It WIll Make The State Meaner, Leaner -- July 27, 2015

Updates

November 21, 2015: revenue shortfall grows. 

October 4, 2015: The Dickinson Press provides update on metropolitan debt in western North Dakota: 

First, the revenue, the forecasts of the gross production tax revenues drawn from oil industry and allotted to the cities through distributions from the state. Three figures: first figure is the revenue distributed by the state back to the city in surge funding (one-time funding last spring). The second figure is the forecast from the last legislative session in January, 2015. The third figure is uses oil prices from August, 2015 (all figures in million of dollars, and rounded):

• Williston: $64; $38; $36
• Tioga: $11; $4, $3.4
• Stanley: $17; $3; $3
• New Town: $9; $4; $4
• Watford City: $32; $12; $11
• Killdeer: $9; $4; error?
• Dickinson: $44; $22; $20

Now, the debt going into next year:

• Dickinson: $113 million
• Watford City:
• Minot: $85 - $100 million; after bond issue in November, $102 million
• Williston: $131 million (lock box: $70 million for new recreation center to be financed through special sales tax)

Disclaimer: I've never followed very closely nor understand well the budget process in these metropolitan areas. If this information is important to you, go to the source.

Let's put the Williston debt in perspective:

• According to Google, Harold Hamm's net worth in 2015 is: 9.4 billion
• Williston's debt is about $130 million + the $70 million for the rec center (which I think is already paid for through the sales tax, but I could be wrong on that).
• Regardless $200 million (Williston debt) / $9.4 billion (Harold Hamm's net worth) = 2%.
• Harold Hamm could write Williston a $200 million check and not even notice it.

Original Post

The Bismarck Tribune is reporting:

North Dakota’s top oil regulator says the current slowdown in oil drilling “is not a bust by any stretch of the imagination” but will put a strain on state revenues in the next two years.

Really? How bad is it? Only $100 million more than what was projected.

Oil tax revenues helped North Dakota close out the 2013-15 biennium that ended June 30 with a $699.7 million balance in the state’s general fund, or about $100 million more than what was projected when the Legislature adjourned in April, according to preliminary figures from Office of Management and Budget Director Pam Sharp. The final balance will be available next month, she said.

What about flaring?

Department of Mineral Resources Director Lynn Helms also said low crude prices could prevent the state from reaching its goal of reducing flaring to 10 percent by October 2020 because natural gas processing projects have been suspended as the price of natural gas liquids has followed oil prices down. Eighteen percent of the state’s gas was flared in May.

Permitting?

The state is still receiving about 20 drilling permit applications daily, a “fairly rapid” pace.

The monthly dockets?

The state Industrial Commission was hearing about 185 to 200 oil and gas well cases per month in October and is now hearing about 100 cases per month, similar to 2009-2010 levels, while permitting numbers are back to 2011-12 numbers.

You know, awhile back the state paid a lot of money for an outside contractor to study the future of North Dakota based on oil. It's too bad the contractor did not provide data based on $50-oil. I think the contractor used $100-oil as the floor.

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Later: I didn't think I could find that study referred to in the last paragraph above, but here is the study, and the comment I placed when posting that study:

The most glaring short-coming (obviously one can say this in hindsight), KLJ did all their studies based on three price-points for oil: $70/bbl; $85/bbl; and, $100/bbl.

In hindsight, they needed to take this to $50/bbl which is very possible for the next two to three years. (It is very possible but very unlikely.)

$50-oil won't shut down the Bakken but it changes the economic picture and the impact on North Dakota dramatically. In fact, the impact with $50 oil might be greater than if oil goes to $150 for the next five years. The contractor was lucky to complete this study by September, 2014, before the plunge in oil prices.