proud of what the industry has done for the state and also how it contributes to the stability and energy security of the entire country.” The oil boom has put North Dakota on the map, but this explosion in growth has come with economic instability as well as countless environmental injustices.
Oil and gas are such a central part of the economy that about 53% North Dakota’s tax revenue comes from the industry. Due to this dependence on the oil industry, North Dakota has historically had an unusual economic situation. “We tend to move counter-cyclical to the national economy, said Dr. Jeremy Jackson, the director of the Center for the Study of Public Choice and Private Enterprise at North Dakota State University, in an interview with the HPR. “North Dakota tends to do better actually when states are not doing as well.” As oil prices increase, the rest of the nation struggles to pay the price while North Dakota pockets the money. When the COVID-19 pandemic unexpectedly shut down the state, the economy experienced what experts call a structural change, sending the national and state economy into a tailspin.
With such a disproportionate reliance on oil revenues, North Dakota was hit badly — the oil industry made headlines in April as the price of U.S. oil went negative. A report released in May by Jackson predicted a significant decrease in salaries, wages, the overall labor force, gross state product, and total tax collections as well as an increase in the unemployment rate.
In response to this economic malaise, Gov. Burgum made the decision on May 1 to almost entirely reopen the economy. Many hoped that this would stimulate the economy, but North Dakota’s economic situation has little to do with the economic activity within the state. Jackson elaborated, “We tend to focus on opening up … [but] we need the places that buy the things that North Dakota produces, to open up and to start consuming those things.”
While every state economy has been affected by the economic crisis, North Dakota’s lack of diversification in tax revenue sources has had a direct impact on state funding. In May, Gov. Burgum asked state agencies to prepare for 5-15% in budget cuts, directly in response to a decrease in tax revenue from the oil industry due to decreased demand. In some cases North Dakota’s youth are the ones paying the price — 34 oil and gas companies now owe tens of millions of dollars in overdue royalty payments to public school funding.
This disproportionate division of tax revenue sources is directly hurting services and systems that support North Dakotans. This reliance on the oil industry to prop up the state’s economy has had devastating consequences for long term economic stability.
Perpetuating Environmental Injustice
The oil industry is unsustainable environmentally as well as economically. Oil extraction has numerous harmful ecological consequences including land surface disturbance, air pollution, groundwater contamination, and disruption of wildlife corridors. The industry is notorious for releases of oil and drilling wastewater, as well as dumping truckloads of toxic fluid along the road or drained waste pits illegally. In 2018 alone, the North Dakota oil industry generated 460 million barrels of waste water equivalent to a barrel for each barrel of oil crude produced in the state. This production has been accompanied by a significant increase in leaks, spills, well blowouts, and air pollution. These environmental effects are largely experienced by Indigenous communities like those of the Mandan, Hidatsa, and Arikara Tribes who reside on the Fort Berthold reservation where a large proportion of oil extraction takes place.
The construction of pipelines across the state also continues a long pattern of exploiting Indigenous communities and their land. In 2016, thousands of Indigenous and environmental activists rallied at Standing Rock Sioux Reservation to protest the construction of the Dakota Access Pipeline. The pipeline was designed to cross through communities, farms, tribal land, sensitive natural areas, and wildlife habitat. Its path cut through streams, rivers, and federal dams where a spill could contaminate state and tribal drink water. Despite widespread dissent, construction of the pipeline was completed in June of 2017. Petroleum industry advocates continue to tout the economic benefit of pipelines, in many cases ignoring their environmental and human harm. Hamman said in an interview with the HPR, “[Pipelines are] a huge benefit not only to producers and all of the associated employment and work that came with it, but a pipeline company was paying taxes to the state and local entities where it was crossing.”
The reliance on oil also presents an imminent and alarming threat to the planet by accelerating anthropogenic climate change through the emission of greenhouse gases into the atmosphere. Burning petroleum fuels accounted for about half of U.S. energy-related carbon dioxide emissions in 2018. Within North Dakota, there has been an average temperature increase of 2 degrees Farenheit in the past century. Such temperature fluctuations are predicted to put children, the elderly and low income populations at increased risk. State floods have been worsening dramatically, with an approximately 10% increase in river flows per decade during the worst flood of the year in the Red River watershed since the 1920s.
