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What North Dakota Knows that California Doesn’t

eye on the news

What North Dakota Knows that California Doesn’t

The real boom is in traditional energy, not “green jobs.” February 23, 2012
Infrastructure and energy
California
Economy, finance, and budgets

If California policymakers want to lift the state out of its economic malaise, they would do well to emulate . . . North Dakota. Once the least-visited state in America, the Peace Garden State is rapidly becoming the economic envy of the nation. Its 3.5 percent unemployment rate is the lowest of any state, according to the Bureau of Labor Statistics. North Dakota also boasts a state budget surplus of $1 billion. Compare these figures with California’s 11.7 percent unemployment rate—second highest in the country—and a likely $13 billion budget deficit in the coming fiscal year, and suddenly the Great Plains look like an attractive alternative to the Golden State.

How did North Dakota pull it off? Oil production has driven the recent boom. Drilling restrictions in Alaska, the Gulf of Mexico, and even Canada have given North Dakota an opportunity to expand its oil industry substantially. North Dakota now accounts for 6 percent of U.S. domestic oil production and already ranks fourth in the nation behind Texas, Alaska, and, yes, California. Unlike California, however, North Dakota is a fairly new player in the oil-production market. The state imposes no energy-efficiency resource standard for electricity or natural gas, and it has no mandatory statewide residential or commercial energy code. North Dakota lawmakers have let market demand dictate coal and oil production. According to North Dakota U.S. Senator John Hoeven, the state government’s approach to energy is to “develop all of our energy resources, both traditional and renewable . . . in a way where we incentivize new technologies to create more energy more dependably and more cost-effectively with good environmental stewardship.”

While California is rich in both conventional and renewable energy, gridlock in the state legislature has hampered development of these resources. Unlike North Dakota’s officials, who welcome the economic growth and new revenues, California lawmakers seem intent on reducing the state’s role in domestic oil production. Legislators have imposed laws much stricter than federal standards and worked aggressively to subsidize alternative energy sources and mandate their use. California’s Global Warming Solutions Act of 2006 and subsequent legislation—requiring that the state obtain at least one-third of its energy from renewable sources such as wind, solar, and geothermal—will impose onerous costs not only on businesses, but on every ratepayer and consumer in the state. Estimates vary, but at least one study projected that the law would cost the state economy $183 billion—a staggering burden for Californians already struggling under the highest energy prices in the nation.

By contrast, North Dakota’s underdog story illustrates how a different approach to public policy—and in particular, to traditional energy procurement—can bolster economic activity and job creation. North Dakota’s energy boom has caused a host of “problems” every state wishes it had—such as the need for more infrastructure development and more housing to accommodate job growth. Some of the state’s rural communities have seen population double virtually overnight. And forget about that “least visited” label—trying to book a hotel room in many places is next to impossible.

While Golden State legislators bow to special interests and dither in a dream world where “green jobs” save the day, North Dakota is reaping the economic benefits of traditional energy production. It’s time California did the same.

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