MESSAGE By Mark Anderson, CEO, Mainstream Investors, LLC
How North Dakota got it right (and how other states can, too!) As North Dakota entered the last decade of the 20th century, it found itself near the bottom of nearly every economic metric measured, save agriculture. Each year, it was a net exporter of people, and with a total population of just 638,800 statewide, it could little afford to export the intellectual capital that would be required to build the state into an economic powerhouse. Fast-forward to today. According to the U.S. Chamber of Commerce, North Dakota now ranks first in the nation in overall performance; long-term job growth; short-term job growth; gross state product growth; per capita income growth; and STEM (science, technology, engineering, and mathematics) job growth. It ranks second in productivity growth and college affordability, and third in educational attainment. And, it has the lowest workforce safety and insurance rates of all 50 states. Did I mention that North Dakota is also the second-largest oil-producing state in the nation? How was all this made possible? Well, it goes without saying that the state has been richly blessed with many natural resources, both on the surface of the land and beneath it. But that is just a part of the story. Many states are blessed with abundant resources but lack the vision and regulatory and tax climate to exploit them for the benefit of their citizens and the nation. No, it goes beyond that. It Starts at the Top North Dakota’s pro-business culture originated over 20 years ago with thengovernor Ed Schafer. Elected in 1992, Schafer committed himself to growing 56
BAKKEN OIL REPORT – SPRING 2014
and improving North Dakota’s business climate early on through his “Schafer Means Business” campaign focus. He was twice elected governor and made improving the state’s tax and regulatory climates and encouraging investment in North Dakota his top priorities. He also implemented strict fiscal management and cutting-edge technology designed to improve the effectiveness of state government and support business growth across the state. In 2000, Schafer was succeeded as governor by John Hoeven. Hoeven, who had served since 1993 as the president and CEO of the nation’s only stateowned bank, The Bank of North Dakota, continued Schafer’s work to stimulate growth in North Dakota by directing the development of EmPower North Dakota, a comprehensive energy program created to encourage growth in all energy sectors. After Hoeven was elected to the United States Senate in November 2010, Lieutenant Governor Jack Dalrymple was appointed to serve as North Dakota’s 32nd governor. Through his North Dakota 2020 & Beyond project, Dalrymple has continued the pro-business focus started, and then advanced, by Schafer and Hoeven. “North Dakota wants business to happen in our state,” says Andy Peterson, president of the Greater North Dakota Chamber. “Where some states see business as something to tax and regulate, North Dakota sees it as something to help.” Building a Supportive Structure When building a diversified state economy, it is important to create
a structure that both promotes and regulates industry. North Dakota’s energy program is a fine example of this. From the very beginning, the state’s oil and gas regulatory structure was designed to facilitate the development of energy production across the state. North Dakota’s oil and gas industry operates under the oversight of the North Dakota Industrial Commission (NDIC), which manages (among other state agencies) the North Dakota Geological Survey, the Department of Mineral Resources Oil and Gas Division, and the North Dakota Pipeline Authority. The NDIC was established by the North Dakota Legislature in 1919 to “conduct and manage, on behalf of the state, certain utilities, industries, enterprises and business projects established by state law.” The members of the NDIC include the governor, the attorney general, and the agriculture commissioner. The North Dakota Geological Survey (NDGS) is the primary source of geological information in the state. Created by the Legislature in 1895, it publishes maps and reports to support industry and the regulatory programs of the NDIC. NDGS also has over 375,000 feet of core samples and 30,000 boxes of drill cuttings from wells across the state in its Wilson M. Laird Core and Sample Library housed at the University of North Dakota. The Department of Mineral Resources Oil and Gas Division (DMR) is responsible for regulating the drilling and production of oil and gas in North Dakota. In addition, it promotes the responsible development of oil and gas throughout the state and is charged with protecting