Dorso Column: North Dakota Democrats Marginalize Themselves With Phony Oil Numbers

Oil Well Pumps

I had a chance to spend quite a bit of time with my friend who is a successfully retired oil man this week. As we were driving I asked about the future of oil exploration in North Dakota. He follows developments closely as he is still an investor in what he describes as plays on natural gas. I think that qualifies him to be a better prognosticator of the future of oil exploration then N.D. senate and house Democrats.

He informs me that the decision to drill in particular areas is based on a number of factors. Most of them take a lot of guesswork as to what the future holds. The cost of drilling a well in North Dakota isn’t cheap. Can you borrow or raise the money to finance the well and at what cost? What are the regulatory schemes of the state you are drilling in and what will they add to the cost? Can you get the crews with the expertise to run a drilling rig and at what cost? When you start to produce the oil and gas what will it cost to get the production to market? What will the market price of the crude or gas produced be and how much profit, if any, can be made?

Although the numbers can be ascertained for many of those questions, the decision to drill is complicated because all of these and many of the other factors that must be figured into the equation. In most cases the answers are a guess as to what the future might bring. My friend likes to say exploration is like “making the decision to jump off a diving board when you don’t know how deep the water is.”

By the way, he foresees the future of oil production in North Dakota as very favorable. How fast it comes to full fruition is a matter of resolving some of the issues.

North Dakota’s biggest hurdle is the availability and cost to ship the crude and natural gas. If the Keystone pipeline be built and when will it be completed are big factors in estimating future production of Bakken crude. Both the shipping of crude and the collection/sale of natural gas are big impediments to future exploration.

I showed my friend a print out of the Democrat assumptions used in their recent news release. He is very skeptical of the numbers. Until some of the concerns about shipping are resolved there is no chance that the numbers the Democrats used could become reality. In fact the longer it takes to resolve them the least likely it will come to pass. There are other areas of exploration that are showing promise and there are only so many assets that are readily available for the recovery of the reserves.

This brings me to my point. Why would you publish numbers that can be so easily debunked concerning a critical area of North Dakota’s economy? The broader question is, why do Democrats insist on using numbers to back up arguments that people in the know can prove to be suspect?

Pres. Obama has a habit of throwing out numbers that are proven false by anyone who cares to research them. Liars use numbers and numbers lie. The problem with that in politics is that if you don’t trust the numbers you usually don’t trust the person spewing them. That in the end leads to disrespect for the arguments and the person using them.

I have mentioned many times that unless there is some mutual respect, legislating is a very difficult process. In the case of North Dakota’s legislature what is occurring is that the Democrat minorities are marginalizing themselves.

If a lobbyist were to throw out numbers such as those used in the current debate on oil production most legislators would totally discount any assertions made by that person. In this case the Democrats have not only hurt themselves in the instant case but added to the skepticism of their fellow legislators on other matters.

Instead of being able to add to the debate and find compromise with the Republican majorities the Democrats find themselves campaigning rather than legislating. Most legislators see it for what it is. Hopefully North Dakota’s citizens recognize the difference between political rhetoric and governing.

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  • ec99

    Come on, Mr. Dorso. You’re a politician and you know throwing out numbers is what most of you do. They are easy to remember, and most people don’t have the time nor desire to test them. It’s why such myths as 10% of the US is gay, or the greatest instances of spousal abuse occur on Super Bowl Sunday. Or even Black Friday is the biggest shopping day.

  • Bubba

    The 1750 annual well increase number is based on Lynn Helms’ numbers. Please see North Dakota overview by Lynn Helms, Director of the Oil & Gas Division of the Department of Mineral Resources at the ND Industrial Commission, 11-21-2012
    Webinar powerpoint halfway down the page at t Helms’ projects 1800 new wells a year, on average, through 2022 (to a total of 26783), reducing to around 1200 a year average from 2023 through 2032 (to a total of (38633), and ultimately reaching 46396 by 2050. Keep in mind that his numbers would most likely consider oil taxes and market conditions as they existed at the time of the report. So are you calling Lynn Helms a liar, or just dead wrong? Based on your argument above, if the democrat numbers are misleading and unfounded, it would follow that Helms’ (and the republican) projection is misleading. Please review Lynn Helms’ report and either confirm that you disagree with Lynn Helms’ projection, or correct your statement.

  • JimTownGuy

    We all know the Republicans would never fudge any numbers or misrepresent any “facts”. Everything they say is gospel.

    The tax rate was known well before the companies started drilling. If they don’t like it, they don’t have to drill. We know that won’t happen though. They won’t stop until every last drop of oil is sucked out of the ground.

  • Captjohn

    I tend to be skeptical of any long term predictions about oil production. I did not hold myself out as an expert but related a knowledgeable persons review of the numbers.
    Mr. Helms believes in a scenario that encourages policy makers to invest heavily in assets required for the development of the fields. That doesn’t make him a liar nor does it make my friend ignorant. They have a difference of opinion on the consequences of the many factors that influence the level of oil production in a given area.
    My concern was that Democrats used numbers so far into the future that they aren’t relevant. The legislature meets every two years. I would suggest that any scenario beyond four years is not consequential to the argument. The legislature can and should adapt tax policy for oil ,gas and coal that reflects market conditions. A review of past tax policy is not only desirable but a responsibility. Basing decisions on predictions that are a decade into the future wouldn’t seem prudent. Thus in my estimation the Democrats used argument that marginalized their position.
    I never accused agencies or Mr. Helms of lying. They make predictions based on their perceptions of factors that may come about. Those predictions often contain a bias hoping to effect public policy.
    For those of you who think all politicians use numbers in a liars game I beg to differ. Most legislators are using numbers prepared by others. Those that pick numbers that can’t be substantiated over time should be retired. I always felt that if one went with the more conservative estimate your veracity was better served.

