North Dakota Budget Talk -- 2021 - 2023 Biennium

Locator: Outrigger10010.

I normally don't pay much attention to North Dakota legislative activity, but a four-hour flight from Grapevine, TX, to Seattle, WA, gave me an opportunity to spend some time doing just that. 

I was surprised how interesting this all was.

Some data points from Geoff Simon's top ND energy news for the week:

• ND legislative appropriations committee adopted an interim revenue forecast for the 2021 - 2023 biennium;
• income forecast:
• $40 / bbl through the biennium
• production to decline to 1.1 million bpd (2021-2022)
• production to decline to 1.0 million bopd (2022-2023)
• this would add just under $3 billion in oil tax collections over the coming biennium;
• compares to $3.5 billion expected in the current biennium (2019 - 2021)
• expenditures:
• $434 million to western North Dakota (formulaic)
• that would be down about 16% from the $518 million in the current biennium
• Legacy Fund: would realize $780 million in deposits
• from that $780 million:
• Common Schools Trust Fund: $127 million
• Foundation Aid Stabilization Fund: $127 million
• Three Affiliated Tribes: $373 million
• other income:
• sales tax revenue: $1.74 billion
• personal income tax: $816 million
• corporate income tax: $260 million
• motor vehicle excise tax: $260 million

Director's comments with release of Director's Cut:

• monthly crude oil production held steady due in part of 74 new well completions in November
• look at this: in December, 44 wells were completed, most of which were credited to the state's CARES Act frack incentive -- Helms said the number of completed wells in December would have likely dropped to zero without that incentive
• unlikely to see an increase in drilling activity unless prices stabilize above $55/bbl
• the industry continues to meet the natural gas capture target, 93%
• slightly slower on the reservation due to difficulty obtaining right-of-way for construction of gating pipelines (flaring will become less of a problem on federal land if the DAPL is shut down)
• mentioned the completion of Outrigger Energy's Sanderson NGL processing plant 15 miles west of Williston; capacity: 250 million cubic feet of gas per day (42,000 BOEPD?)

DOT:

• proposed budget: $1.8 billion for new biennium
• about $400 million more than current biennium
• that $400 increase possible if bonding (Legacy Fund) proposal accepted
• widening US Highway 85 from Watford City to I-94
• 2021 - 2023 budget includes $50 million to widen US Highway 85 from Watford City south to Long X Bridge
• requires US Congressional support
• phase 2: US Highway 85 from Long X Bridge to state highway 200
• phase 3: US Highway 85 from state highway 200 to I-94

North Dakota 2016 Taxable Sales And Purchases

North Dakota 2016 Taxable Sales and Purchases.

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.

******************************************

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.  

McKenzie County Passes A County Budget Of Almost $200 Million -- Wednesday -- October 8, 2014

Active rigs:

	10/8/2014	10/08/2013	10/08/2012	10/08/2011	10/08/2010
Active Rigs	190	184	193	194	156

RBN Energy: Part IV -- Eagle Ford condensate.

Just four years ago (October 2010) the Eagle Ford Basin was producing less than 100 Mb/d of crude oil. Now production is over 1.5 MMb/d and in the interim a network of gathering, pipeline and terminal infrastructure has sprung up to deliver crude and condensate to market via Houston and Corpus Christi.

The quality challenge of handling up to 45 percent condensate has changed in the last year from one of “dealing with” unwanted super-light crude into a midstream scramble to build condensate splitters and now export facilities. Today we continue our survey of changing Eagle Ford infrastructure by looking at Harvest, Martin, Trafigura and Buckeye.

This is Part 4 in our series updating analysis of Eagle Ford infrastructure.

In Part 1 (see Condensate City – Finding a Home For Eagle Ford Crude) we described a five-fold increase in Eagle Ford crude oil production over the past three years to 1.5 MMb/d. We explained that unlike other basins such as the Bakken in North Dakota, takeaway capacity has not been a big challenge for Eagle Ford producers. Instead the varying quality and in particular the high percentage of condensate in liquids output (about 45 percent) has caused headaches for producers and refiners alike. We also noted that two main pipeline routes to market have developed from the Eagle Ford – south to the Port of Corpus Christi and East to Houston area refineries.

In Part 2 we described the growth and continuing expansion of the crude takeaway systems developed by Magellan Midstream Partners and Kinder Morgan.

In Part 3 we reviewed the expanding takeaway infrastructure developed by Plains All American Pipeline (Plains) and Enterprise Product Partners (Enterprise). This time we look at relatively smaller infrastructure build out by Harvest Pipeline, Martin Midstream, Energy Transfer Partners and Trafigura.

The Dickinson Press is reporting:

McKenzie County commissioners have approved a whopping budget of $188.8 million, a 93 percent increase over 2014, as North Dakota’s largest oil producing county tries to keep up with booming growth.

Canadian train derailment: this is incredibly unimportant in the big scheme of things, but for the archives, CBC is reporting a major train derailment near Wadena, Saskatchewan. Wadena, Saskatchewan, is about 275 miles due north of Williston; or about 100 miles northeast of Regina. The train was 100 cars long; 60 cars were empty; forty were carrying freight; two tank cars carrying crude oil condensate exploded; no injuries. Twenty-six (26) cars derailed: six of them contained hazardous materials, including four that had either hydrochloric acid or caustic soda. The other two had petroleum distillates, CN said. These were the two that exploded. The origin of the train was west of the Bakken.

North Dakota's "Legacy Fund" > $535 Million

Link here to the Dickinson Press/Inside Climate News.