Concerns over North Dakota’s energy sector have been around for years. Throughout much of history, these concerns were centered around coal, which has been mined since the late 19th century and still contributes $3 billion to the state’s economy. In 1973, Governor Art Link famously said in his speech When the Landscape is Quiet: “I have no intention for North Dakota to become a sacrifice area in order to run television sets and air conditioners on the East and West Coast.” Yet five decades later, North Dakota has become exactly what Link decried, not with coal but with oil. By perpetuating an economy reliant on the fossil fuel industry, we hurt the people and lands of the present and future.
The Future of the Peace Garden State
It is clear that the growth of North Dakota’s oil industry is unsustainable economically and environmentally, but some see change on the horizon. “We need to look at 30, 40, 50 years into the future: What do we want this landscape to look like?” Dave Glatt, the director of the North Dakota Department of Environmental Quality, told the HPR. Rather than viewing oil as a resource that we must drain before moving on, North Dakota must use this opportunity to shift its economy to greener energy production.
In an effort to revive the floundering oil and gas industry, the North Dakota Department of Mineral Resources created the Bakken Restart Taskforce to facilitate the recovery of the oil and gas industry after the COVID-19 pandemic. In an assessment of the industry, the taskforce determined that as of June 26, there have been 5,000 shut-in wells, 405,000 barrels per day of shut-in production, and 791 abandoned wells. Environmental regulations including groundwater and air quality sampling standards have been relaxed to give oil and gas extractors an economic break.
Instead of allowing the industry to get by with even more harm, we should use this pandemic as an opportunity to restructure the economy. As demand increases, the price of oil is rebounding and oil production is edging towards pre-pandemic levels.
One key avenue for growth may be investing in renewable energies like wind. Jeff Danielson, the central state director for the American Wind Energy Association, sees wind and solar investments as critical for creating a more resilient American economy, especially in North Dakota, a state with a largely untapped capacity for wind and other renewable energies. “North Dakota has excellent natural resources,” Danielson told the HPR. “It is a state that has a high potential for harnessing the power of wind … There is no reason that North Dakota cannot lead Midwest peers, like Iowa, Kansas.” The U.S. Energy and Information Administration states that in addition to substantial wind energy resources, North Dakota has enormous potential for geothermal and solar energy.
Renewable energies like wind and solar are mainly used for electricity production and do not necessarily replace petroleum, much of which is refined to create petroleum products like gasoline, jet fuel, petrochemical feedstocks, waxes, and asphalt, according to the U.S. Energy Information Administration. But wind, solar, hydro, and geothermal energy do provide profitable economic alternatives to the current reliance on fossil fuels. Investing in these alternative technologies likely will not provide the same rapid growth in GDP, but as wind energy is not reliant on the depletion of a finite resource, it provides a more sustainable economic solution in the long run. While wind energy has certain drawbacks like increased bird and bat deaths, wind is an emissions-free source of energy decreasing air pollution, carbon dioxide emissions, and other negative environmental and human impacts of oil exploration, extraction, and transportation.
But such an economic transition from extreme fossil fuel dependence to renewable resources must not result in further human harm. There have been 9,700 cumulative unemployment claims filed in North Dakota’s oil industry since the onset of the pandemic. A crucial component of what is referred to by many environmental justice advocates as a just transition is creating pathways for new employment opportunities. Almost 3.3 million Americans work in clean energy, outnumbering fossil fuel workers 3-to-1. This includes 335,000 solar industry workers and over 111,000 wind industry workers. Wind jobs have a projected percent increase in employment of 58% compared to the average growth rate 5% for other industries. As environmental activist Bill McKibben recently wrote with great excitement, many oil workers in North Dakota are being retrained to work in the wind energy industry, since the job skills are quite similar and the employment outlook is more promising.
North Dakota and the rest of the country must come to terms with the instability and environmental destruction inherent to its extractive economy. While ranking No. 2 in petroleum production, North Dakota ranks No. 4 in youngest states. A future of North Dakotans will have to reckon with the economic and environmental implications of harmful oil industry practices. Ironically, in 2011, the North Dakota legislature established the latin motto “Serit ut alteri saeclo prosit” or “One sows for the benefit of another age.” But with a dangerous dependence on the oil and gas industry, the oil seeds being sown now are the seeds of destruction.
Image by Zbynek Burival is licensed under the Unsplash License.
