Taking a breather
for Tri-State Livestock News
Oil and gas industry workers have become “victims of our own success,” American Petroleum Institute senior economic advisor Rayola Dougher said, as production continues to slow in eastern Montana’s corner of the Bakken patch.
While that’s good news for consumers, it’s a tougher pill to swallow for those in the oil business.
With up to 3 million barrels of oil “sloshing around the world market” each day, Dougher told attendees at the Montana Farm Bureau Federation summer conference in Sidney, Montana. “we just brought way too much onto the market this year. But that’s because we just can’t predict what will happen around the world.” Dougher was the keynote speaker.
But agriculturalists in the area say the slow down they’ve seen in Bakken traffic in their rural part of eastern Montana has been a good opportunity for communities to “catch up” and take a much-needed breath after the big “boom.” Several spoke on a panel focused on the impact of the Bakken development later in the day.
“This is the third boom I’ve seen in this area,” Sidney farmer, rancher and former state Senator Don Steinbeisser, Sr., said. “Oil is big, but agriculture is still the number one industry in Montana. And it’s helped agriculture – it’s helped a lot of farmers, ranchers pay the bills.”
Richland County Commissioner Shane Gorder said the county is focused on catching up on infrastructure needs that were overloaded in the boom. Ground will break soon on a $6.5 million fire hall in Sidney, “that’s been needed,” he said, “and this will be a fire hall that will carry us into the future.” Down the road in Savage, they’ll be breaking ground soon on a $400,000 lagoon system.
“The slowdown is in the oil drilling side; there’s still a lot going on in Richland County though,” Gorder said. “We’re still trying to keep up with 1,200 miles of roads here that are getting beat up.”
He shared budgeting figured for pre-boom and pre-slowdown to illustrate the Bakken impact on the county, which sits on the North Dakota border. In 2008, when the census registered less than 4,800 people in Sidney, the county’s road maintenance budget was $4,313,000. Six years later, the county allocated $5,443,000 to maintain its roads, bridges and culverts. In 2013, Sidney’s population had grown to 6,250 in the census gathering, and that didn’t even begin to reflect the traffic of the area.
Greg Brewer manages Crop Production Services, an ag supply store in Fairview.
“If you’ve ever been to the Bucking Horse Sale in Miles City, it was like that, 24 hours a day, 365 days a year,” Brewer said.
A farm product delivery that typically took 45 minutes could then be expected to take double that with oil field traffic, but business was good. They went from selling around 200 water tanks a year to 6-700. But the cost of doing business changed, too. Paying $8 or $9 an hour for store help doesn’t cut it anymore – now, $20 per hour is standard, and “they’re still hard to find.”
That hasn’t gotten any easier with the slowdown, either, the panelists agreed. Oil workers who have been laid off this spring are holding out for prices and production to ramp back up. Housing costs remains out of reach for most, too, as prices are slow to adjust despite the drilling slowdown.
Steinbeisser said providing housing to farm and ranch employees is essential to keeping good help in agriculture – “Nobody can afford to pay $3,000 a month for rent,” he said.
The cost of doing business has remained high, too, but Gorder said that’s just a part of what they’ve come to expect as the county works to catch up on maintenance needs. In 2008, he said the county could purchase gravel for road work at around 50-75 cents/yard. Today, that’s closer to $2 or $3 per yard, leading them to explore other options for longer term solutions with cement stabilization projects.
Traffic has slowed this summer since production started dropping off last fall, which provides some relief for farmers in the area.
“We got to the point where guys just didn’t move machinery at certain times of the day,” Brewer said. “And if you didn’t have two or three vehicles to flag in the front and behind, you just didn’t do it.”
Patrick Hackley farms and ranches near Culbertson, where making small adjustments to equipment to focus on safety has become a higher priority. He mounts cameras on tractors to allow him to see ongoing traffic.
“Even on the county roads, safety is a huge thing. But we’ve gotten used to it, we live with it,” Hackley said. “We’ve done a lot in a short amount of time, but I think the slowdown will help us catch up with the infrastructure and what we need there.”
Landowners who included road maintenance agreements in their leasing contracts help, Gorder said, and many companies are supportive of needs in the communities. The Fairview Fire Department needed new Jaws of Life, which an oil company donated toward, he said, among other contributions.
Hackley added many of the site managers are locals who come back to support the county fair, 4-H and FFA programs. That support and extra business in the rural communities is a boost to agriculturalists, they agreed.
Dougher said API forecasts indicate a continued modest slowdown in the Bakken this year, then a pickup in 2016.
“But really, we don’t know what that recovery line looks like,” she said. “The reasons for these fluctuations are totally out of our control.” She pointed to international markets and political instability around the world, making a case for continued domestic drilling, despite a flooded market.
“The only thing we have control over is what we produce ourselves,” she said. From 2008 to 2014, she pointed to a 73 percent growth in U.S. oil production. With that, she said, the U.S. went from depending on foreign product for 68 percent of America’s petroleum to just 28 percent in 2015.
She cited studies that estimated if the Bakken production had not been in the world market since its boom, gas prices would be estimated around $5 per gallon.
“They have stopped drilling in some areas, but we have to look ahead,” Dougher said. “We’re looking at the long haul, and we don’t know about what’s going to happen in Iran; we don’t know who’s coming on or off the world market. We’re focused on having a reliable, safe fuel source for our country, plus the world market. And only we can provide that for ourselves.” F