The "Legacy Fund":

in existence since August, 2011 (thereabouts); 13 months old according to DP/ICNvoters approved in 2010
accrues from 30 percent of the state's oil tax collections
cannot be spent until 2017
requires two-thirds of Legislature to approve spending
first deposit: September, 2011
most recent deposit: $45 million; growing faster than anticipated

Back-of-the-envelope calculations: 2017 --> 60 months from now x $50 million/month --> $3 billion. My understanding is that the money is invested in money market accounts.

If $45 million represents 30 percent for the most recent month, what was the total? $150 million.

School Funding -- National Data -- Includes North Dakota Data -- Center on Budget and Policy Priorities

Update

By the way, this is why North Dakota students do so well in history: "we" no longer have US-public-school-trained teachers teaching history. Rather, our students learn history through "the history teachers":

Henry VIII, thehistoryteachers

Original Post

I think it was yesterday that I posted that there were 272 new students in the Williston school district -- I was told that in a passing conversation and I have not confirmed that, and exactly what district(s) that all includes. Be that as it may, it changes a bit of my perspective on what is going on in Williston.

I have been parrotting the "general consensus" that new folks coming into the area will not bring their families (for whatever reason), and that once the work goes away (20 years from now), the single men and geographically separated husbands and fathers will return to their homes.

Whether "272" is exactly correct or not, the number comes from a reliable source. In addition, there will be new folks moving in throughout the year, although the number will be significantly less during the winter/school year.

I don't think it's a stretch to say that for most families, their number one concern is their children: their children's health, their education, and their environment (i.e., safe and stimulating).

North Dakota, in general, and Williston, specifically, have always had a great reputation with regard to the elementary, middle and high schools. I believe there was a recent story published that compared North Dakota college admission test scores and the state as a whole did very, very well. In the past, some have argued the results were skewed because the tests were taken only by those heading to college. It is my understanding that North Dakota now requires all students to take the ACT test. But I digress.

The purpose of this post is to direct folks to something called the "Center on Budget and Policy Priorities," which published the funding outlook for schools on a statewide basis. The story was published last week.

This is the headline: New School Year Brings Steep Custs in State Funding for Schools

It's a great link and one should immediately look to where North Dakota sits with regard to funding. North Dakota was #1 in funding increase for 2012 over 2008, increasing by 24 percent. Iowa was second at 17 percent. Alaska was third at 14 percent and then it trailed off fairly quickly.  At the bottom: South Carolina, down 24 percent; Arizona, down 24%; California, down 23%, and so forth.

When you get to the site, there are some interesting data points, and/or graphs not shown:

1. How much in "raw dollars" does each state spend/student?
2. What is the high school graduation rate in each state? (Or any metric comparing success to dollars spent? There are no such metrics.)
3. For eye-catching results, the center chose to show FY08-FY12 as the first graphs -- the worse years of the recession. As you scroll down, the graphs farther down finally compare this year with last year.
4. No graphs of teacher/student ratio? Is funding going to teachers or to administration?

When you look at the graphs, one understands exactly why the current administration's new half-trillion dollar stimulus bill is focused on teachers and schools. These are some of the states with the largest percentage cuts in the past year: Illinois (-12%); Wisconsin (-10%); Califoria (-9%), and then Ohio, Pennsylvania, New York.  These are hugely important states going into the 2012 election year.

Again, the report focuses on FY08-FY12.

Taxable Sales Up $1 Billion in North Dakota

Link here (regional links break early and break often). Firgures for 2Q11.

The latest figures cover the months of April, May and June, and they show a fourth consecutive quarter of above 25 percent growth over the previous year. The first quarter of 2011 was up 33.6 percent and the third and fourth quarters of 2010 were up 28 percent and 31.2 percent, respectively, over 2009.

“Anything over 20 percent or 30 percent is pretty remarkable,” Fong said. “It’s not just the west, and it’s not just oil.”

Data points (some numbers rounded)

• Fargo: $590 million (represents an increase of 8 percent over 2Q10)
• Williston: $535 million (represents an increase of 75 percent over 2Q10
• Tioga and Stanley: each had increases over 100 percent year-over-year

I can't wait to see the county totals. It is obvious that Williams County will "smother" Cass County.

Top-Five Tax Friendly States (Not a Bakken Story)

I have previously posted my sentiments regarding North Dakota's budget, the surplus, the fact that the state is taking in tax royalty at unprecedented rates, blah, blah, blah.

But with all that, North Dakota does not even make it to the top five tax-friendly states for retirees, according to Kiplinger. These are the top five tax-friendly states for retirees: Alaska, Wyoming, Michigan, Pennsylvania, and Colorado.

Look at the property taxes in Wyoming:

Retirees don't pony up much in taxes in the Cowboy State. Thanks to the abundant revenues that Wyoming collects from oil and mineral companies, residents shoulder the lowest tax burden of any state except Alaska, according to the Tax Foundation. Prescription drugs and groceries are exempt from state sales taxes. For most property, only 9.5% of market value is subject to tax, so a home worth $100,000 is taxed on $9,500 of assessed value.

Wyoming is high on my list. One of the best years of my life was an overnight stay in Rock Springs some years ago.




But what really surprised me was that Texas did not make it to the top five. It must be their property tax rates because Texas has no state income tax. Nor does South Dakota or Florida, to the best of my knowledge. With the fiscal problems that Pennsylvania has (Harrisburg is technically bankrupt), it is amazing that it makes the top five. Whatever.

Another link regarding this issue, click here. 

On a positive note, Schlumberger's earnings soar.