North Dakota Studies Volume 2, Issue 2 Fall 2010 NORTH DAKOTA’S BOOMING ENERGY INDUSTRY griculture has long been North another economic engine to comple- Dakota’s number one industry. But ment the existing strong agricultural NorthA Dakota also has abundant natural and tourism industries. North Dakota’s resources in the form of oil, coal, natural strong labor market, diversified economy, gas, and wind, and the state has the and healthy state reserve balances puts ability to convert these natural resources the state in an enviable position among into economical and efficient energy for states. the citizens of the state and nation. As a result, North Dakota has become an Rock’in in the Bakken important energy provider to millions of people across the nation. On April 4, 1951, a great discovery was The Bakken Formation in western North made in North Dakota. In that year, the Dakota has the potential to produce Thanks to North Dakota’s booming energy Amerada Petroleum Corporation brought billions of barrels of oil. industry, homeowners, landowners, and in North Dakota’s first oil well, the businesses have benefitted from property Clarence Iverson No. 1 well, near Tioga in There are currently more than 5,000 wells tax relief. The economic impact of energy Williams County. Over the next 28 years, capable of producing oil and gas in North resources has also resulted in increased the well produced more than 585,000 Dakota. The average North Dakota well funding for education, human resources, barrels of oil. Prior to 1951, 64 wells had produces approximately 47 barrels per and the state’s infrastructure needs. been drilled in North Dakota dating back day. During 2009, 92.5 billion cubic feet to 1910. Since 1951, more than 16,000 of natural gas was produced and 56.4 Nationally, economists expect budget dif- wells have been drilled in the state. billion cubic feet of natural gas was pro- ficulties to linger for most states during cessed in North Dakota. 2010 and 2011. However, North Dakota In the first six months of 2010, North Continued on Next Page... is one of just seven states (ND, SD, WY, Dakota oil wells have produced an average IA, AR, WV, NH) expected to lead the of more than 280,000 barrels of oil per nation into economic recovery beginning day. At the current pace, more than 105 INSIDE THIS ISSUE in fiscal year 2011. million barrels of oil will be produced Maps–Maps–and More Maps! during 2010. Since 1951, crude oil pro- Maps can be an invaluable resource For North Dakota, the emerging energy duction in North Dakota has totaled when teaching social studies industry has provided the state with nearly 1.7 billion barrels. classes. Check out the host of maps available for Grades 4, 8, and high school North Dakota Studies. See Pages 8–13. NORTH DAKOTA STUDIES Recent developments have made the It is well-known that the drilling rig Production tax revenues for 2009 were Bakken Formation the focus of much of count is a barometer for measuring new more than $392.9 million All-time the oil activity in western North Dakota. oil and gas activity. In the first half of oil tax revenues to the state have been It is estimated that the formation holds 2010, there was an average of 105 rigs approximately $3 billion. The average billions of barrels of oil. When the operating in North Dakota. The peak production and extraction tax paid on Bakken Formation was first discovered year for drilling rigs was 1981, with an crude oil in 2009 was 9.87%. The tax in 1953, the technology of the time average monthly rig count of 119. The rate on crude oil varies between 5% didn’t allow for drilling to be cost effec- all-time high was in October of 1981 and 11.5% depending upon the type of tive as the oil is nearly 2 miles deep. In with 146 rigs operating. well. recent years, however, the advancement of new drilling technology has increased During fiscal year 2008–2009, the Over the past 57 years, the State of the potential for the Bakken Forma- state averaged more than 5,508 North North Dakota has received more than tion and that is creating a great deal of Dakotans at work in the oil patch of $791 million from oil and gas leases, excitement in the oil industry. western North Dakota, with the expec- bonuses, royalties and rentals on state tation that the number will grow. Peak land. During 2009, more than $36.4 NORTH DAKOTA ANNUAL oil field employment occurred in late million went to the Lands and Minerals 1981, when more than 10,000 people Trust and more than $120 million to OIL PRODUCTION were working in the oil patch. the Board of University and School YEAR BARRELS OF OIL Lands Trust. 