THE CURSE OF THE BAKKEN: EXPLORING THE IMPACT OF SHALE ENERGY ON THE ECONOMY OF NORTH DAKOTA

Abstract

When speaking about an energy revolution, one almost never would consider the oil industry. Yet, unbeknownst to most, America has played host to one of the most significant energy revolutions in modern memory. The development of the dual technologies of hydraulic fracturing and horizontal drilling has opened up vast quantities of what were previously inaccessible sources of oil and gas. Nowhere has this been more evident than in the state of North Dakota, which sits atop the Bakken Shale, one of the America’s largest continuous oil reserves. This newfound ability to extract Bakken Shale Oil prompted a modern day gold rush. As the number of active rigs in the region quadrupled, small farming communities watched their population triple in less than ten years while household incomes nearly doubled. The boom incited a building frenzy and real estate prices soared. Just as soon as the region’s beleaguered infrastructure and economy were catching up to its rapid growth, oil prices began a precipitous decline, throwing the viability of the industry into serious doubt. This thesis seeks to examine the future of oil and gas development in the Bakken region and its local economic impacts. It makes the case that the recent rapid growth in the shale oil industry cannot be expected to last. This could be economically disastrous as oil development is directly connected to the region’s economic wellbeing. This thesis recommends an extensive build out of oil transportation and refining infrastructure from the Bakken to end the regionalized pricing of its oil. This will increase local wellhead prices and make the oil industry economically viable for longer, giving the residents of North Dakota time to reinvest the profits in sustainable industries outside of oil and gas.