Belt tightening on the way?

North Dakota has enjoyed burgeoning budgets for decades, but that may change when the Legislature convenes next year.

The state’s budgets and surpluses have, for many years, been the envy of the nation. The reason? Oil.

The fracking boom born in North Dakota, which quickly spread to many other locations throughout the nation, gave new life to oil fields which many thought had long lost their potential for productivity. It brought on a boom, the likes of which the state had never seen before — (Incidentally, that didn’t happen by accident and we’ll return to that topic in a later piece.)

The nation is experiencing another oil boom, with a change in policies from Washington, and Americans are noticing the benefits at the gas pump, as fuel prices have steadily dropped over the past year.

While that’s good news for the family budget, it may not be good news in North Dakota’s oil patch.

The reason is simple. North Dakota is a long way from refineries. That means it costs more to transport our oil to them. North Dakota’s oil is also more costly to refine than some others. With those extra costs, it becomes less viable than oil pumped on some other fields around the nation, which makes it more challenging to be profitable here.

That doesn’t mean that the days of the state’s oil boom are coming to a close, it just means that things are slowing down a bit. The wells are still pumping, but less drilling is occurring.

While oil production was up slightly in November, compared to October, the handwriting is on the wall. Continental Oil has announced a reduction in its drilling in North Dakota by three rigs and a general decrease in rigs and fracking crews is evident.

Less oil being pumped means less taxes paid and that means less money flowing into state coffers to be spent by the Legislature next year.

Fiscal challenges may not be a bad thing

Fiscal conservatives have long questioned the North Dakota Legislature’s spending habits (hardly those of a “conservative” state) in recent years. The reason is simple and it’s an old truism in legislative circles — if the money is there, it gets spent!

The 2023 Legislative Session was particularly criticized for overspending, with some signs of restraint returning last year, but many still believe far too much was spent.

Legislative Council fiscal staff reportedly projects about a billion dollars less for the Legislature to work with, next session.

What may be coming next year may yield more fiscal responsibility. There’s nothing like “starving the beast” of government to yield newfound fiscal responsibility. That’s the silver lining in a gloomy report. We hope it yields good fruit.