95 6,96 Each drilling rig results in approxi- 960 ,993,603 mately 120 direct and indirect jobs. Enough Coal Other sectors of the petroleum 970 ,006,300 to Last 835 Years industry include refineries, gas plants, 980 40,446,550 pipelines, retail gasoline stations, North Dakota is rich in another great 984 5,658,396 wholesalers, and transporters. The energy source—coal. Although railroad 994 7,693,359 industry altogether employed 12,747 companies and individuals mined coal 000 3,73,08 people in North Dakota in fiscal year long before statehood, the recorded 2008-09. history of lignite mining goes back to 007 45,,960 1873. Beginning with the 1970s and 008 6,780,87 Job Service North Dakota reports a worldwide concern for new energy, 009 79,706,495 that in fiscal year 2008-09 the average however, North Dakota’s lignite coal 00 05,000,000* yearly wage in the oil and gas extraction took on new importance. Source: Oil and Gas Division, North Dakota industry was $82,803. That wage was Industrial Commission. *Estimate based on the 132.5% above the statewide average The coal found in North Dakota is first six months of 2010. wage of $35,970! called lignite. The state has the single largest deposit of lignite coal in the NORTH DAKOTA ENERGY world. It is estimated that North Dakota has 25 billion tons of coal that North Dakota is the fourth largest oil producing state behind Texas, can be mined. This means that the Alaska, and California. state has enough lignite to last more There are 7 counties in the state with commercial oil production. than 835 years at today’s rate of pro- The leading counties include Mountrail, McKenzie, Dunn, Bowman, duction. Williams, and Billings. Oil and gas exploration has occurred at some point in every county in North Dakota is one of the country’s the state except Traill County. top 10 coal-producing states. Coal production in North Dakota primarily Western North Dakota has enough lignite reserves to supply the takes place in the three western counties state’s generating plants for more than 835 years. of Mercer, Oliver, and McLean. North Dakota has the potential to produce . billion kilowatt hours of electricity from wind energy per year—more than any other state. In 2008, lignite production was 29.7 The electricity generated from North Dakota’s lignite-based power million tons. North Dakota lignite plants is used by more than million customers in the Upper Midwest. mines have produced approximately 30 million tons for the past 20 straight QUICK FACTS years. About 79% of lignite coal is used to generate electricity, 13.5% is used to generate synthetic natural gas, and 7.5% is used to produce fertilizer products such as anhydrous ammonia. A very small percentage is used as home heating fuel, for use as fertilizer and for use as oil well drilling mud. The electricity generated from lignite is used by over 2 million consumers and businesses in the Upper Midwest, while Surface mining lignite coal in western North Dakota. (ND Game and Fish Department) the Great Plains Synfuels Plant at Beulah supplies synthetic natural gas made from cally harnessed the wind’s energy. Before lignite to 225,000 homes and businesses the introduction of electricity to the rural in the East. areas of North Dakota, farmers depended on windmills for pumping water. The For years, North Dakota’s three coal blades on the windmill were turned by counties—Oliver, Mercer and McLean— the power of wind and, in turn, pumped have ranked among the state’s top six for the water. highest average annual wages. These lignite mining counties have some of the Today, wind energy development is hap- best-paid workers in the state according pening all over North Dakota. Wind to Job Service North Dakota. Among farms are being built from Richardton to North Dakota’s 53 counties, Job Service Grafton and from Velva to Kulm. North figures show coal-rich Oliver County, Dakotans are quickly learning that the in west-central North Dakota, had the state has an excellent wind resource and highest average annual wages in 2009— the potential for more wind development $60,202. Mercer County is ranked than any other state in the nation. second with an average annual wage of $52,384. The average statewide annual The wind towers that are beginning to Wind turbines are becoming a common wage in 2009 was $35,970. dot the North Dakota landscape are also feature of the North Dakota landscape. local products. DMI Industries in West (Neil Howe) More than 4,000 North Dakotans are Fargo is a major producer of wind towers employed in the lignite industry.