McKenzie County ND

The third wave of Oil Boom is going strong in McKenzie County. Lessons of the past, revenues set aside by legislation to provide money to offset the impact and increased wages to retain hired help are factors that have eased its impact.

Ron Anderson, McKenzie County commissioner from Keene was first to present information on local and county issues at Tuesday’s (Feb. 12, 2008) meeting in a Town Hall Meeting sponsored by the McKenzie County Jobs Development Authority, the North Dakota Petroleum Council and the North Dakota Association of Oil and Gas Counties held in Watford City.

From Anderson’s point of view, county government learned to deal with the problem of employee retention from the late 1970s. And because this county has had oil production for a long time, Anderson considers it to be comparatively well off, particularly since inflation is strong on roads and road maintenance, which counties who lack access to oil-production also face. But in order to keep valuable employees, on average this county has provided salary increases have been around five percent per year plus the quality of health insurance and coverage choices have been increased. The pay to heavy equipment operators has increased in order to keep up with the pace of other employers. And while inflation has increased many other costs, it is anticipated that other employees in other areas of county government will also need pay increases as incentives to remain.

Wages escalate as the oil industry takes employees from each other, Ron Ness of the North Dakota Petroleum Council commented and a pool of many more trained workers are needed as there no longer exists a ready mass of “farm hands” and offspring prepared for this type of hard work.

Lynn Helms, head of North Dakota Department of Mineral Resources touched on oil field jobs being supported by stripper wells, many of which have been working since the 1980s. They are among the current 3,800 producing wells in the state.”Stripper wells do not have a big impact, but on average one well produces just over five barrels per day,” says Helms, whose projections say the oil business will be producing past the year 2070. “They support jobs.”

The production “life expectancy” of a new Bakken well is around 40 years, but the last 20 years will be as a stripper well, with significant amounts of natural gas, according to Helms in response to a request for information from Ron Anderson.

Helms described the focus on the Bakken as ‘almost obsession’ and related that the rig count is 58 today in North Dakota. Nine rigs are in McKenzie County; eight of the nine are using horizontal drilling and seven of the nine are in the middle Bakken.

Kent Ellis of Paladin Resources noted that drilling for oil is seen as a gamble and the companies look to invest where there is less risk.

“North Dakota is an expensive place to drill because the average depth to oil is 10,000 feet compared to (a national) average of 5,000 feet,” says Ellis.

Moving the oil to market has had problems, and much of North Dakota crude oil faced a discounted price, so the state of North Dakota hired a Pipeline Authority in Mark Makelky, director and Professional engineer.

“There are two ways for crude oil to leave the state, and that is Enbridge, moving it west to east, and the Belle Fourche or Butte line, moving it south to north, the reverse of its original course,” Makelky says.

Should Enbridge do a Phase 6 Expansion, there will be higher horse power pumps to replace smaller ones and more tank facilities, like one at Tioga, for example, and Phase 6 will increase volume from 110,000 barrels per day to 161,000 barrels per day.

However, after Phase 6, the so-called ‘easy fixes’ are completed on that pipeline route, and new pipe, much more expensive, will be about the only option.

The question of building new pipeline or even refineries will no doubt be very expensive.

Consider the General Fund Budget for the entire state is $2,456,973,956. Now consider the oil and gas contribution of $186,000,000.

Costs must be weighed against benefits.

Ron Anderson is on a Steering Committee supporting the passage of Measure No. 1 for the voters to consider in November. It would create a Permanent Oil Trust Fund. According to Ness, a ‘Yes’ vote would provide an annual income to provide a more (fiscally balanced) “legacy for the future.”

A ‘bust cycle’ of oil activity brings little revenue, is not a job climate suitable for hiring workers. In 1998 there were no rigs drilling in the state and so few people were hired.

However, in eight years the state has seen a great turn around in the oil industry, according to Ron Ness, president of the North Dakota Petroleum Council.

“The boom is back,” says Ness. “The high oil prices have encouraged the boom and in many ways we are reliving issues from the 1980s.”

Three times the Bakken has been drilled and failed to prove economical. But, “if the horizontal drilling and the continued improved technology continue, we have great oil potential here,” Ness points out.

Tremendous potential exists in spite of the high risk of the play. Wells drilled in the Bakken cost an average of $5 to $6 million. For the oil industry, the challenge is learning to fracture the shale or even practice “hydraulic multi-fracturing.”

Workforce-aged people is a problem as 50 to 70 percent of the current workers will be lost. Very few were hired during the 20-some years of ‘bust cycle.’
“We need eight people per day each day for the next four years to meet the demand and we can train most of them, ” according to Ness.

See reference to Williston State College to train oil ‘hands’ in previous blog.

The oil & gas industry generates 5,267 direct jobs and 21,000 indirect jobs.

This entry was posted on Thursday, February 14th, 2008 at 3:51 pm and is filed under 02. Poverty: Skills and Mobilizing, 05. Leadership: Knowledge and Awareness, 08. Leadership: Structural Change, 09. Community: Knowledge and Awareness, Community Events. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.