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OTHER VIEWS: North Dakota oil producers, make hay now

The higher-than-expected price means the state conceivably could receive some $4 billion in oil tax revenue in the next biennium — more than $1 billion than projected.

Editorial FSA

As of April 15, a barrel of North Dakota oil is selling for about $57. That’s considerably higher than the $40-per-barrel baseline lawmakers had used to plan North Dakota’s budget.

The higher-than-expected price means the state conceivably could receive some $4 billion in oil tax revenue in the next biennium — more than $1 billion than projected.

Of course, North Dakotans benefit directly from that money, specifically in the growth of the Legacy Fund, which siphons a percentage of all oil and gas revenue into a state savings account. Today, its balance is $8.2 billion and growing.

So the U.S. Army Corps of Engineers’ decision this month to allow the Dakota Access Pipeline to continue pumping oil during review of a federal environmental impact statement should be viewed as a good sign for business in the state.

The pipeline, known as DAPL, has been a source of controversy since its construction last decade. The 1,170-mile line opened in 2017 after controversy erupted in central North Dakota where it crosses the Missouri River. The months-long protests put a focus on the nation’s reliance on carbon-based energy.

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DAPL still is controversial, and its future still is in doubt. For now, it continues to flow from North Dakota’s Bakken region to refineries in Illinois. That’s good.

Why?

Because when the Bakken originally was ordered to be shut down, its operators projected a $7.5 billion loss for North Dakota companies and the state budget through 2021. When that projection was made, we wrote that it’s possible those projections were exaggerated, but still worthy of concern.

Bakken oil will flow no matter whether or not DAPL exists. But it would come at the expense of infrastructure decay — rails and roads — and likely would prompt the kind of rail delays that the state endured back around 2014. Those were frustrating times for many, and especially ag producers.

There’s more: Transporting oil via trucks and trains costs more than through a pipeline, equating to about $5 more per barrel. When oil companies see that reduced margin, they may be hesitant to invest further in the state.

The price per barrel today is edging toward $60, but it’s been much lower in the past year. Pipelines, which help boost production margins, provide a small bit of assurance for producers skittish about future prices.

If production drops, revenue and tax collections will drop, too.

Last summer, we wrote that “cutting the already slim margin certainly means oil production in the state will decrease further, which means fewer dollars coming to North Dakota’s piggy banks. And it all comes during the economic downturn brought on by the coronavirus pandemic.

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Bakken oil should flow through the DAPL pipeline.”

We still feel that way. Yes, we do believe in global warming and climate change, but also that carbon-based fuels are not going away anytime soon. And for the state to reap the greatest reward on this finite resource, more transportation options are better.

In farming, there’s an old saying: “Make hay while the sun shines.”

In North Dakota’s oil industry, it’s been cloudy for a while. Now, the sun is emerging and a bit of optimism exists. The state should reap this benefit while it can.

This other view is the opinion of the editorial board of our sister publication, the Grand Forks Herald.

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