    • Bubba

      Fair enough and I agree about a little mutual respect. Mr. Dorso, remember that’s a two way street. Disagreement can take the form of stating basis for disagreement rather than quick resort to calling someone disrespectful and a liar. The problem with someone who calls other folks disrespectful liars for disagreeing with them (while failing to check underlying data that would show the absence of dishonesty) is that you can’t trust the accuser or any argument they make. Here is the problem, you accused the democratic party of using numbers that have no merit, make some assertion that the President is a liar that uses false numbers (assuming you do the right research), and then push this onto the north dakota democratic caucus. Your argument – Those who do research know Obama uses false facts and is a liar (this is your assertion, not fact); therefore, North Dakota democrats use false facts and are liars – is pretty poor. Now in this instance, the democrats’ numbers that you discredit are put forth by a republican (Helms’) who, by your own assertion, is working to influence public policy (i.e., lobbying-lite – I don’t know this to be true) through the channels of a state funded agency whose mandate is, ostensibly, to manage the state’s natural resources. If you would have done the research, you would have known these well growth numbers came from his agency. By the way, I don’t think that your failure to research those numbers makes you a liar, nor do I find you disrespectful. Anyway, you point out that if a lobbyist brought those disrespectful democrats’ (i.e., Helms’ republican) numbers before the legislature, they would be ignored. So are you saying that the Republican legislature is ignoring the data presented by Department of Natural Resources because it is meritless? It just seems odd to me that you would characterize some group as dishonest and disrespectful in this piece by, you know, calling your political opponent a liar based on the skepticism of your friend and for relying on your own party’s data. I guess we can all agree to disagree, but a little mutual respect would be nice – I’m sure you would agree that it usually is up to the party in power to set the example.

      • Captjohn

        I apologize for saying anything about Mr. Helms. Seems he had nothing to do with the Democrat numbers. Where they got them heaven knows.
        Before you attribute information you are the one that needs to do some homework. I apologize to everyone for not checking you erroneous information.
        In one fell swoop you have proved my original assertion. If Democrats prevaricate I’ll continue to think they are marginalizing themselves.
        Of course now the ball is in your court. Are you going to accuse Mr. Helms of lying?

        • Bubba

          Those numbers, particularly the wells per year number, are actually lower than the number thrown out by Lynn Helms (I made the chart available). My point has always been those numbers are Lynn Helms’ numbers, he used them in May, He used them in November, and I have no reason to doubt the sensibility of his projection. I don’t see where I erred pointing out the fact that Lynn Helms’ wells number averages over 1750 a year for the next 20 or so years, and that’s been my issue from the beginning on this hubbub from a small portion of the republican camp. Let’s recap. Port comes out and calls Mac Schneider dishonest based on those well numbers, and says he is trying to “scare” people. Port realizes he is wrong about those well numbers because Helms’ uses the same numbers, but won’t admit it, so he shifts focus to projected barrels per and a “consensus model”, which of course isn’t provided. Helms provides some good data on production rates, etc. I think everyone should take a look at the powerpoint slides he presented in November, you’ll get an idea about job growth, revenue, taxes, community impact, etc. With proper research in the first place by Port and the republicans who are trying to find an issue here, this wouldn’t have been a problem. Anyway, I guess barrels per day should have been his focus in the first place although bbl per day numbers as presented are not out of line (all of this stuff could be more artfully modeled, as you point out it isn’t the easiest thing in the world to predict production rates in the future, but the algorithms get better every single day – just depends on if the state wants to pay for it). You then decide to make some grand statement about how don’t trust those lying democrats and Mac Schneider based on something your oil investing buddy told you, and I point out that Lynn Helms well number projections are in line (in fact more aggressive) with Mac Schneider’s numbers, thus they are the same as Lynn Helms numbers, and that it is poor taste to go after somebody when their numbers match your numbers. Represented mathematically, where x is Lynn Helms’ well growth projection, y is Mac Schneider’s n is equal an average of 1750 a year or greater for the next 10 years, if x=n and y=n, then x=y and for fun. I have no issue with Lynn Helms’ data or projections, and I think oil development is a great thing for the state. I really don’t care much about this tax cut, it was set for 5 years down the road anyway right (past your 4 year test! so bad policy anyway, right?); the stripper well tax needs real work. By the way, what information do you have that contradicts 1750 average wells a year (give or take 50) over then next 10 years? If that’s wrong, I apologize, so show me what you have that says otherwise.

  • Dallas

    Sorry John, the numbers aren’t so easily debunked. Your friend says he’s ‘skeptical’ and the numbers are suspect until the transporation problem is solved. Assume the transportation problem is solved and then so is any suspected problem with the numbers.

    I too am an investor. I think the Democratic numbers are low. Whiting has two new wells in the Three Forks Formation—-not Bakken—Three Forks near Watford City. The wells, are testing at near 5,000 barrels per day. 5,000 barrels each; New Game!

    John, afraid Ed’s going to get fired?

    Get it together boys. Still got a chance with the House passed bill that’s in the Senate. But you have to bring some credibility to the table. John and Ed don’t have it.

    • captjohn

      AAh my friend is supposed to assume the transportation problem is resolved. What if you are wrong. He did tell me in detail of the new finds but that does not change the uncertainties looking far into the future. Transportaion isn’t the only issue that has to be taken into account but I’ll leave that to you who are experts in long term prognostication. I have all ready said I tend to be conservative when dealiing with issues such as these.