University of Minnesota Morris Digital Well University of Minnesota Morris Digital Well

University of Minnesota Morris Digital Well University of Minnesota Morris Digital Well

Undergraduate Research Symposium 2013 Undergraduate Research Symposium

4-2013

Natural Resources a Curse or a Blessing: Evidence from Williston, Natural Resources a Curse or a Blessing: Evidence from Williston,

ND ND

Alissa Melberg University of Minnesota - Morris

Follow this and additional works at: https://digitalcommons.morris.umn.edu/urs_2013

Part of the Agricultural and Resource Economics Commons, and the Growth and Development

Commons

Recommended Citation Recommended Citation Melberg, Alissa, "Natural Resources a Curse or a Blessing: Evidence from Williston, ND" (2013). Undergraduate Research Symposium 2013. 5. https://digitalcommons.morris.umn.edu/urs_2013/5

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Presented By: Alissa MelbergAdvisor: Bibhudutta Panda

April 20, 2013

United States North Dakota

Unemployment Rate 8.3% 3.6%

Real GDP 0.39 6.33

Real GDP per capita -0.52 5.31

*Five period averages expressed as a percentage

0

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40

60

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120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Cru

de

Oil

Pro

du

ctio

n (

in m

illi

on

s)

Year

Crude Oil Production in North Dakota

0

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Dri

llin

g R

ig C

ou

nt

(ave

rag

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um

be

r p

er

da

y)

Year

Drilling Rig Count in North Dakota

Information on Williston Literature Review Data on various aspects Concluding remarks

Located at the heart of the Bakken Shale deposits

County seat for Williams county

Oil discovered in 1951 on Clarence Iverson Farm

Drilling became intensive but slowly died off by the 1980’s

Realized that there was 11 million barrels of oil sitting under the ground that were inaccessible

Post 2007 oil production was in full swing again Two processes contributed to the sudden surge

Hydraulic Fracturing

Horizontal Drilling

CROSS-COUNTRY EVIDENCE

Gylfason (2000) Sachs and Warner (2001) Dutch Disease

REGIONAL EVIDENCE

Gunton (2003) 2 Main Theories

▪ Competitive Advantage Theory

▪ Forward Linkages

▪ Final-Demand Linkages

▪ Dependency Theory

DATA COLLECTION

North Dakota Workforce Intelligence

Bureau of Economic Analysis

Census Data American Community

Survey Bureau of Labor Statistics Williston Economic

Development Center

EMPIRICAL ANALYSIS

Empirically draw inferences about the Comparative Advantage and Dependency theories found in the literature

Population Growth

Area 2000-2007 2007-2011

United States 1% 1%

North Dakota 0.2% 1%

Williston 1% 4%

*Numbers reflect annual percentage change

Several Linkages to test for in data

▪ Forward Linkages

▪ Backward Linkages

▪ Final-Demand Linkages

New Hires Average Establishments

Industry 2000-2007 2007-2011 2000-2007 2007-2011

Mining 11% 51% 5% 20%

Utilities 11% 44% NA 10%

Construction 13% 57% -3% 17%

Manufacturing 3% 15% -1% -0.8%

Transportation 10% 64% 6% 35%

*Numbers reflect annual percentage change

Growth Rate in Real Wage for Williams County

Industry 2000-2007 2007-2011

Mining 21% 37%

Utilities NA 22%

Construction 14% 38%

Manufacturing 11% 10%

Transportation 13% 42%

*Numbers reflect annual percentage change

Test the following economic indicators in industries not directly related to mining:

▪ New Hires

▪ Average Establishments for Each Industry

▪ Real Average Yearly Wage

New Hires Average Establishments

Industry 2000-2007 2007-2011 2000-2007 2007-2001

Retail Trade 3% 18% -2% 0%

Real Estate 18% 35% 3% 16%

Agriculture 4% 5% NA NA

Wholesale Trade 6% 41% 2% 10%

Information 0% 0% -1% 1%

Finance 0% 6% 0% 10%

Professional Services 9% 30% 7% 11%

Administration -12% 37% 1% 6%

Educational Services 1% 5% -2% 6%

Health Care 2% 9% 2% 2%

Arts and Recreation -4% 6% NA -2%

Accommodation Services 3% 25% -1% 6%

*Numbers represent annual percentage change

Growth Rate in Real Wage for Williams County

Industry 2000-2007 2007-2011

Retail Trade 3% 14%

Real Estate 20% 37%

Agriculture NA NA

Wholesale Trade 11% 38%

Information 2% 5%

Finance 3% 8%

Professional Services 15% 24%

Administration 3% 23%

Educational Services 2% 5%

Health Care 2% 5%

Arts and Recreation NA 2%

Accommodation Services 4% 24%

*Numbers represent annual percentage change

0

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Nu

mb

er

of

Bu

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Pe

rmit

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Number of Building Permits Given

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2010 2011 2012 2013

To

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ote

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Number of Hotel Rooms in Williston

Data shows evidence of the following linkages:

