BISMARCK — North Dakota oil production had shown signs of resurgence this summer, but recent gains may not be a sign of industry revival.
In July, Bakken oil production reached its highest levels since the start of the pandemic, according to the latest report by North Dakota Department of Mineral Resources Director Lynn Helms.
But among the factors driving a recent rebound, Helms said, industry concern over the November presidential election has been a key factor. He said the potential transition from a Trump administration to a Biden administration has many oil companies worried about tightening environmental restrictions on the industry and prompted many of them to push for drilling permits ahead of the November election.
"There are serious concerns about what could happen in November," Helms said, citing "mixed signals" toward the oil and gas industry that have come out of the Biden camp so far.
In particular, he said, North Dakota producers are concerned it will become more difficult to secure drilling permits under a Joe Biden presidency, leading many companies to act preemptively and against economic incentives this summer.
The latest numbers from the North Dakota Department of Mineral Resources, reflecting industry activity from July, show a significant uptick in oil activity in the middle of the summer. Among other milestones, North Dakota producers returned to just over one million barrels of daily production for the first time since the start of the pandemic, while the number of working frack crews has multiplied from just one earlier in the pandemic to five.
But Helms warned not to expect these numbers to hold.
"All or much of that activity has been driven by concern that federal permits won't get renewed," Helms said. "Even though the economics would tell you that it's not the best time ... much of that is being driven by concern about the November election."
North Dakota oil companies hit their all-time production peak in November of last year and were enjoying prices at more than $60 per barrel early in 2020. Global oil prices entered a free-fall in the spring, as the onset of the coronavirus pandemic coincided with a price war between Saudi Arabian and Russian producers.
While North Dakota's prices recovered moderately over the course of the summer, they have begun to slide again in the last few weeks. Since late August, Bakken crude has dipped back into the low thirties per barrel, well below the $40 bar typically considered the benchmark to justify drilling in the region.
The state still has "a tremendous amount" of crude oil in storage, according to Helms, who predicted the significant surplus in supply will hold prices down as summer travel wanes. Heading into the winter, North Dakota has just ten rig crews drilling for oil and gas, and the state expects permitting to decline in the months ahead.
The near future for the oil industry may look positive for observers in North Dakota, Helms said, but there is still a long road ahead for a healthy recovery from the pandemic.
A complete return to pre-pandemic production levels may take a full two to four years, according to Justin Kringstad, director of the North Dakota Pipeline Authority, who also presented at Tuesday's briefing. While that timeline looked shorter at points over the summer, he said flatlining oil prices stretched the department's expectations of the timeline for full recovery.
"One thing that has happened with the future oil prices, earlier this year things just got flatter and flatter, which does not bode well for increasing investment," Kringstad said.
Readers can reach reporter Adam Willis, a Report for America corps member, at email@example.com.