There is no reason to panic about the coming oil production plateau.
Barring a complete fallout in oil prices, North Dakota and its oil industry will be fine in the long run. However, a slowdown - even if it lasts a few months - isn’t all bad for the state.
The past three to four years have been a neverending cycle of struggles for city and state leaders as they tried to keep up with an industry that had no interest in slowing down.
Cities grew, housing rates skyrocketed, multinational and small businesses made their run on the Oil Patch, and oilfield companies looking to make a quick buck showed us how quickly environmental issues can creep up when not properly regulated.
A slowdown - even one that barely registers on the historic radar - would be beneficial to North Dakota leaders as they try to catch up.
One certainty is that oil production in North Dakota will continue. There is too much money and infrastructure invested for the industry to go away completely, even as prices fall. It’s still profitable - especially in high-production areas like McKenzie, Dunn, Williams and Mountrail counties.
North Dakota Department of Mineral Resources Director Lynn Helms has called the recent price decline “a blip” and said he is optimistic prices will recover.
The oil industry doesn’t have that same sentiment as a whole. Oasis Petroleum has stated it plans to cut back its number of North Dakota drilling rigs, and it’s likely that foreseeable future drilling in the Bakken and Three Forks shale formations will happen in established areas, with fringe locations and formations like the Tyler in the southwest part of the state continuing to go unexplored.
Those in the Oil Patch also must remember that as big as these shale formations are, they do not dictate the world oil market. Everything that happens in the North Dakota energy industry hinges greatly on the world market and moves made by OPEC.
When we wrote this on Dec. 17, the price for Williston Basin sweet crude oil sat at $39.44 a barrel, according to Plains Marketing, a company that stores, terminals and markets crude oil across North America.
The last time it was that low was the beginning of May 2009, when prices were $39.08 and quickly climbing. By the end of June, prices had leapt to $55.08 and - for the most part - just kept climbing until very recently.
Last week, West Texas Intermediate crude - the benchmark for the nation - hovered at around $57.40. North Dakota Lt. Gov. Drew Wrigley told the Highway 2 West Manufacturers Association on Dec. 16 in Grand Forks that the state’s oil extraction tax goes away for up to two years if the price of WTI crude falls below the threshold of $52.06 and holds there for five consecutive months.
If that happens - and at this point, no one can prognosticate what will - the state could lose billions of dollars in revenue. That is a concern, but one that the state must handle in the coming legislative session.
Throughout much of 2014, the biggest question was “How big does this get?” As we go into 2015 with some uncertainty and the notion that falling prices are leading some energy companies to reel in their operations, perhaps it’s OK that North Dakota is faced with an opportunity to breathe. Maybe it’s good that we get a chance to begin controlling how the industry operates within the state moving forward, allow our cities and rural counties to catch up with housing and infrastructure, and allow law enforcement agencies to clean up our streets.
Because we all know oil prices will rise again. History has taught us that.
The Dickinson Press Editorial Board consists of Publisher Harvey Brock, Managing Editor Dustin Monke and News Editor April Baumgarten.