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Published February 06, 2014, 11:08 AM

Oil Patch leaders to Legislature: Show us the money

DICKINSON, N.D. -- Members of the North Dakota Association of Oil and Gas Producing Counties are near a breaking point as financial needs related to energy development in the organization’s region continue to pile up.

By: Bryan Horwath, The Dickinson Press

DICKINSON, N.D. -- Members of the North Dakota Association of Oil and Gas Producing Counties are near a breaking point as financial needs related to energy development in the organization’s region continue to pile up.

That was the message Wednesday during the association's meeting in Dickinson.

“How do we get the oil and gas counties to convince North Dakota legislators to fund the need?” asked Brad Bekkedahl, a Williston finance commissioner and a state Senate candidate. “They never fund the need. If they funded the need, we’re not having this discussion. Their tact is to give us a little more money this time than last time, and we should be happy.”

Last year, the Legislature approved $1.1 billion for political subdivisions to address energy development and growth issues in western North Dakota. But according to many of the association's members, the amount and allocation — to be used for various infrastructure projects — fall far short of meeting the ever-escalating demand.

“We sit in Watford City, where our population has gone from 1,500 to over 10,000 people,” Watford City Mayor Brent Sanford said. “We have a funding gap right now of $135 million. Our school population has doubled and we have an onslaught of permanent population coming. It’s very frustrating. We’re ready to borrow unprecedented amounts of money, but nobody will loan to us because of the sunset. Nobody seems to have faith that this will continue.”

Sanford said he believes gross production tax numbers should be allowed to be used as leverage for long-term bonding, adding that Watford City is eyeing a $100 million project for a high school campus.

Dickinson City Administrator Shawn Kessel and Bekkedahl both said their cities — even with the Oil Patch and hub cities funding — aren’t in a position to borrow additional money beyond 2015.

“For the $225 million in needs that we have, we went to our bonds people and asked how much we could borrow,” Bekkedahl said. “With the $60 million guarantee in this two-year funding cycle and all of our sales tax authority until 2020, when it expires, they said we could get $99 million, so that’s what we bonded for.”

Bekkedahl said his city will likely have about $125 million worth of projects that may not be completed in 2014 because of a lack of available funds.

Originally slated to be a discussion about the oil and gas gross production tax distribution formula, association members spent much of the two-hour meeting looking for ideas on how to frame their message to legislators, Republican Gov. Jack Dalrymple, North Dakota Petroleum Council President Ron Ness and oil industry leaders.

“I’ve been an advocate that we would take the high road and we would get through this,” said Williston Mayor Ward Koeser. “What really got to me was what I told the governor that something is wrong with the fact that every fund the state has is sitting on an excess of money, which people are trying to figure out what to do with, and you take the oil region, and all of us — Williston, Watford City, Dickinson — are having to bond to operate. ... That is wrong. How do you justify that?”

No formal action was taken during Wednesday’s meeting.

With the group’s next meeting scheduled for Feb. 19 in Bismarck, the possibility of asking for a special legislative session was discussed, as was the idea of making a request for association members to meet with the governor.

Strain on schools

Though North Dakota is well on its way to producing more than 1 million barrels of oil per day thanks to the booming Bakken shale play, association members talked of more ominous numbers Wednesday. Sanford said he estimated that “40 percent of our school system in Watford City are homeless because they live in campers.”

Koeser said Williston's school district has 52 portable classrooms in use because the city’s population and its school enrollment have exploded in recent years. In the Killdeer School District, Superintendent Gary Wilz said his system is quickly running out of room and will need more space in the near future.

“I don’t think that people understand,” Sanford said. “People don’t feel there is any local impact that can make this oil go away, but these operators are frustrated with Watford City and McKenzie County right now. They’re asking why they can’t get housing, day care and schools.”

Sen. Rich Wardner, R-Dickinson, said after the meeting that he wasn’t ready to predict whether a special session to tackle Oil Patch funding issues would take place before the regularly scheduled 2015 Legislative session, but said he understood association members’ concerns.

“I wouldn’t venture a guess as to if that would happen,” Wardner said. “I think either a special session or taking some things on early in the next session would both work. From the time the session started in early January last year, things have changed so rapidly out there. The estimated production was going to be 850,000 barrels of oil per day -- at the highest -- over the next two years. Now, we’re about ready to go over 1 million.

"There is a lot more activity out here than what was anticipated. As a result, maybe what was enough when we were in session is not enough now. We need to, as a state, step up to the plate and make sure we take of the cities, counties and school districts here in western North Dakota that are impacted by oil.”

Sanford said any enhanced investment the state puts in the oil-producing areas will come back around.

“You’re going to strangle the golden goose at some point,” Sanford said. “There will be a return on this investment. We’re not talking about a loss. Why wouldn’t there be a lot of pride to say that some of these places have something good going? Why wouldn’t the state want to invest in something that will bring it a long-term return?”

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