What North Dakota Could Teach California

Thursday's Editorial   —   Posted on March 15, 2012

(by Stephen Moore, The Wall Street Journal, WSJ.com) Williston, N.D. – In his speech last week responding to high gas prices, President Barack Obama insisted that “we can’t just drill our way out of” our energy woes. Actually, we can–and if the president wants proof, he should travel to boomtown USA: Williston, North Dakota.

Williston sits atop the Bakken Shale, which will later this year be producing more oil than any other site in the country, surpassing even Alaska’s Prudhoe Bay, the longtime leader in domestic output. This once-sleepy town is what the Gold Rush might have looked like had it happened in the time of McDonald’s, Wal-Mart and Home Depot. And the oil rush is making Dakotans rich in a hurry, with farmers and other landowners becoming overnight millionaires from lucrative royalties and leases. One retired farmer tells me that, thanks to oil rigs churning on his property, he suddenly has a net worth north of $30 million.

When I ask how many people live in Williston, which had a population of 12,000 in 2005, longtime residents shrug and offer different answers: 20,000? 25,000? 30,000? Every night, hundreds of workers sleep in the hulls of their trucks or in temporary housing encampments like soldiers in a war zone. New homes are popping up at breakneck speed. McDonald’s is offering workers $18 an hour plus a “signing bonus.” In Williston, certainly, America remains the land of opportunity.

All this is thanks to the technological leap forward represented by hydraulic fracking, a process that allows drillers to blast through underground shale rock and pump out oil and natural gas. Projections of how much oil is here seem to grow every year.

In 1995, the U.S. Geological Survey estimated 150 million “technically recoverable barrels of oil” from the Bakken Shale. In April 2008 that number was up to about four billion barrels, and in 2010 geologists at Continental Resources (the major drilling operation in North Dakota) put it at eight billion. This week, given the discovery of a lower shelf of oil, they announced 24 billion barrels. Current technology allows for the extraction of only about 6% of the oil trapped one to two miles beneath the earth’s surface, so as the technology advances recoverable oil could eventually exceed 500 billion barrels.

Now contrast this bonanza with what’s going on in another energy-rich state: California. While North Dakota’s oil production has tripled since 2007 (to more than 150 million barrels in 2011), the Golden State’s oil production has fallen by a third in the past 20 years, to 201 million barrels last year from 320 million in 1990. The problem isn’t that California is running out of oil: In 2008, when the USGS estimated four billion barrels of recoverable oil from the Bakken, it estimated closer to 15 billion barrels in California’s vast Monterey Shale.

Rather, California’s problem is politicians–at the behest of their green-energy allies–deciding to wall off the state from developing evil fossil fuels [oil, gas, coal]. With its prohibitive environmental regulations, state cap-and-trade law, costly renewable energy mandates and 40 years of prohibitions on almost all offshore drilling, California ranks worst in the country and 91st in the world in its hostility to drilling, according to the Fraser Institute’s 2011 Global Petroleum Survey. This month, according to North Dakota’s Department of Mineral Resources, California is no longer America’s third-largest energy-producing state–leapfrogged by North Dakota.

The Census finds that North Dakota led the nation in job and income growth in 2011. It has the nation’s lowest unemployment rate, at 3.3% (California’s is 11.1%), and it saw a huge 38.5% increase in its number of millionaires between 2009 and 2010, according to state tax return data. California, by contrast, lost nearly 50,000—or almost one-third—of its high-income residents ($500,000 and above) between 2007 and 2009, according to the Sacramento Bee.

North Dakota is also flush with cash and a budget reserve of at least $1 billion, out of a $3.5 billion biennial budget. The state has already cut income taxes, and it is building thousands of miles of “shovel ready” infrastructure projects–roads, bridges, railroads, pipelines–without almost any of Uncle Sam’s funny money. Bismarck may be the only state capital in the country that debates what to do with all its tax riches.

Perhaps they could send it as foreign aid to Sacramento. California’s budget analysts just announced their fifth straight year of fiscal plague, with up to $6 billion of red ink for 2012-13. Budgets for schools, transportation, health care, libraries and museums are being cut, even though the state already has one of the nation’s highest income and sales taxes. Gov. Jerry Brown is sponsoring a ballot initiative this year to raise those taxes yet again.

He’d be better off leading a fact-finding delegation to North Dakota to learn how to pay bills, create tens of thousands of jobs, and balance a budget. The short answer: Drill [drill, drill]…. Mr. Obama might want to come on that trip too.

Mr. Moore is a member of The Journal’s editorial board.

Published March 11, 2012 at The Wall Street Journal. Reprinted here March 15, 2012 for educational purposes only. Visit the website at wsj.com.