State economic slump caused by low oil prices has put serious strain on municipal finances, services
BISMARCK, ND – In what could be his last address as the active Governor of North Dakota, Jack Dalrymple told the crowd at the Williston Basin Petroleum Conference that the industry is solid as solid can be, according to The Bakken Magazine, but behind the soothing words are plenty of signs the oil bust has hit the state hard.
“We see this industry going on for decades and decades to come. Any storyline depicting the end of the Bakken or a boom gone bust is inaccurate.
“Outside media coming to find the bust is struggling once they get to North Dakota. They really aren’t finding it,” said Dalrymple.
Dalrymple says he is proud of his work leading the state through its dramatic needs during the Bakken’s rise in the past few years.
Although February was a tough month for Bakken activity and budgetary considerations for the state, Dalrymple said he sees the recovery coming and when he talks to companies about their plans for the future everything is good.
“We feel much better today at $48.50/b than $26/b,”said Dalrymple.
Currently, North Dakota producers are capturing more than 90 per cent of the associated gas coming out of the ground, a number that puts the state four years ahead of its scheduled goals.
The amount of pipelines that have been installed and are yet to be installed, is amazing, he added.
The day the first ship load of Bakken crude left the Gulf of Mexico on its way overseas was also a huge day for North Dakota. “That shows we are directly connected to the world market,” said Dalrymple.
Over the last five years, the state has committed roughly $1 billion per year of cash towards meeting the state’s needs created from oil extraction. That investment will create other industries that can utilize the state’s resources, he added. “This has been an opportunity for the entire state of North Dakota and we have used these dollars wisely.”
The state’s $3.67 billion Legacy Fund’s principal and interest can’t be touched until 2017, according to Reuters.
North Dakota has lived through cheap oil before. Booms and busts in the 1950s and 1980s left many of the state’s western communities mired in debt. Williston didn’t pay off the millions of dollars it owed from municipal projects of the 1980s oil boom until the early 2000s.
Despite that experience, many welcomed the infusion of capital when Continental Resources Inc, Whiting Petroleum Corp and other oil producers began using horizontal fracking in 2008 and 2009 to tap the 7.4 billion barrels of oil estimated to lie beneath their feet.
New roads, schools, community centers and other public facilities began sprouting up, funded largely by oil tax revenue.
Now, Continental and others have stopped fracking altogether in North Dakota. Statewide, there are only eight crews fracking new wells for the few companies still willing to pay for the service. Two years ago, there were 45, a peak for the teams that pump water, sand and chemicals deep underground to extract oil and natural gas.
“This boom, it’s over, at least it feels that way,” said Mark Ohl, who lost his job on a drilling rig after Continental canceled its contract. “But if you don’t know the oil industry is cyclical, you’re an idiot.”
The slowdown has also inflicted pain on community budgets. Williston’s debt and other liabilities nearly quadrupled from 2008 to 2014, to $158 million, as the city sought to keep pace with growth.
Yet the city’s sales tax receipts fell 47 percent in March from a year earlier, according to the state treasurer.
Moody’s Corp, the credit rating agency, downgraded Williston’s general obligation bonds in March to junk status, citing the city’s reliance on those sales taxes to repay debt.
“Putting all your eggs in one basket can be very risky, and I think we’re seeing that bear out in Williston and North Dakota now,” said Hetty Chang, a Moody’s analyst.
Statewide, Governor Dalrymple ordered agencies to trim 4 percent from their budgets to offset a $1 billion budget gap. The state will end free vaccines for children as part of the cuts. The University of North Dakota System is laying off more than 130 employees.
With files from Reuters.