The U.S. Geological Survey recently completed an updated assessment of the oil and natural gas potential in the Bakken, the geological formation which is located in parts of Montana, North Dakota, South Dakota, and Canada. According to their assessment, the formation holds a significant amount of oil, natural gas, and natural gas liquids--far more than previously estimated in 2008. Secretary of the Interior Sally Jewell described it: "These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation's dependence on foreign sources of oil."
North Dakota is experiencing an oil boom that has increased total U.S. oil production as well as sheltered the state from the economic impacts of the Great Recession. In the past six years, North Dakota's oil production has increased by 510 percent, mushrooming from 39.9 million barrels of oil production in 2006 to 243.2 million barrels in 2012 (Figure 1). Almost 90 percent of the 2012 North Dakota production came from the Bakken formation. Economically, North Dakota's total wage base has increased by more than 74 percent during this period. Per capita personal income has increased from $32,914 in 2006 to $51,893 by 2012.
Is Montana Experiencing a Similar Oil Boom as North Dakota?
Although we all have heard about the economic activity of oil development in Eastern Montana, the data paint an entirely different picture. Montana's oil production was 36.2 million barrels in 2006. By 2012, oil production actually dropped to 26.2 million barrels, a decrease of about 10 million barrels. Montana's total wage base increased by about 21 percent during this period, with per capita personal income increasing from $31,959 in 2006 to $37,370 by 2012. While North Dakota's and Montana's per capita personal income was similar in 2006, North Dakota's per capita personal income was $14,523 more in 2012.
Why is the Boom in North Dakota and Not in Montana?
About two-thirds of the Bakken formation is physically located in North Dakota where the geological pool is thicker and closer to the surface. This means there is more of an economic incentive to produce in North Dakota before doing any extensive drilling in...