▪ Forward

▪ Backward

▪ Final-Demand

Dependency Theory

Too short term to know exactly what will happen

Data does not support it at this time

Dutch Disease

Overheating of the economy

Ultimately will hurt development of the region

$-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

2005 2006 2007 2008 2009 2010 2011 2012

To

tal R

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/Tw

o B

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roo

m A

pa

rtm

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ts

Year

Williston Rent Inflation

Several other social indicators that are important in showing the economic growth of Williston include the following:

▪ Growth of Williston in Acres

▪ Health

▪ Crime Rates

▪ Environmental Concerns

0

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4000

6000

8000

10000

12000

14000

2003 2006 2009 2010 2011 2012 2013

Acr

es

pe

r S

qu

are

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Growth of Williston in Acres

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Crime Index Offenses

Only two hospitals in Williston▪ Trinity Health – 6 physicians

▪ Mercy Medical – 4 physicians

Increased population may require more doctors and health care facilities

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

Williston District 1 Enrollment Rates

New drilling processes create brine More than 1,000 accidental oil spills in the last

year of production Releases of the chemicals cause harm to:

▪ Streams

▪ Wetlands

▪ Farmland

▪ Drinking Water

There is a strong evidence for Comparative Advantage Theory

▪ Whether this is sustainable or not only time will tell

Data does not support the Dependency Theory argument

Increased wage rates and prices provide some precursor to Dutch disease effect which might affect small business in long run

Socioeconomic issues need to addressed

"American Community Survey." United States Census Bureau. N.p., n.d. Web. 24 Mar. 2013. <http://www.census.gov/acs/www/>.

Boyd, D. "Oil Boom Creates Infrastructure Needs." The American Oil and Gas Reporter(2011): n. pag. Print.

Chambers, William T. "Kilgore, Texas: An Oil Boom Town." Economic Geography 9 (n.d.): 72-84. Web.

"City of Williston, North Dakota - Department Information." City of Williston. N.p., n.d. Web. 24 Mar. 2013. <http://www.cityofwilliston.com/DepartmentContent.aspx?DeptID=WND.CW.BNP>.

Clouser, Rodney. "The Economic Impact of Agriculture and Natural Resources in Volusia County, Florida." IFAS Extension Florida University (2005): 1-8. Web.

"Crime Homicide Reports." North Dakota. N.p., n.d. Web. 24 Mar. 2013. <http://www.ag.state.nd.us/reports/bcireports/crimehomicide/crimehomicide.htm>.

"Data on Various Economic Indicators." NDWIN - North Dakota Workforce Intelligence Network. N.p., n.d. Web. 24 Mar. 2013. <https://www.ndworkforceintelligence.com/>.

"ELSI - Elementary and Secondary Information System." National Center for Education Statistics. N.p., n.d. Web. 24 Mar. 2013. <http://nces.ed.gov/ccd/elsi/tableGenerator.aspx>.

Gunton, T. "Natural Resources and Regional Development: An Assessment of Dependency and Comparative Advantage Paradigms." Economic Geography 79 (2003): 67-94. Web.

Gylfason, T. "Natural Resources, Education, and Economic Development." Paper Presented at the 15th Annual Congress of the European Economic Association (2000): n. pag. Web.

Holeywell, Ryan. "North Dakota's Oil Boom Is a Blessing and a Curse." North Dakota's Oil Boom Is a Blessing and a Curse. N.p., Aug. 2011. Web. 24 Mar. 2013. <http://www.governing.com/topics/energy-env/north-dakotas-oil-boom-blessing-curse.html>.

Ismail, K. "The Structural Manifestation of the ‘Dutch Disease’: The Case of Oil Exporting Countries." International Monetary Fund Working Paper 10.103 (2010): n. pag. Web.

James, Alex, and David Aadland. "The Curse of Natural Resources: An Empirical Investigation of U.S. Counties☆." Resource and Energy Economics (2010): n. pag. Print.

Kelsey, Timothy W. "Economic Impacts of Marcellus Shale in Bradford County: Employment and Income in 2010." Marcellus Shale Education and Training Center (2012): 1-21. Print.

Key, James. "The History of Oil in the Williston Basin." Rockin' the Bakken - Oil In Williston. N.p., n.d. Web. 24 Mar. 2013.

MacPherson, James. "Williston, North Dakota Oil Boom Comes With Wealth, Worries." The Huffington Post. TheHuffingtonPost.com, 22 May 2012. Web. 24 Mar. 2013.

"North Dakota WIB Pivot Reports." Longitudinal Employer-Household Dynamics. N.p., n.d. Web. 24 Mar. 2013. <http://lehd.ces.census.gov/>.

Sachs, J. D., and A. M. Warner. "The Curse of Natural Resources." European Economic Review 45 (2001): 827-38. Print.

"State and County QuickFacts." United States Census Bureau. N.p., n.d. Web. 24 Mar. 2013. <http://quickfacts.census.gov/qfd/index.html>.

"Williston Area Development Foundation." Williston Area Development. N.p., n.d. Web. 24 Mar. 2013. <http://www.willistondevelopment.com/>.

Thanks to Professor Panda for all the help that he provided throughout the year.

Any Questions???