OUR OPINION: From boom to bust? Not if N.D. can help it
It's too big an assignment for this week's special session. But between this session and the regular session in 2013, the North Dakota Legislature should take a hard look at the oil boom, with an eye to planning to avoid hardship when the boom in...
It's too big an assignment for this week's special session. But between this session and the regular session in 2013, the North Dakota Legislature should take a hard look at the oil boom, with an eye to planning to avoid hardship when the boom inevitably goes bust.
And the key word is "inevitably," because sooner or later, the North Dakota oil play is going to play out. It might take decades rather than mere years, as happened with the previous boom. But one day, it'll fade, and North Dakota should plan ahead for when that day comes.
** Williston, N.D., already is doing just that. In the 1970s and 80s, Williston experienced the cycle at its worst; and the bust "left the community with vacant apartments, unoccupied mobile home parks, empty businesses and huge public debt from the infrastructure investments that had been made to accommodate growth," the Williston Comprehensive Plan states.
This time, the city is being much more conservative in response to pressure from the boom. Another change is Williston's determination to share the risks of growth, Mayor Ward Koeser said in October.
Oil companies and others who need new facilities are paying a greater share of the costs. That'll limit the city's exposure when the downturn comes.
** For the state as a whole, officials should study boomtowns around the globe that have taken steps to minimize the bust.
Norway does this better than anywhere else in the world. Norway struck oil in its North Sea holdings in 1969, and by the early 1970s, the Norwegian Parliament already had passed a sustainability plan.
It has two broad components:
First, it's not shy about taxing the companies that drill Norwegian oil. "In exchange for the right to drill, oil companies must hand 78 percent of their profit to the state," energy blogger Richard Schneider writes.
Norway sends the bulk of that oil money to the Government Pension Fund, a unique long-term trust.
"This is Norway's long-term savings account, and in the years since it was launched, it has become one of the four largest investment funds in the world," the Toronto Globe and Mail reported in 2008.
As of December 2010, the fund was valued at $525 billion, or about $110,000 for every Norway resident.
Norway also insists that companies pay a big chunk of the environmental costs of oil activity. For example, Norway effectively banned flaring, the torch-like burning of natural gas that now lights the western North Dakota landscape. The rule forced companies to capture and use rather than flare the gas.
Second, Norway takes great pains not to spend its surplus. "It is a profound act of self-discipline," the Globe and Mail reported.
"All but 4 per cent of Norway's oil earnings must be placed in the fund for savings; nothing can be withdrawn from the fund until the oil is gone, decades from now; and -- most crucially -- absolutely none of the money can be invested inside Norway."
For the Norwegian people, that means "the oil revenue is not revenue at all, it's just wealth being moved into a more diversified portfolio for the future," the Government Pension Fund's money manager told the newspaper.
Without a doubt, North Dakota's plans will be very different. But Norway still has important lessons to teach. So do Alaska, Wyoming and other states that are wary of booms and busts. North Dakotans and their legislators should study and learn.
-- Tom Dennis for the Herald