Recession-Proof North Dakota: Farming Out Our Economic Boom to America

Recession-Proof North Dakota: Farming Out Our Economic Boom to America
by Sen. John Hoeven
09/26/2011

Ten years ago, we in North Dakota set a course for the future. Beginning in 2001, when I first took office as governor, we implemented a pro-jobs, pro-growth plan that would, over time, grow and diversify our economy and create thousands of new jobs for our citizens. As a result, last year North Dakota led the nation with a 7.1% increase in economic growth, and last month, our unemployment rate was 3.5%, once again the lowest in the nation.

Good Business Climate

Yet despite the fact that the national unemployment rate has lingered at 9% for months and the country has had virtually flat economic growth, the Obama administration is doing just the opposite of what we did in North Dakota: constraining growth and jobs creation with more regulations, more spending, more taxes, all without a comprehensive plan to tap America’s energy industry, on which most other industries depend. America, too, needs a pro-jobs, pro-growth plan, and I believe there’s something to be learned from the North Dakota experience.

It took many steps along the way for North Dakota to get there, but our first two were crucial. First, we set out to build the best business environment possible, forging a legal, tax and regulatory climate that would attract investment, stimulate innovation and create jobs.

Second, we worked to develop a roadmap for success—an economic-development strategic plan that targeted key industries where North Dakota holds a natural advantage owing to our resources and our people. Those include agriculture, technology-based businesses, advanced manufacturing, tourism and energy, all of which helped us create a growing and more diversified economy.

As part of our energy strategy, we created a comprehensive energy policy called “Empower North Dakota,” which works aggressively to develop all of the state’s varied energy resources, both traditional and renewable. This plan doesn’t pick winners or losers. Instead, it promotes all of our energy sectors in tandem, and has actually gotten them working together.

For example, we worked to partner our electrical utilities with wind developers because they had common objectives. Coal utilities were willing to expand their portfolios with renewable energy sources, wind producers were looking for infrastructure to get their product to market, and both needed more transmission lines. As a consequence, we boosted wind energy production in the state from less than half a megawatt in 2000 to more than 1,400 megawatts today, with more on the way. Similarly, we partnered our coal-based utilities with our biofuels producers. At one facility we used waste steam from a coal plant to power an ethanol plant.

Of course, development of oil and gas, which today are thriving in North Dakota, was part of our plan too. In 2000, oil companies were leaving the state. Why? Essentially because the technology was lacking to produce oil economically from new formations, and the data on confirmed reserves were lacking. To add to that, the workforce was aging and we lacked training for new workers.

To turn that around, we built a legal, tax and regulatory climate for investment: We established an oil and gas research fund, paid for by the industry. We put tax incentives in place. We initiated studies of the Bakken formation, at the heart of the Williston Basin, through the North Dakota Geological Survey. That was followed up by a United States Geological Survey study, and I’ve just asked the U.S. Geological Survey to do an updated study as well.

We also improved infrastructure and created a pipeline authority to expand transport capacity, and even established a Center of Excellence for Petroleum Safety and Technology at Williston State College to train workers in the new oil-field drilling and recovery methods. As a result of all this, North Dakota climbed from the ninth- to the fourth-largest oil- and gas-producing state in the nation, surpassing states including Oklahoma and Louisiana.

Oil and gas in western North Dakota are important parts of our state’s growing and more diversified economy, but they are only parts. States such as Oklahoma, Louisiana and California also have oil, but their economies haven’t fared as well. In fact, Alaska, which produces twice as much oil and has about the same population as North Dakota, has an unemployment rate near 8%.

The reason for our success is that we didn’t put all of our eggs in one basket. We promoted new businesses and expansions in every region of our state, from Fargo and Grand Forks in the eastern Red River Valley—where agriculture, technology, the life sciences and professional services are the job and income generators—to Williston and Dickinson in western North Dakota, where the oil industry has flourished because of good public policy and a sensible regulatory and tax environment.

Perhaps one of the best measures of our statewide success is population growth. For decades, North Dakota, like other rural states, was losing population, in part because of a lack of economic opportunity. However, in the last decennial census we saw a 4.7% increase in the state’s population. While some of the oil- and gas-producing counties in western North Dakota saw growth, Cass County, home to Fargo, in eastern North Dakota, saw more people moving in to live and work than all of the 17 oil- and gas-producing counties combined, a 22% increase over the decade.

But population wasn’t the only measure of our statewide progress. From 2000 to 2010, North Dakota’s economy expanded at an average annual GDP (gross domestic product) growth rate of 6.7%, compared with a national rate of less than 4%, with gains in agriculture, financial services, tourism and even manufacturing. Last year alone, North Dakota had an annual GDP growth rate of nearly 10%. By the end of the decade, we had expanded our economy by 90%, nearly double the national rate of 47%.

As a result of our growing economy, we balanced our budget year in and year out, and today have no general obligation debt. Further, we not only held the line on taxes, but reduced them—both income and property taxes. In 2011, North Dakota has a substantial budget surplus and strong reserves to secure our economic future.

In the nation’s heartland, we even undertook an aggressive plan to market North Dakota products and services around the world in order to open new markets and bring new dollars to our state. And all that work to cultivate overseas markets paid off. Our exports of farm machinery, aircraft parts, biotech products and other North Dakota goods grew by more than 300% in 10 years. That compares to a national growth rate of 63%.

At the same time, we boosted per capita income by 58%. In 2000, North Dakotans earned just 85% of the national average. Today, they earn 100%, climbing steadily in the rankings among states from 38th to 18th place in 2010.

Most importantly for North Dakotans and their families, we created jobs and raised income and wages. Over the decade, we generated nearly 15% growth in total employment, and those jobs encompassed almost every sector of our economy and every region of our state.

All of our hard work didn’t go unnoticed. The Wall Street Journal, Newsweek, the New York Times, USA Today, The Economist, Forbes, Money magazine, and even the London Times—all have written about North Dakota’s progress. Joel Kotkin, in a Wall Street Journal piece this spring, called North Dakota’s approach “sensible thinking” about the economy. Last year, the U.S. Chamber of Commerce ranked North Dakota No.1 among all 50 states as the nation’s top overall economic growth performer and job creator—not for the year, but for the decade.

The truth is that the things we did in North Dakota are not unique to North Dakota. The principles we used are based on common sense and a belief that the American economy is the engine that drives the car. We can create jobs and overcome our nation’s challenges—if we have a will to act and if we focus tirelessly on the kinds of things that create jobs and opportunities for our people.

Frankly, our country is at a crossroad that will determine the kind of future we want for ourselves and our children. We can cede responsibility for jobs and industry to the federal government, which is not working, or we can take another path: We can empower a new generation of entrepreneurs, visionaries and small businesses to innovate and lift our nation up, as they have in the past.

I am committed to working with the people of North Dakota and my fellow senators to create the kind of environment that will empower Americans, and in so doing, strengthen the financial well-being of our country, today and for generations to come.

The future is in our hands.