South Dakota vaulted into the No. 1 spot in the world for natural gas and oil investment, according to an international survey of energy executives by the Fraser Institute.

U.S. states claimed eight of the top 10 spots this year in the Fraser Institute’s Global Petroleum Survey 2010. Fraser is a Canadian-based public policy firm. South Dakota, which was ranked seventh of 143 jurisdictions in 2009, ranked first among 133 jurisdictions this year.

Texas was in second place followed by Illinois in third and Wyoming in fourth. Mississippi was sixth, Utah seventh, Oklahoma ninth and Alabama 10th. Australia, ranked in fifth place, was the only jurisdiction outside North America to achieve a top 10 spot. Manitoba, in eighth place, was the highest ranked Canadian jurisdiction.

“American states are perennial favorites for oil and gas investment because they offer the stability and clear, transparent regulatory framework that investors value most,” said the institute’s Gerry Angevine, who coordinated the survey. Angevine is a senior economist in the institute’s Global Resource Center.

The survey is administered each year to petroleum industry executives to measure and rank the barriers to investment of oil- and gas-producing regions, Fraser said. The exploration and development budgets of participating companies totaled about $161 billion in 2009, representing more than 60% of global upstream expenditures last year.

Colorado was named the worst U.S. state for energy investments in last year’s survey (see Daily GPI, June 29, 2009), but the state is showing signs of regaining investors’ favor, moving into 61st place from 81st a year ago.

“Colorado is improving its reputation among industry executives, but the state still has a long way to go,” said Angevine. “In 2007, the state was ranked No. 1 in the world, but environmental regulations introduced since then continue to discourage investors.”

Alaska in 2009 was ranked the third least attractive state for gas and oil investments, but it moved up 10 places to 68 from 78. Respondents still are critical of Alaska’s fiscal regime and environmental policy, said Angevine.

<>”Jurisdictions known for high royalty fees and tax rates, inadequate infrastructure, price controls, labor shortages and uncertain environmental regulations are the places petroleum investors say they most want to avoid,” the economist said. “Regions offering competitive tax and regulatory regimes, on the other hand, attract highly positive attention, fostering investment and economic benefits for years to come.”

The survey was conducted before the oil spill in the Gulf of Mexico, which ranked that region in 11th place overall, up from 14th in 2009. It was considered the most attractive of all the “purely” offshore regions ranked in this year’s survey.

“Until now the U.S. Gulf of Mexico has been seen as having a relatively attractive regulatory climate,” said Angevine. “But if more stringent, and therefore costlier, regulatory requirements are imposed in the wake of the BP Deepwater Horizon oil leak, the U.S Gulf of Mexico is likely to lose ground to other jurisdictions in next year’s survey.”

New York was given the worst ranking among U.S. jurisdictions, falling to 102nd place after achieving the 29th spot in 2009. Respondents cited the increasing cost of regulatory compliance, as well as issues of regulatory duplication and inconsistency, as strong barriers to investment in New York.

“New restrictions on natural gas shale drilling, based on fears of water supply contamination, are also major deterrents to investment in New York,” Angevine said.

Globally, three Australian jurisdictions (South Australia, Northern Territory and Victoria) ranked in the top 20, along with New Zealand and 12 U.S. jurisdictions. The lowest ranked jurisdictions were Bolivia, Venezuela, Russia, Ukraine, Iran, Turkmenistan, Ecuador, Nigeria, Iraq and Kazakhstan.

A total of 645 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 133 jurisdictions, said the institute. The survey questionnaire asked senior executives and managers about a range of issues, including royalties and licensing agreements, taxation, the cost of regulatory compliance, trade and labor regulations, legal process, and political stability, among others.

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